Can money buy happiness? It depends on who you ask. Psychologists have long said that after certain basic human needs are satisfied, money's capacity to increase happiness diminishes significantly. This goes hand in hand with the fact that we tend to overestimate how much pleasure we receive from having more tangible things.
So, why is this? Is there a way economically to describe this phenomenon? Perhaps, we can use the law of diminishing returns. The law of diminishing returns is "used to refer to a point at which the level of profits or benefits gained is less than the amount of money or energy invested." While this law was formulated as a way to describe the outcome of an economic investment vs profit returned, it seems that it can also be applied to human happiness - wealth as the investment and happiness as the profit. Let's take Kyle, for example. At first, Kyle is incredibly satisfied and happy with buying and consuming a donut from Krispy Kreme. However, after he continues to buy a donut every single day, the donut will progressively have less and less appeal when compared to the first time he bought one. Soon, Kyle may not even like donuts anymore!
This relationship seems to be a possible explanation for the current state of GDP and its relation to happiness. Over the last few decades, statistics illustrate the continuity of GDP growth, along with the stagnation of the rise of happiness among people. It seems that although people continue to earn and spend more money, they are not getting any happier, or perhaps, only mildly so.
So, why is this? Is there a way economically to describe this phenomenon? Perhaps, we can use the law of diminishing returns. The law of diminishing returns is "used to refer to a point at which the level of profits or benefits gained is less than the amount of money or energy invested." While this law was formulated as a way to describe the outcome of an economic investment vs profit returned, it seems that it can also be applied to human happiness - wealth as the investment and happiness as the profit. Let's take Kyle, for example. At first, Kyle is incredibly satisfied and happy with buying and consuming a donut from Krispy Kreme. However, after he continues to buy a donut every single day, the donut will progressively have less and less appeal when compared to the first time he bought one. Soon, Kyle may not even like donuts anymore!
This relationship seems to be a possible explanation for the current state of GDP and its relation to happiness. Over the last few decades, statistics illustrate the continuity of GDP growth, along with the stagnation of the rise of happiness among people. It seems that although people continue to earn and spend more money, they are not getting any happier, or perhaps, only mildly so.
Given that the poor would be much more happy gaining some extra wealth than the rich, a situation that maximizes happiness for the human race might mean decreasing income inequality. I'm not saying communism is the way to go, but one of the main goals of life is to gain happiness, and to achieve that for as many people as possible, it may be required to redistribute wealth.
ReplyDeleteInteresting concept. I agree with the idea that money cannot buy an individual eternal happiness, but I do believe that it provides the framework for individuals to live a comfortable life. Not having to worry about one's finances can free up a lot of time and energy. Although it doesn't buy you happiness, it does give you a lot of freedom and flexibility, allowing for you to undergo opportunities that you otherwise may not have the access to.
ReplyDeleteI agree that money cannot buy happiness but money can make life easier, especially for low income families. Considering that right now we are applying to college, some may be overwhelmed with the cost and knowing they have to take out loans to further their education. Being able have financial flexibility would definitely relieve stress in this process. I think the main issue is that the top 1% are simply paid more than enough to have a good life. Even though they may not be happy they do not try to change the system or only donate a portion of what they make to others. They still hold onto their wealth.
ReplyDeleteDoes the statistic for GDP growth and happiness level account for inflation at all? It is possible that a rising GDP might not be able to increase the amount of goods that could be bought in the first place, which would also create a stagnation in happiness. I also agree with the point Ben and Meera made, which was that very wealthy people gaining more money than the rest of the population does not increase total happiness. This might be a factor that affects the comparison between GDP and happiness as well.
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