Does money buy happiness, or does happiness come indirectly from the higher rank in society that money brings? We tested a rank-income hypothesis, according to which people gain utility from the ranked position of their income within a comparison group. The rank hypothesis contrasts with traditional reference-income hypotheses, which suggest that utility from income depends on comparison to a social reference-group norm. We found that the ranked position of an individual’s income predicts general life satisfaction, whereas absolute income and reference income have no effect. Furthermore, individuals weight upward comparisons more heavily than downward comparisons. According to the rank hypothesis, income and utility are not directly linked: Increasing an individual’s income will increase his or her utility only if ranked position also increases and will necessarily reduce the utility of others who will lose rank.
Source: “Money and Happiness: Rank of Income, Not Income, Affects Life Satisfaction” from Psychological Science
Wolfers and Stevenson at the Wharton School at the University of Pennsylvania (I’m a proud alum) have done some fascinating research on money and happiness that you can check out at the wonderful Freakonomics blog.
Personally, I don’t believe in get-rich-quick schemes, I don’t think most people can beat the market for any length of time, and I think the fees on trading erase most of the gains for those who do. If you want to improve your personal finances read this, if you want to learn more about the stock market read this and if you want to break out of the mold and find a way to live a more exciting life and make money at it, give this a look.
I believe status is far more important to people than money, once a sustenance level of income is achieved. Thoughts?
Is power more evenly balanced in poor households?
You should follow me on Twitter here or subscribe to this blog’s feed. If you’re a regular reader please support the blog by doing your book and movie shopping at the store. You’ll find all my recommendations there. Here are the site’s most popular posts of all time.