It turns out that money actually can buy happiness, but not a lot of it. At some point, well under $100,000, the happiness value of a dollar starts to plummet, according to Richard Easterlin, economics professor at University of Southern California. This is because social interactions impact happiness more than money does.
But here’s a new way to look at the money and happiness equation, from a new study by Nattavudh Powdthavee of the University of London: If you make sure to see a friend or relative in person almost every day, that is like increasing your salary by $180,000 a year.
However buying incremental happiness with a six-figure income is very costly. For example, Powdthavee says if you are going to relocate from a city where your family and friends live to a city where you have no family or friends, you would need to earn $133,000 just to make up for the lack of happiness you feel from being far from those people.
Powdthavee drives home the importance of making a conscious choice about your time when he writes, “Since it normally requires both time and effort to achieve either higher income or a stable social relationship with someone, the weight attached to each individual’s investment decision thus depends upon the type of possession — money or friendship — that he or she believes will yield a larger impact on happiness than the other.”
It’s great that Powdthavee does the money vs. relationship math for us, because as humans we are absolutely terrible at predicting what will make us happy and maybe shouldn’t even bother. For one thing, we are all likely to tell ourselves we’re happy, whatever we are doing, in order to justify what we’re doing. This is a fine predisposition for maintaining our sanity, but it’s not a great attitude to have if you are trying to figure out how to change your life to be happier. Our judgment about our own happiness is so bad that Andrew Oswald, economist at the Warwick University has written a paper that to calls for researchers to stop drawing conclusions based on asking people if they are happy.
So I recommend believing that the research is right and your personal predictions are wrong. But the caveat with all this money research is that when we ditch our relatives to take a high paying job, we’re not actually interested in the money, per se. It’s something else.
In a study where people make decisions about sharing money, Harvard University economist Terry Bernham showed that when it comes to money, we don’t strive for some idea we have of what is “enough” but rather to have a little more than our friends. The Economist describes Burnham’s study and reports, “What people really strive for is relative rather than absolute prosperity. And this is likely to be particularly true in individuals with high testosterone levels.”
The Economist concludes that this is totally rational behavior, because while more money has not been shown to get more sex, more money does buy the social status to have more choices for sex partners. So money isn’t an end in itself, but social status is, whether we like it our not, because it has been our means to preserve our DNA.
This explains the study that blogger Gautam Ghosh quotes showing that someone who is a gatekeeper for a hospital can be happier in their work than a doctor based on their perceived contribution to the community. And it also explains the drive to forgo a big salary to make art: If your art hangs in the Guggenheim, you get your choice of girls to go home with, even if your home is sort of shoddy.
So what can we do?
1. Recognize that you should make relationships your top priority. Really. Most of us say we do this, but many of us could not actually point to a time when we took a big hit in the money department just so we could preserve regular date night with our significant other.
2.Admit it’s an uphill battle to care less about social standing. But it’s worth it. The more you care about where you stand in relation to others, the less happy you’ll be. Social standing can take so many forms. Instead of patting yourself on the back for not buying a McMansion, be honest about the fact that you didn’t want one anyway. Understand how you measure your social rank, and try to tame it. For my part, I tell myself that if I check compete.com fewer times a week, I’ll be a happier person. (Maybe true. But look, I still linked to it.)
3. Trust the research when you are faced with a tough decision. Yes, all research is like diet research — one decade cheese is bad, next decade cheese is good. But just because the research is not perfect doesn’t mean you should go off and do whatever your gut tells you. Your gut tells you pizza is great and so is grilled cheese. But duh, it isn’t. And your gut tells you that you will be happier with a little more money, and you could relocate from family if you make sure to visit a lot. But you know what? Duh. You know the truth.
Hat tip: Senia Maymin