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"It is a happy talent to know how to play."

"The Great Affluence Fallacy" is a Great Big Lie

8/11/2016

4 Comments

 
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There's a common myth in popular psychology that money doesn't buy happiness. 

​It totally does.
Yet David Brooks wrote this week in his New York Times op-ed, The Great Affluence Fallacy,
As we’ve gotten richer, we’ve used wealth to buy space: bigger homes, bigger yards, separate bedrooms, private cars, autonomous lifestyles. Each individual choice makes sense, but the overall atomizing trajectory sometimes seems to backfire. According to the World Health Organization, people in wealthy countries suffer depression by as much as eight times the rate as people in poor countries.

He didn't include a citation beyond "World Health Organization," but I'm guessing he's referring to a 2011 study that measured depression in low-, middle, and high-income countries. 

In the study, trained surveyors conducted face-to-face interviews with 89,037 people in 18 countries. The surveyors asked respondents questions about their major depression symptoms, including sadness and loss of interest in daily life, in order to diagnose the disorder. Respondents also answered questions about their age, income, marital status and other demographic data.

Here are the percentages of people who have experienced or possibly will experience depression at some point in their lives:
High-income:
  • Japan: 6.6 percent
  • Germany: 9.9 percent
  • Italy: 9.9 percent
  • Israel: 10.2 percent
  • Spain: 10.6 percent
  • Belgium: 14.1 percent
  • New Zealand: 17.8 percent
  • Netherlands: 17.9 percent
  • United States: 19.2 percent
  • France: 21 percent

(Average: 13.72 percent)

Low- and middle-income:
  • China: 6.5 percent
  • Mexico: 8 percent
  • India: 9 percent
  • South Africa: 9.8 percent
  • Lebanon: 10.9 percent
  • Colombia: 13.3 percent
  • Ukraine: 14.6 percent
  • Brazil: 18.4 percent

(Average: 11.32 percent)

So, yeah. I guess this particular study showed that people in rich countries are slightly more likely to be depressed than middle- and low-income countries. 

But, you know, all the studies before this one had different results -- it's tricky to measure happiness. 

It's worth noting that in France, Germany, the U.S., and New Zealand, the poorest respondents had double the risk of depression. The "Affluence Fallacy" isn't about wealth -- it's about wealth disparity. 

Makes sense, right? Income inequality is associated with a number of chronic conditions, like heart disease, obesity and depression. 

In fact, according to economist Justin Wolfers, the "myth of the depressed millionaire" is just that -- a myth. 

Affluence doesn't make us isolated and lonely -- and here's the data to support it:

1. Wherever you live in the world, rich people are happier than poor people.
​
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Image credit: This study by Daniel Sacks, Betsey Stevenson and Justin Wolfers, 2012.

​The graph is busy, so here's the Tl;Dr: all the lines are roughly parallel. Meaning that 
an X% raise in income will make you roughly the same amount happier, no matter where in the world you live.

​Note: while many studies look at increases in happiness relative to an amount of money, this study used a log-scale -- meaning that increases in income are by a percent, not an amount.

Because, you know -- diminishing returns and stuff. That's to be expected. There's a ton of really important stuff you could buy with $40,000/year that you couldn't buy with $35,000/year. But what can you buy for $255,000 that you couldn't buy with $250,000? And of that stuff, what did you actually need to attain a basic standard of living?

2. Countries with higher GDPs are much happier than countries with lower ones:​
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Image credit: This study by Daniel Sacks, Betsey Stevenson and Justin Wolfers, 2012.

Again, note the log scale.

3. Rich countries are happier than poor countries… in roughly equal measure to rich people being happier than poor people within a society.
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The New Stylized Facts about Income and Subjective Well-Being, Sacks, Stevenson and Wolfers, 2012.

This graph... is an eye-full. Basically, the arrows show the difference in happiness between rich and poor people within a country. The slope of each arrow indicates how much happier (again, on a log scale) rich people are than poor people.

​For the most part, the arrows are pretty parallel -- both to each other, and to the between-country wellbeing gradient (the green line). 

Because rich countries are happier than poor ones, in roughly equal proportion to rich people being happier than poor people. 

***

​That said, I do agree with David Brooks on one aspect of his argument: people are terrible at spending money in ways that make them happy. ​Anti-social spending is a recipe for disaster.

Which is not the same as saying money can't buy happiness. After all, as I wrote in Money DOES Buy Happiness -- IF You Know How to Spend It, 
Many people fantasize about coming into lots of money... and using it in an antisocial manner. "I'd buy a private island!" "I'd never take public transportation again!" "I'd tell my boss he can go ____ himself!" "I'd buy an expensive car/wardrobe/etc., and make everyone jealous!"

But, weirdly, many people who do come into wealth end up feeling unmotivated, isolated and alone. It's not uncommon for lottery winners say that winning the lottery actually ruined their life.

But there are, in fact, two proven ways to buy happiness: 

1) Spending money on someone else.
2) Spending money on experiences, rather than possessions. 



Let's focus on that second point. 

We've all heard the story about the guy who bought a fancy car but still felt sad. 

That doesn't mean a car can't make you totally happy. If you love driving, if you are passionate about speed and specs and vehicle performance, a car will make you happy. Because in your hands, it's not a thing. It's an experience. It's a tool. It's something that makes your heart race. 

Because experiences matter way more than things. According to Elizabeth Dunn and Michael Norton's amazing book, Happy Money: The Science of Happier Spending, here are a few of the reasons why:

1. Anticipation of an experience drives happiness -- whereas anticipation of a possession drives impatience. Think of Black Friday vs. getting ready for a party with your friends.

2. Experiences tend to be social. Possessions tend to be... well, possessions. Humans are social beings. We love stories. We love moving our bodies together. We love sharing values. Possessions, on the other hand, get old quickly. They can't relive a moment with us. They can't make us laugh. They can't bring us soup when we're sick.

 3. Most people stop appreciating things over time. This is actually part of the reason why raises are such terrible motivators. A raise is only a raise for a week. After that, it's just your salary.

We evolved to never be content with the things we have -- hoarders do much better in famines than people who were happy with the things they had. 

4. We're less likely to measure the value of experiences by comparing them to those of others. I just got back from Bonaire, a Dutch Caribbean island near Venezuela. I had the most amazing time. There is nowhere else in the world -- not even a more "expensive" or "exotic" trip to Bali or an African safari (which is what approximately half of the people I know are doing right now) -- I would rather have gone. Because omg LOOK!​
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This experience made me incredibly happy -- and never at any point have I wished I could have had someone else's summer vacation or compared my trip to theirs. 

​So I'll repeat:

Rich countries are happier than poor countries. Rich people are happier than poor people. And money can buy happiness -- if you know how to spend it.

I leave you with this book recommendation. Worst case, you learn some cool stuff about psychology. Best case, you change your whole life by learning the science of happier spending:
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4 Comments
Zeph
3/6/2017 12:15:46 pm

Let me check. You seem to be saying that (1) more money only buys happiness if you spend it well, (2) most people don't know how to spend it well, and (3) worldwide statistics seem to show that more money universally produces more happiness (on average).

Is your implication that on average, around the world, people actually do generally know how to buy happiness after all? Or that if most people were aware of how to buy happiness, those charts would have had a much steeper slope, but more money does indeed buy substantial happiness even when people are unwise in spending it?

The log nature of it is both unsurprising (many of our perceptions are based on ratios rather than linear additive dynamics, from sound and light sensations to more psychogical constructs) and a little concerning in a finite world running into the limits of exponential growth - because the obverse of this is that exponential increase in money is needed to produce linear increases in satisfaction. This could be yet another way our species is in trouble.

You say "But what can you buy for $255,000 that you couldn't buy with $250,000? And of that stuff, what did you actually need to attain a basic standard of living?". Oddly, that last sentence echos the "Myth of Affluence" concept that more money definitely DOES buy happiness, up until basic needs are met, because nobody likes being hungry, cold, or sick - but above that level it pays decreasing returns (a $200 microwave is unlikely to produce a whole lot more enjoyment than a $100 one - and as you say, people do in large part spend the bulk of their disposable income on material goods).

I'm not sure your case is open and shut, but I will/would have to do more (library type) research to reconcile conflicting results of (experimental type) research. Thanks for challenging the (new) conventional wisdom, so I at least know not to take the positive psychology finding at face value.

It's too bad if you are correct; I believe that one of the most challenging transformations facing our species is the shift to a sustainable culture which does not worship exponential growth of material means as the only path forward, and it is comforting to think that in theory we can produce a satisfying world by at least meeting everybody's basic needs, with assurance that more per capital wealth beyond that would not produce more benefit (ie: a sustainable economy would not inherently involve individuals needing to compromise their potential true happiness by refraining from growing their consumption). So growth would happen in cultural terms which can creatively evolve and change without extracting ever more natural resources each year.

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Eva Glasrud link
9/24/2017 09:30:38 am

I think it's pretty clear that most people are pretty bad at "buying" happiness. There have been some studies lately that got super popular in pop science, which I thought had obvious but non-obvious results. One found that spending money on things like takeout and cleaning ladies makes you happier -- something that lots of people resist because it makes them feel guilty. Almost every female friend I have who has a housekeeper has felt embarrassed and tried to justify to me why she needed the help, and I'm just like, "Look. I don't care if you have carpal tunnel or if you just like to play golf instead of cleaning in the afternoons. If you can afford help around the house, you should hire someone! What else would you spend the money on that's more valuable than LESS STRESS and MORE TIME?" Similar story with takeout: if you love cooking, and lots of my friends do, then you should cook at every opportunity! If it's stressful or burdensome for you... order out!

Them of course, there's the Dunn & Norton work on prosocial spending, and spending money on experiences rather than things.

I wouldn't say that more money ONLY buys happiness if you spend it well. Even if you're spending most of your $200k salary on clothes and watches, when you don't especially care about fashion, you're probably less stressed than someone who makes $20k and lives knowing that some random setback -- a traffic ticket, a broken car -- could throw off your whole budget and/or bankrupt you.

As for this:

> "You say "But what can you buy for $255,000 that you couldn't buy with $250,000? And of that stuff, what did you actually need to attain a basic standard of living?". Oddly, that last sentence echos the "Myth of Affluence" concept that more money definitely DOES buy happiness, up until basic needs are met, because nobody likes being hungry, cold, or sick - but above that level it pays decreasing returns (a $200 microwave is unlikely to produce a whole lot more enjoyment than a $100 one - and as you say, people do in large part spend the bulk of their disposable income on material goods)."

What I meant is, $5,000 to someone who's struggling to make ends meet is HUGE. For someone who's already bringing in $250,000... not so much. But... another $15,000, maybe they could move closer to their work, meaning their 2-hour daily commute is reduced to 20 minutes. Maybe you can bring on extra household help or childcare, so you can get back in shape, get back to work, get eight hours of sleep per night, or do things that bring you relaxation and joy. You can find an apartment with an extra bedroom, so you have more space and less clutter -- a space to do work from home.

I can see why you're concerned about these findings... but I'd like to think (based, admittedly, more on anecdotal observations than actual research) that people are getting better at spending money wisely. The trend of celebrating "lifestyle" over ostensible consumption is encouraging -- I'ms sure spending $1,000 on SoulCycle classes and another $500 on SoulCycle merch is a lot healthier than spending that money on dresses or jewelry you'l wear once.

Reply
paper editing service reviews link
3/15/2017 06:52:35 am

Money is the biggest power of the world, a person having it gets confused what all he need for his lavish life. A man can buy everything with money except the feelings which are natural. If one is having a lot of money he needs to use it in good places neither than doing it lavishness.

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Howdy link
7/3/2021 09:19:11 am

hey, I found this article helpful to me. I also wish to read some other blogs from your site. I bookmarked your site to enjoy similar reading in as soon as you posts. Thank you.

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