How Money Can Buy Happiness…If You’re Rich

It often seems as though there is an enormous gap between the wealthy and non-wealthy when it comes to the outcry over America’s economic troubles. One reason for this is that the rich have the means and the motivation to make their voices heard. They also care more about money from a developmental standpoint — that’s why many of them chose a life path that was likely to make them wealthy. A third explanation is that the rich are less likely to support the party of the president, and thus more likely to complain.

A new study led by UC Berkeley’s Cameron Anderson opens the door for another complementary explanation for why the rich love their money. Although a lot of work has been done on the connection between happiness and socioeconomic status (i.e. income), the findings are inconclusive. Anderson’s team decided to investigate how happiness was affected by “sociometric” status — the respect and admiration one has in face-to-face groups (e.g. friends, co-workers). The authors use the phrase “local ladder” to describe it.

In an experimental manipulation and two correlational studies sociometric status was predictive of “subjective well-being” while socioeconomic status was not. The researchers also tracked the subjective well-being of M.B.A. students before and after graduation. They found that socieometric status once again predicted subjective well-being, but even though many students had new jobs and large salary increases, their incomes did not have a significant effect.

Why might this make the mega-rich more concerned about their moeny? I would argue that when you’re wealthy, money has greater salience and greater significance in your face-to-face group interactions. If a plant worker in Ohio has to take a pay cut, he’s still going to be a bigwig at his neighborhood poker game. At the very least, his status at work is unlikely to change because everybody is probably taking pay cuts. But if you’re wealthy, this “local ladder” may involve country clubs, international businessmen, and exclusive events halfway around the world. A decrease in wealth is more likely to make you feel like your sociometric status is diminishing. The result is that money becomes important for a wealthy person’s happiness is a way it isn’t for the non-wealthy. From a socioeconomic standpoint, a given proportion of your income has more utility if you have less money. But from a sociometric standpoint, that may not be the case.

Two more points. First, this is a broad generalization that risks stereotyping large swaths of people. Second, certain monetary losses (e.g. losing a house) would probably have a disproportionate sociometric effect on the poor and the middle class. Still, the study suggests an interesting mechanism for how initially placing a high value on money can alter the social fabric of your life to make money even more important.
Anderson, C., Kraus, M., Galinsky, A., & Keltner, D. (2012). The Local-Ladder Effect: Social Status and Subjective Well-Being Psychological Science DOI: 10.1177/0956797611434537

3 Responses to How Money Can Buy Happiness…If You’re Rich

  1. Paul Crowley says:

    Surely the argument is not that a dollar is worth more to the rich person than the poor (which seems incredibly unlikely) but that 1% of income is worth more to the rich person, which one can more easily believe.

  2. erichorowitz says:

    Good catch. That’s more of less what I meant. I changed my phrasing to reflect it.

  3. Bernice Muleba says:

    I don’t believe people who are poor are happy with their life style. And when you have a lot of money you’re not happy neither because you think that you are not in secure. So i would love to say that happiness is something psychological. Just to let people know that they have to do the best their can to be happy with what they can effort for the time being. Statistic said nobody is happy all the time, but some people are definitely more fulfilled than others. Happy doesn’t have much to do with material goods or high achievement, much more the quality of your relationships with the people around you

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