How much money will make you really happy?

When I was a student, a friend of mine fantasized about earning £ 100 a day. It seemed an incomprehensibly large sum of money; he simply could not conceive of spending enough to run out of such riches. This happened almost 30 years ago – the equivalent fantasy today would be more than £ 200 a day. My friend, who lived with his parents, was both naive and wise. His dream income is roughly double the UK average salary, several times the global average and around a hundred times the global poverty line. How Much Does Someone Really Need?

Economists have offered several answers over the years. In his famous essay Economic possibilities for our grandchildren, John Maynard Keynes said that if incomes were to increase eightfold from the 1930s levels, “the economic problem could be solved, or at least be in sight of a solution.” Revenue has increased as much as he had anticipated, yet no solution is in sight. This may be because, as Keynes also noted, there is an insatiable desire for needs that make us “feel superior to. . . our companions “.

A little over a decade ago, Daniel Kahneman and Angus Deaton, both Nobel Prize Winners in Economics, found that $ 75,000 a year (more than $ 100,000 today, roughly my friend’s dream income) was enough to optimize everyday experiences. More money than that did nothing to reduce the amount of time people felt anxious, stressed, or sad.

However, there is another measure of happiness: Do people rate their life as satisfying? With this definition, Deaton and Kahneman found no limit to the use of money: extra income, at any level, correlated with higher levels of life satisfaction.

More recently, psychologists Paul Bain and Renata Bongiorno changed focus: instead of wondering how much money was enough, they invited survey respondents to imagine their absolutely ideal life. Then they asked how much money it would take to reach that life, if it came in the form of a lottery win. Those lottery prizes ranged from $ 10,000 (for those whose absolutely ideal life consists of replacing curtains and upholstery) to $ 100 billion (for those whose absolutely ideal life involves a great deal of Twitter buying drama). Most people, however, did not favor the top prize. A $ 10 million lottery prize was a popular choice.

How come? One possibility is that no one really has a clue how to answer the survey question, and $ 10 million was the central answer, a thousand times more than the minimum and a thousand times less than the maximum.

Another is that people are as naïve as my friend. They don’t realize that after buying a nicer house and a nicer car, paying off debts, and establishing a large pension, they would find that they could really use another couple of million dollars.

Writer Malcolm Gladwell has another theory. As a guest of the It is not a fish podcast, Gladwell said the problem with $ 100 billion is that you have unlimited choice. Simple decisions (making a lunch or buying a sandwich?) Become incredibly complex (having dinner in Paris, or Copenhagen, or just having my personal chef prepare something on my plane?). Life is cognitively overwhelming.

Another problem, says Gladwell, is that all challenges are removed from life. Do you like to collect stamps, keychains or Beanie Babies? Forget about it! You can buy them all, before that lunch in Copenhagen, if you wish.

My version is slightly different. I don’t want $ 100 billion, but the problem isn’t cognitive overload. I’m pretty sure billionaires aren’t overwhelmed by the prospect of lunch. And while projects are important, they are also scalable. If you’ve enjoyed collecting keychains, move on to the fine art collection – even with $ 100 billion to spend, the project to create the world’s largest private museum is likely to have legs.

The real problem is that being a multibillionaire would change your relationship with every other human being. Keynes knew that we often wish to feel a little “superior to our fellow men” but, when superiority becomes extreme, you become the target of kidnappers, terrorists, scammers and gold diggers of all kinds. Few of your relationships are likely to survive. Can you really trust those who do?

Bain and Buongiorno, researchers who found that people would prefer $ 10 million rather than $ 100 billion, argue that their result offers hope for sustainable development, because it suggests that people don’t have unlimited material desires. Perhaps.

I draw a different conclusion. The wealthiest people in past societies had material needs they could not meet, but which we can: air conditioning, air travel, and antibiotics. Our descendants may very well have material needs that we rarely think about because they are beyond our reach, from teleportation to eternal youth.

The best hope for sustainable development is not that we stop wanting things we cannot currently have. It’s just that most of what we appreciate isn’t a question of money. My friend, with his fantasies of earning 100 pounds a day, enjoyed drinking beer and listening to music with the rest of us. It was a convivial lifestyle. Conversely, life with $ 100 billion must be so terribly lonely.

Tim Harford’s new book is’How to add up the world

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