Connection Between Money and Happiness: Does Money Bring Happiness

According to a Financial Express article published in 2018, there is an ideal yearly amount of money that makes people happy . In the opinion of Rahul Agarwal, director of EZ Wealth, the well-known proposition that money increases happiness is only true to a certain extent. An increase in money can only enhance lives when basic material needs, such as a house or food, are not met . Agarwal explains the connection between money and happiness by referring to the theory of ‘Decreasing Marginal Utility’, at first an increase of money will bring more happiness, but after a while the accumulation of more money does not add to happiness.

The claim that money should only cover basic material needs is not backed up by any factual information. The article does refer to earlier research and experts in the field, but fails in naming either the research or experts. So does money bring happiness ?

While the Financial Express article is not the most credible or complete source, the claims are backed up by factual information in an article in the Social Indicators Research journal.

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Howel, Kurai and Tam describe need theory, a theory that describes the relationship between income and subjective well-being . Need theory supports the ideas described in the Financial Express article, namely that increased income increases well-being strongly, or possibly only, when the money is used to satisfy basic needs . The study of Howel, Kurai and Tam aimed to extend need theory beyond basic needs and researched whether additional income can be used to satisfy higher-order needs.

Howel, Kurai and Tam tested whether financial security caused by increases in economic standing would increase life satisfaction. They concluded that ‘provocative evidence’ was found to indicate that this relationship is true, however further research would have to be conducted in order to truly understand the relationship between additional income and satisfaction of higher-order needs. The article in the Social Indicators Research journal is supported by a considerable amount of earlier research and is therefore more credible than the article in the Financial Express.

Despite the evidence found in the study of Howel, Kurai and Tam, a journal article published in the Psychological Science journal describes the relationship between increase in income and life satisfaction more explicitly. Boyce, Brown and Moore ‘tested a rank income hypothesis, according to which people gain utility from the ranked position of their income within a comparison group’. They found that an increase in income will only increase a person’s utility or life satisfaction, if the ranked position also increases. The study concluded that an overall increase in incomes of a society may not raise the happiness of individuals if the ranked position does not change . Since there are only limited amount of individuals that can be highest earner, pursuing economic growth may not make people any happier .

Despite the extensive research and elaborate argumentation of the article by Boyce, Brown and Moore, their statement is highly critised by Dwight R. Lee. In an article published in The Independent Review, Dwight R. Lee argues that money and happiness are always positively related. . More real purchasing power brings about an increase in human happiness, this happiness, however, is only temporary . Improvements in our lives because of money will only temporarily increase happiness because it is in our nature that we adapt to changes in circumstances. The fact that additional happiness is only temporary is, however, no reason to stop pursuing more money . People can namely replenish their happiness by new struggles, new achievements or an increase in money.