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If money doesn't make us happy, why do we act as if it does?

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  • Ahuvia, Aaron

Abstract

Research on income and subjective well-being shows that among the non-poor, increased income has little or no lasting impact on happiness. Yet the desire for more income remains a powerful motive among many people at all income levels. Is this simply because many people are misinformed and believe that higher incomes will make them happier, or are they motivated by something other than the pursuit of happiness? This paper argues for the latter. The paper begins by exploring this question, reviewing the literature on income and subjective well-being, and discussing of the role of utility in decision making. This paper then argues that three main factors lead us to value increased income even if it does not make us happier. First, happiness is just one value among many, and not the only conscious goal people set for themselves. Second, even when people are striving to maximize happiness, our tendency to overweight short-term payoffs leads us to overvalue the short-term rewards that income provides. Finally, I argue that our values-based decision making competes with other motivational systems and evolutionary drives. Three evolutionary desires are discussed: (1) to store resources, (2) to be sexually attractive, and (3) to manage our social relationships and our personal identity within those relationships. While all three motivations play a role in our desire for increased income, this paper argues that it is the third - the use of money and consumption as a social tool - that has the most important overall influence on our desire for increased income past the point where it ceases to increase personal happiness.

Suggested Citation

  • Ahuvia, Aaron, 2008. "If money doesn't make us happy, why do we act as if it does?," Journal of Economic Psychology, Elsevier, vol. 29(4), pages 491-507, August.
  • Handle: RePEc:eee:joepsy:v:29:y:2008:i:4:p:491-507
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    References listed on IDEAS

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    2. Federica D’Isanto & Panagiotis Fouskas & Melania Verde, 2016. "Determinants of Well-being Among Legal and Illegal Immigrants: Evidence from South Italy," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 126(3), pages 1109-1141, April.
    3. Martin Binder, 2015. "Do it with joy: Subjective well-being outcomes of working in non-profit organizations," Papers on Economics and Evolution 2015-03, Philipps University Marburg, Department of Geography.
    4. Liselot Hudders & Mario Pandelaere, 2012. "The Silver Lining of Materialism: The Impact of Luxury Consumption on Subjective Well-Being," Journal of Happiness Studies, Springer, vol. 13(3), pages 411-437, June.
    5. Nabi, Nazia & Siahtiri, Vida & O'Cass, Aron, 2019. "In search of status: Unpacking the relationship of status with individualism-collectivism, counterconformity motivations and life satisfaction," Journal of Retailing and Consumer Services, Elsevier, vol. 51(C), pages 378-386.
    6. Monica Guillen-Royo & Laura Camfield & Jackeline Velazco, 2013. "Universal and Local Reconciled: Exploring Satisfaction with Universal and Local Goals in Thailand and Bangladesh," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 113(2), pages 627-645, September.
    7. Christian Schubert, 2014. "“Generalized Darwinism” and the quest for an evolutionary theory of policy-making," Journal of Evolutionary Economics, Springer, vol. 24(3), pages 479-513, July.
    8. Mohanty, Madhu S. & Ullah, Aman, 2012. "Direct and indirect effects of happiness on wage: A simultaneous equations approach," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(2), pages 143-152.
    9. Michael Landesmann & Isilda Mara, 2013. "Do I Stay because I am Happy or am I Happy because I Stay? Life Satisfaction in Migration, and the Decision to Stay Permanently, Return and Out-migrate," wiiw Working Papers 103, The Vienna Institute for International Economic Studies, wiiw.
    10. Creutzig, Felix, 2020. "Limits to Liberalism: Considerations for the Anthropocene," Ecological Economics, Elsevier, vol. 177(C).
    11. Thomas Li-Ping Tang & Toto Sutarso & Mahfooz A. Ansari & Vivien Kim Geok Lim & Thompson Sian Hin Teo & Fernando Arias-Galicia & Ilya E. Garber & Randy Ki-Kwan Chiu & Brigitte Charles-Pauvers & Roberto, 2018. "Monetary Intelligence and Behavioral Economics Across 32 Cultures: Good Apples Enjoy Good Quality of Life in Good Barrels," Journal of Business Ethics, Springer, vol. 148(4), pages 893-917, April.
    12. Jüri Allik & Rene Mõttus & Anu Realo & Dmitri Rozgonjuk, 2018. "What Makes Young Russians Happy and Satisfied With Their Lives?," SAGE Open, , vol. 8(3), pages 21582440188, September.
    13. Rajesh Iyer & James A. Muncy, 2016. "Attitude toward Consumption and Subjective Well-Being," Journal of Consumer Affairs, Wiley Blackwell, vol. 50(1), pages 48-67, March.
    14. Drakopoulos, Stavros A. & Grimani, Katerina, 2015. "The Effect of Pay Cuts on Psychological Well-Being and Job Satisfaction," MPRA Paper 61195, University Library of Munich, Germany.
    15. Hizkia H. D. Tasik, 2019. "A Tale of Income and Energy in Rural Areas: What Contributes to People’s Happiness? Evidence from Eastern Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 9(4), pages 248-255.
    16. Andrea Werner, 2014. "‘Margin Call’: Using Film to Explore Behavioural Aspects of the Financial Crisis," Journal of Business Ethics, Springer, vol. 122(4), pages 643-654, July.
    17. Grimani, Katerina, 2014. "Labor earnings and Psychological well-being: An Empirical Analysis," MPRA Paper 57098, University Library of Munich, Germany.
    18. Eugenio Figueroa B. & Roberto Pasten C., 2012. "Income and the pollution path: Update and extensions," Working Papers wp369, University of Chile, Department of Economics.
    19. Anna Pettini, 2014. "Beyond Non-Satiation: Needs and Requirements," CESifo Working Paper Series 5110, CESifo.
    20. Manchiraju Srikant & Krizan Zlatan, 2015. "What is materialism? Testing two dominant perspectives on materialism in the marketing literature," Management & Marketing, Sciendo, vol. 10(2), pages 89-102, September.

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