Money matters. For entering U.S. collegians, the number one life goal—surpassing “helping others in difficulty,” “raising a family,” and 17 other aspirations—is “being very well off financially.” In the most recent UCLA “American Freshman” survey, 82 percent rated being very well off as “essential” or “very important.” Think of it as today’s American dream: life, liberty, and the purchase of happiness.
For human flourishing, fiscal fitness indeed matters . . . up to a point. In repeated surveys across nations, a middle-class income—and being able to control one’s life—beats being poor. Moreover, people in developed nations tend to be happier and more satisfied than those in the poorest of nations.
Beyond the middle-class level, we seem to have an income “satiation point,” at which the income-happiness correlation tapers off and happiness no longer increases. For individuals in poor countries, that point is close to $40,000; for those in rich countries, about $90,000, reports a new analysis of 1.7 million Gallup interviews by Andrew Jebb and colleagues.
And consider: The average U.S. per-person disposable income, adjusted for inflation, has happily tripled over the last 60 years, enabling most Americans to enjoy today’s wonderments, from home air conditioning to wintertime fresh fruit to smart phones. “Happily,” because few of us wish to return to yesteryear. Yet not that happily, because psychological well-being has not floated upward with the rising economic tide. The number of “very happy” adults has remained at 3 in 10, and depression has been on the rise.
What triggers the diminishing psychological payoff from excess income? Two factors:
- Our human capacity for adaptation: Continual pleasures subside.
- Our tendency to assess our own circumstances by “social comparison” with those around us—and more often those above us. People with a $40,000 income tend to think $80,000 would enable them to feel wealthy—whereas those at $80,000 say they would need substantially more. Become a millionaire and move to a rich neighborhood, you still may not feel rich. As Theodore Roosevelt said, “Comparison is the thief of joy.”
The outer limit of the wealth–well-being relationship also appears in two new surveys (by Grant Donnelly, Tianyl Zheng, Emily Haisley, and Michael Norton) of an international bank’s high net-worth clients. As you can see in figures I created from their data, having $2 million and $10 million are about the same, psychologically speaking.
If wealth increases well-being only up to a point—and much evidence indicates that is so—and if extreme inequality is socially toxic (great inequality in a community or country predicts lower life quality and more social pathology), then could societies increase human flourishing with economic and tax policies that spread wealth?
Let’s make this personal: If earning, accumulating, and spending money increases our happiness only to a satiation point, then why do we spend our money for (quoting the prophet Isaiah) “that which is not bread” and our “labor for that which does not satisfy?” Quite apart from moral considerations, what’s to be lost by sharing our wealth above the income-happiness satiation point?
And if one is blessed with wealth, what’s to be gained by showering inherited wealth, above the satiation point, on our children? (Consider, too, another Donnelly and colleagues finding: Inherited wealth entails less happiness than earned wealth.)
Ergo, whether we and our children drive BMWs or Honda Fits, swim in our backyard pool or at the local Y, eat filet mignon or fish filet sandwiches, hardly matters. That fact of life, combined with the more important facts of the world’s needs, makes the case for philanthropy.