Money and Happiness: How to Break Free from the Hedonic Treadmill, Avoid the Income-Happiness Paradox, and Embrace the Social Comparison Theory

Does Money Buy Happiness? Hedonic Treadmill, Income-Happiness Paradox and Social Comparison Theory

We all want to be happy, but how much does money contribute to our happiness? This is a question that has fascinated psychologists, economists, and philosophers for decades. In this blog post, we will explore some of the theories and findings that try to answer this question, such as the hedonic treadmill, the income-happiness paradox, and the social comparison theory.

The Hedonic Treadmill

The hedonic treadmill is a term coined by Brickman and Campbell in 1971, describing the tendency of people to keep a fairly stable baseline level of happiness despite external events and fluctuations in demographic circumstances¹ The idea is that we adapt to changes in our life circumstances, both positive and negative, and return to our previous level of happiness over time. For example, if we win the lottery, we may experience a surge of happiness at first, but then we get used to our new wealth and take it for granted. Similarly, if we lose a limb in an accident, we may feel devastated at first, but then we cope with our loss and adjust to our new situation.

The hedonic treadmill suggests that money does not have a lasting impact on our happiness, because we always adjust our expectations and desires to match our income level. As a result, we are always chasing more money, thinking that it will make us happier, but we never reach a lasting state of satisfaction.

The Income-Happiness Paradox

The income-happiness paradox is a contradiction in the data that was first observed by Easterlin in 1974² He found that while happiness varies directly with income both among and within nations at a point in time, happiness does not increase when a country’s income increases over time. In other words, richer countries are not happier than poorer countries on average, and people in the same country are not happier as their income grows over time.

This paradox challenges the assumption that economic growth leads to greater well-being for everyone. It also implies that there is a limit to how much money can buy happiness, and that other factors, such as social relationships, health, education, and culture, may play a more important role in determining our happiness.

The Social Comparison Theory

The social comparison theory was first proposed by Festinger in 1954, and states that people have a basic drive to evaluate their opinions and abilities by comparing themselves to others³ We do this to gain accurate self-evaluations and to learn how to define ourselves. However, social comparison can also affect our happiness, depending on who we compare ourselves to and how we perceive the comparison.

There are two types of social comparison: upward and downward. Upward social comparison occurs when we compare ourselves to those who we believe are better than us. This can motivate us to improve ourselves and achieve more, but it can also make us feel inferior and dissatisfied with ourselves. Downward social comparison occurs when we compare ourselves to those who are worse off than us. This can boost our self-esteem and make us feel grateful for what we have, but it can also make us complacent and less empathetic.

Social comparison theory suggests that money can influence our happiness depending on how we use it as a standard of comparison. If we compare ourselves to those who have more money than us, we may feel unhappy and envious. If we compare ourselves to those who have less money than us, we may feel happy and generous. However, these effects are not stable or universal, as they depend on our personal values, goals, and expectations.

Conclusion

Money is often considered as a means to achieve happiness, but the relationship between money and happiness is not simple or straightforward. As we have seen, there are different theories and findings that try to explain how money affects our happiness, such as the hedonic treadmill, the income-happiness paradox, and the social comparison theory. These theories suggest that money can have both positive and negative effects on our happiness depending on how much we have, how we spend it, how we adapt to it, and how we compare ourselves to others.

However, money is not the only factor that influences our happiness. There are many other aspects of life that contribute to our well-being, such as health, relationships, meaning, purpose, autonomy, creativity, spirituality, etc. Therefore, instead of focusing solely on money as a source of happiness, we should also pay attention to these other dimensions of life that can enrich our experience and make us happier.

References

¹: Brickman P., Campbell D.T., Hedonic relativism and planning the good society. In: Appley M.H., editor. Adaptation-level theory: A symposium. Academic Press; New York: 1971. pp. 287–302. ²: Easterlin R.A., Does economic growth improve the human lot? Some empirical evidence. In: David P.A., Reder M.W., editors. Nations and households in economic growth: Essays in honor of Moses Abramovitz. Academic Press; New York: 1974. pp. 89–125. ³: Festinger L., A theory of social comparison processes. Human Relations. 1954;7:117–140.