When Jean-Jacques Rousseau first said the phrase quite similar to today’s “money can’t buy happiness,” lived in a completely different time. The fact of the matter is, in today’s world, it is much different.
According to research done in Harvard Business School; Money can indeed buy a person happiness. People with more money are happier and more satisfied with life. This fact is specially correct with self-made millionaires.
Why Did People Think That Money Couldn’t Bring Happiness?
As mentioned, Jean-Jacques Rousseau coined a phrase quite similar to the age-old proverb. The Genevan philosopher wrote;
Money buys everything, except morality and citizens.
Jean-Jacques Rousseau
The phrase then made its way to the United States on the William and Mary College Quarterly History Magazine. Since then, it had been used in other forms like; money can’t buy education, money can’t buy friends, money can’t buy love, and so on.
One of the main reasons the proverb has gained popularity was that people wanted to limit money’s power over an individual. For example, proclaiming that you can only buy materialistic things with money, which would not be enough for one to keep happy.
While happiness is internal, it does depend on what truly makes one person happy. (Source: Teaching Banyan)
Who Was Part of the Study?
Professor Michael Norton and his Ph.D. student Grant Donelly were able to prove that self-made millionaires are much happier. In fact, millionaires who earned their wealth were more satisfied compared to those that did not.
The duo worked closely with Tianyi Zheng from the University of Mannheim and Emily Haisley, the behavioral finance director of BlackRock, to survey over 4,000 millionaires all over the globe.
The study was entitled The Amount and Source of Millionaires’ Wealth Predict Their Happiness and was published in the Personality and Social Psychology Bulletin in January 2018. Their research can be found here.
Many people aspire to great wealth, and becoming a millionaire is a commonly used reference for financial success. The question of whether more wealth leads to greater happiness has interested economists, behavioral scientists and the general public for decades.
Grant Donelly
(Source: CNBC)
What Happend in the Study?
In previous studies, researchers believed that having enough money that covers basic needs decrease stress and, in turn, makes people happier, but only to a certain extent. Once people have enough money for basic necessities, money tends to take less effect on their happiness. Here’s where the study conducted by Norton and Donelly says otherwise.
In general, our understanding is that wealth matters, but there is diminishing marginal utility. One limitation of our understanding is what happens at the higher end — the millionaires of the world.
Grant Donelly
Due to the fact that Donelly’s study had a larger sample size, it was definitely validated.
The general finding is that more money does lead to more happiness. So, while we’ve believed before there is diminishing marginal utility, the curve doesn’t diminish as quickly as we once thought — and even when basic needs have been met, acquiring more wealth does increase happiness.
Grant Donelly
(Source: CNBC)