[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/eee/joepsy/v29y2008i4p491-507.html
   My bibliography  Save this article

If money doesn't make us happy, why do we act as if it does?

Author

Listed:
  • Ahuvia, Aaron
Abstract
Research on income and subjective well-being shows that among the non-poor, increased income has little or no lasting impact on happiness. Yet the desire for more income remains a powerful motive among many people at all income levels. Is this simply because many people are misinformed and believe that higher incomes will make them happier, or are they motivated by something other than the pursuit of happiness? This paper argues for the latter. The paper begins by exploring this question, reviewing the literature on income and subjective well-being, and discussing of the role of utility in decision making. This paper then argues that three main factors lead us to value increased income even if it does not make us happier. First, happiness is just one value among many, and not the only conscious goal people set for themselves. Second, even when people are striving to maximize happiness, our tendency to overweight short-term payoffs leads us to overvalue the short-term rewards that income provides. Finally, I argue that our values-based decision making competes with other motivational systems and evolutionary drives. Three evolutionary desires are discussed: (1) to store resources, (2) to be sexually attractive, and (3) to manage our social relationships and our personal identity within those relationships. While all three motivations play a role in our desire for increased income, this paper argues that it is the third - the use of money and consumption as a social tool - that has the most important overall influence on our desire for increased income past the point where it ceases to increase personal happiness.

Suggested Citation

  • Ahuvia, Aaron, 2008. "If money doesn't make us happy, why do we act as if it does?," Journal of Economic Psychology, Elsevier, vol. 29(4), pages 491-507, August.
    • Handle: RePEc:eee:joepsy:v:29:y:2008:i:4:p:491-507
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167-4870(07)00104-3
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Stutzer, Alois, 2004. "The role of income aspirations in individual happiness," Journal of Economic Behavior & Organization, Elsevier, vol. 54(1), pages 89-109, May.
    2. Daniel Kahneman & Robert Sugden, 2005. "Experienced Utility as a Standard of Policy Evaluation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(1), pages 161-181, September.
    3. Oswald, Andrew J, 1997. "Happiness and Economic Performance," Economic Journal, Royal Economic Society, vol. 107(445), pages 1815-1831, November.
    4. Robert Cummins, 2000. "Personal Income and Subjective Well-being: A Review," Journal of Happiness Studies, Springer, vol. 1(2), pages 133-158, June.
    5. Babin, Barry J & Darden, William R & Griffin, Mitch, 1994. "Work and/or Fun: Measuring Hedonic and Utilitarian Shopping Value," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 20(4), pages 644-656, March.
    6. Nicole Fuentes & Mariano Rojas, 2001. "Economic Theory and Subjective Well-being: Mexico," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 53(3), pages 289-314, March.
    7. repec:pri:cepsud:125krueger is not listed on IDEAS
    8. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
    9. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-484, July.
    10. Richins, Marsha L, 1994. "Special Possessions and the Expression of Material Values," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 21(3), pages 522-533, December.
    11. Ed Diener & Robert Biswas-Diener, 2002. "Will Money Increase Subjective Well-Being?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 57(2), pages 119-169, February.
    12. Tania Burchardt, 2005. "Are One Man’s Rags Another Man’s Riches? Identifying Adaptive Expectations using Panel Data," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 74(1), pages 57-102, October.
    13. Lea, Stephen E. G. & Webley, Paul & Walker, Catherine M., 1995. "Psychological factors in consumer debt: Money management, economic socialization, and credit use," Journal of Economic Psychology, Elsevier, vol. 16(4), pages 681-701, December.
    14. Faber, Ronald J, et al, 1995. "Two Forms of Compulsive Consumption: Comorbidity of Compulsive Buying and Binge Eating," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 22(3), pages 296-304, December.
    15. Hoch, Stephen J & Loewenstein, George F, 1991. "Time-Inconsistent Preferences and Consumer Self-Control," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 17(4), pages 492-507, March.
    16. Belk, Russell W, 1985. "Materialism: Trait Aspects of Living in the Material World," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 12(3), pages 265-280, December.
    17. Frijters, Paul, 2000. "Do individuals try to maximize general satisfaction?," Journal of Economic Psychology, Elsevier, vol. 21(3), pages 281-304, June.
    18. Headey, Bruce & Muffels, Ruud & Wooden, Mark, 2004. "Money Doesn’t Buy Happiness… Or Does It? A Reconsideration Based on the Combined Effects of Wealth, Income and Consumption," IZA Discussion Papers 1218, Institute of Labor Economics (IZA).
    19. Willem Saris, 2001. "The Relationship between Income and Satisfaction: The Effect of Measurement Error and Suppressor Variables," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 53(2), pages 117-136, February.
    20. Richins, Marsha L & Dawson, Scott, 1992. "A Consumer Values Orientation for Materialism and Its Measurement: Scale Development and Validation," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 19(3), pages 303-316, December.
    21. Daniel Kahneman & Alan B. Krueger & David Schkade & Norbert Schwarz & Arthur A. Stone, 2006. "Would You Be Happier If You Were Richer? A Focusing Illusion," Working Papers 77, Princeton University, Department of Economics, Center for Economic Policy Studies..
    22. Andrew Clark & Yannis Georgellis & Peter Sanfey, 2001. "Scarring: The Psychological Impact of Past Unemployment," Economica, London School of Economics and Political Science, vol. 68(270), pages 221-241, May.
    23. Veblen, Thorstein, 1899. "The Theory of the Leisure Class," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number veblen1899.
    24. Joaquina Lever, 2004. "Poverty and Subjective Well-being in Mexico," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 68(1), pages 1-33, August.
    25. Bentham, Jeremy, 1781. "An Introduction to the Principles of Morals and Legislation," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number bentham1781.
    26. Chang-ming Hsieh, 2004. "Income and Financial Satisfaction among Older Adults in the United States," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 66(3), pages 249-266, May.
    27. Daniel Kahneman & Alan B. Krueger & David Schkade & Norbert Schwarz & Arthur A. Stone, 2006. "Would You Be Happier If You Were Richer? A Focusing Illusion," Working Papers 77, Princeton University, Department of Economics, Center for Economic Policy Studies..
    28. Eric J. Arnould & Craig J. Thompson, 2005. "Consumer Culture Theory (CCT): Twenty Years of Research," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 31(4), pages 868-882, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Di Tella, Rafael & Haisken-De New, John & MacCulloch, Robert, 2010. "Happiness adaptation to income and to status in an individual panel," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 834-852, December.
    2. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2006. "Income and happiness: Evidence, explanations and economic implications," PSE Working Papers halshs-00590436, HAL.
    3. Oswald, Andrew J. & Powdthavee, Nattavudh, 2008. "Does happiness adapt? A longitudinal study of disability with implications for economists and judges," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1061-1077, June.
    4. Wen-Chun Chang, 2013. "Climbing up the Social Ladders: Identity, Relative Income, and Subjective Well-being," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 113(1), pages 513-535, August.
    5. V. K. Shrotryia & Shashank Vikram Pratap Singh, 2020. "Measuring Progress Beyond GDP: A Theoretical Perspective," Emerging Economy Studies, International Management Institute, vol. 6(2), pages 143-165, November.
    6. Cai, Shu & Park, Albert, 2016. "Permanent income and subjective well-being," Journal of Economic Behavior & Organization, Elsevier, vol. 130(C), pages 298-319.
    7. Qianping Ren & Maoliang Ye, 2017. "Donations Make People Happier: Evidence from the Wenchuan Earthquake," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 132(1), pages 517-536, May.
    8. Mentzakis, Emmanouil & Moro, Mirko, 2009. "The poor, the rich and the happy: Exploring the link between income and subjective well-being," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(1), pages 147-158, January.
    9. Gardner, Jonathan & Oswald, Andrew J., 2007. "Money and mental wellbeing: A longitudinal study of medium-sized lottery wins," Journal of Health Economics, Elsevier, vol. 26(1), pages 49-60, January.
    10. Liselot Hudders & Mario Pandelaere, 2012. "The Silver Lining of Materialism: The Impact of Luxury Consumption on Subjective Well-Being," Journal of Happiness Studies, Springer, vol. 13(3), pages 411-437, June.
    11. Deckers Thomas & Falk Armin & Schildberg-Hörisch Hannah, 2016. "Nominal or Real? The Impact of Regional Price Levels on Satisfaction with Life," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(3), pages 1337-1358, September.
    12. Benno Torgler & Sascha L. Schmidt & Bruno S. Frey, 2006. "The Power of Positional Concerns: A Panel Analysis," CREMA Working Paper Series 2006-19, Center for Research in Economics, Management and the Arts (CREMA).
    13. Caporale, Guglielmo Maria & Georgellis, Yannis & Tsitsianis, Nicholas & Yin, Ya Ping, 2009. "Income and happiness across Europe: Do reference values matter?," Journal of Economic Psychology, Elsevier, vol. 30(1), pages 42-51, February.
    14. Alejandro Cid & Daniel Ferres & Máximo Rossi, 2008. "Subjective Well-Being in the Southern Cone: Health, Income and Family," Documentos de Trabajo (working papers) 1308, Department of Economics - dECON.
    15. Koen Decancq & Marc Fleurbaey & Erik Schokkaert, 2015. "Happiness, Equivalent Incomes and Respect for Individual Preferences," Economica, London School of Economics and Political Science, vol. 82, pages 1082-1106, December.
    16. Bruno Frey & Alois Stutzer, 2014. "Economic Consequences of Mispredicting Utility," Journal of Happiness Studies, Springer, vol. 15(4), pages 937-956, August.
    17. Akay, Alpaslan & Bargain, Olivier B. & Jara, Xavier, 2017. "Back to Bentham, Should We? Large-Scale Comparison of Experienced versus Decision Utility," IZA Discussion Papers 10907, Institute of Labor Economics (IZA).
    18. Drakopoulos, Stavros A. & Karayiannis, Anastassios, 2007. "The Paradox of Happiness: Evidence from the Late Pre-Classical and Classical Economic Thought," MPRA Paper 71657, University Library of Munich, Germany.
    19. Binder, Martin & Coad, Alex, 2010. "An examination of the dynamics of well-being and life events using vector autoregressions," Journal of Economic Behavior & Organization, Elsevier, vol. 76(2), pages 352-371, November.
    20. Oshio, Takashi & Umeda, Maki & Fujii, Mayu, 2013. "The association of life satisfaction and self-rated health with income dynamics among male employees in Japan," Japan and the World Economy, Elsevier, vol. 28(C), pages 143-150.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:joepsy:v:29:y:2008:i:4:p:491-507. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/joep .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.