Does money buy happiness? What does the Easterlin Paradox say?

I miss not having money. How about you?

What I miss most about not having money is that I am tied to my house. My job is mobile – me and my laptop can operate anywhere. Only an hour ago I was reading the papers and looking at the art exhibitions that are on at various galleries around the world.

I would love to say loudly, in the direction of the kitchen, ‘pack a few small items, we are off to the John Constable Portrait exhibition at the National Portrait Gallery in London. Better pack warm, its freezing over there.” I’d love to see that exhibition, especially as I’ve been painting portraits these past few months.

And then there’s the angry daughters-in-law

In the end it all came down to self-portraits after I had spent some months painting portraits of various grandchildren and then run into a bunch of angry daughters-in-law who all objected about the way I depicted their children.

Now that we have no money are we less happy?

Anyway, the shortage of money has got me tied to my desk and as far as I can see, this is not going to change any time soon. Of course, I can always take the Payday Loan route and I’ll keep that in mind if I see that a really exciting, once in a lifetime exhibition opens somewhere.

What else is this money shortage doing?

It is making inroads at the supermarket. We are being ‘more choosy’ about what we buy and are buying only what we are sure we will eat. We have stopped buying ‘luxury’ items and I don’t hang around the ‘spices and dried fruits’ counter any more.

We have also stopped shopping at strange supermarkets and stay strictly at the tried and tested store where we know the prices.

Is this shortage of money affecting our happiness? A famous study carried out in 1974 showed that:

• Rich people tend to be happier than poor people,
• Rich societies are not happier than poor societies and
• As countries get richer they do not get happier.

The Easterlin Paradox.

The Easterlin Paradox is a key concept in happiness economics. It is named after economist Richard Easterlin who discussed the factors contributing to happiness in his 1974 paper “Does Economic Growth Improve the Human Lot?”

Easterlin found, as expected by most economists, that, in a given country, people with higher incomes are more likely to report being happy. However, in international comparisons, the average reported level of happiness does not vary much with national income per person, at least for those countries with sufficient income to meet basic needs.

So what’s to do instead of spending money?

You have to make a switch from being a financial animal to a social one: Here are some tips for your new moneyless existence:

• Connect with people around you, and build relationships,
• Be active: take exercise,
• Take notice: be curious and savor the moment,
• Keep learning: try something new, challenge yourself, and
• Give: do something nice for someone, contribute to society.

Why do I feel that I could do all those things better if I had some money?

Compound interest is still a great invention

Look at this calculation. If you start investing today at the rate of, say, $100 a month for your newborn who arrived at some crazy hour this morning, and who, when he grows up, takes over and continues that same investment until he reaches the age of 50, it will be worth how much?