By James Kwak
A friend passed on this article in The Motley Fool by Morgan Housel. It begins this way:
“That’s the title of Vanguard founder John Bogle’s fantastic book about measuring what counts in life.
“The title, as Bogle explains, comes from a conversation between Kurt Vonnegut and novelist Joseph Heller, who are enjoying a party hosted by a billionaire hedge fund manager. Vonnegut points out that their wealthy host had made more money in one day than Heller ever made from his novelCatch-22. Heller responds: ‘Yes, but I have something he will never have: enough.'”
The rest of the article discusses the cases of Rajat Gupta and Bernie Madoff, the former accused (but not criminally) and the latter convicted of illegal activity done after they had already been enormously successful, professionally and financially.
Housel asks, why do people push on — legally or illegally — when they have more of everything than anyone could possibly need? He summarizes the happiness research as follows:
“Money isn’t the key to happiness. What really gives people meaning and happiness is a combination of four things: Control over what they’re doing, progress in what they’re pursuing, being connected with others, and being part of something they enjoy that’s bigger than themselves.”
Of course, even if that’s true (and I think it is, except for the first sentence, on which more below), that doesn’t mean that people realize it. And if people don’t understand the relationship between their actions and their personal outcomes, we have no reason to believe that they will behave in a utility-maximizing way.
That said, renowned economist Justin Wolfers was recently on Planet Money saying that money does, indeed, buy happiness. He was discussing a paper he did with Betsey Stevenson looking at datasets covering many countries over many years. They find a positive relationship between income and subjective well-being, whether in the form of life satisfaction or happiness (although the relationship appears somewhat weaker for happiness).* In particular, they find that there is no satiation point, at least when making cross-country comparison (that is, the positive relationship persists even when you look only at countries that are at least moderately wealth).
At one point in the Planet Money interview, I believe Wolfers did say that when it comes to happiness, someone (Kahneman, I think) had estimated that there is a satiation point at around $75,000 per year. But, he went on, the issue is that we may want subjective states other than simple happiness. So, for example, we may want the subjective feeling of power, whether or not it actually makes us happy in the moment. And those other subjective states may not have satiation points, or they may have little to do with income.
But ultimately I agree with Heller. It is a great thing to have “enough,” and to know you have enough. And that is a feeling that for some people, apparently, no amount of money can buy.
* The difference, put simply, is between whether you feel happy at this moment and whether you feel satisfied with your life as a whole. For more, see this fantastic TED Talk by Daniel Kahneman (which I have recommended before).