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Money and Happiness in Economic Theories

Does Money Buy Happiness?

According to the discovery of various economists and sociologists such as Adam Smith, money does not buy happiness where they have argued that the limited ability of people to achieve happiness through material wealth is not enough to guarantee them material wealth. Even though a majority of the world’s population believes that money is the key to happiness, such a proposition has not been seen to have any impact on their overall behavior.

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Based on a survey conducted in the US during the 1950s, the average number of people who experienced an increase in their real income per capita did not demonstrate an increased level of happiness which showed that money did not influence the level of individual happiness (Lee, 2005).

According to Lee (2005), there is a general disconnection between money and happiness which can be attributed to two aspects the first of which is that any additional happiness from an increased income means that the incomes of other people will go down as the personal income of one person usually depends on the personal income of another. This effect means that the person whose income will go down will experience reduced levels of happiness which will make the person with the additional income also have a reduced level of happiness.

The second aspect which explains the disconnection that exists between money and happiness is that the pursuit of additional wealth and income usually becomes addictive thereby reducing an individual’s time with their family members and friends, limiting their social life which in return reduces their happiness and the happiness of others around them (Layard, 2005). Based on such arguments money does not seem to provide any amount of happiness to an individual as human beings will always be in pursuit of more material wealth.

Does It Make Sense to Pursue Money?

Adam Smith in his work “The Theory of Moral Sentiments” deals with the pursuit of money and happiness where he discusses the aspect of whether money leads to an individual’s overall happiness. Smith (1981) uses the story of a poor man’s son who devotes all of his life to attain material and monetary wealth because he sees money to be the key to wealth. However, during his pursuit of wealth, the man begins to realize that he might never obtain the wealth he so desperately needs.

He makes this observation after he begins to notice that the humble security and contentment he wishes to have will not be attained through material wealth. He realizes that wealth and greatness are only frivolous trinkets of human existence that are only meant to provide a sense of ease and tranquility within a human being. Smith draws a conclusion from this story where he remarks that the poor man is filled with regret on realizing that he wasted most of his time pursuing pleasures that could afford him no satisfaction (Smith, 1981).

Smith argued that people who sacrificed a lot in the pursuit of wealth rarely enjoyed the fruits of their labor which made the whole exercise a futile attempt. Lee (2005) on the other hand supported Smith’s argument but he went to state that if people stopped pursuing wealth the economic world would become stagnant, making it hard for the personal income to increase.

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If everyone chose not to be ambitious, then the easy life would choose to be unattractive at some point as some members of society strive to gain more materialistic items that will make them happy. If the poor man had applied the cost-benefit principle before deciding to sacrifice the better half of his life to pursue wealth, then he would have been able to determine whether his actions would benefit him (Frank, 2005).

References

Frank, R.H., (2005). The opportunity cost of economics education. Web.

Layard, R., (2005). Happiness: lessons from a new science. New York: Penguin Publishers.

Lee, D.R., (2005). Who says money cannot buy happiness? Independent Review, 10(3): 385-400.

Smith, A., (1981). An inquiry into the nature and causes of the wealth of nations. Indianapolis: Glasgow Edition.

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StudyCorgi. (2021, February 2). Money and Happiness in Economic Theories. Retrieved from https://studycorgi.com/money-and-happiness-in-economic-theories/

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StudyCorgi. "Money and Happiness in Economic Theories." February 2, 2021. https://studycorgi.com/money-and-happiness-in-economic-theories/.

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StudyCorgi. 2021. "Money and Happiness in Economic Theories." February 2, 2021. https://studycorgi.com/money-and-happiness-in-economic-theories/.

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StudyCorgi. (2021) 'Money and Happiness in Economic Theories'. 2 February.

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