Money cannot buy happiness, but there is a new kind of association found between money and our perception towards it: comparison with other people's wealth.
Money by itself is a tool that can provide us with food, shelter, comfort and clothing. The connection between our happiness and our own wealth is overshadowed by the connection between our happiness and other people's subjective socioeconomic status.

The Apparent Wealth Of Other People

Conventional wisdom states that relationships and experiences produce happiness, not just money. This thought process, prevalent for decades, is busted by new research, which says that happiness is dependent upon what we think we have as compared to others, and not how much they have.
Happiness, success and wealth are not individualistic or personal, but is a broader, collective pursuit based on our own perception for other people.

Wealth Is Relative

Money may not lead to happiness, but according to a new study co-authored by Yale SOM’s Michael Kraus, our perceived wealth and status relative to others does affect how happy we are. The findings may help explain why happiness has fallen as income inequality has grown.&nbsp;<figure><picture>
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 <img src="https://insights.som.yale.edu/sites/default/files/styles/square_sm/public/2021-01/goldfish%20relative%20wealth.jpg?h=6dade3ba&amp;itok=q2Nz9E-i" alt="Two goldfish in separate bowls, one empty and one with toys and decorations">

 </picture></figure><div><time datetime="2021-01-26">
 January 26, 2021
 </time></div>Money might not buy love, but a new study suggests that it is more strongly related to happiness than some people think — particularly when people compare their income with someone else’s.Writing in the journal Psychological Bulletin, researchers describe an association between people’s subjective socioeconomic status — how they perceive their own income, education, and occupation standing in comparison with others — and happiness.That association, they say, is significantly larger than the connection between people’s objective socioeconomic status — as measured by income and educational attainment — and their level of happiness.“There is a conventional wisdom in social science that relationships and experiences are more important than money in producing happiness,” said co-author Michael Kraus, associate professor of organizational behavior at the Yale School of Management. “But we found that when people consider their wealth relative to others, there is a stronger association between money and happiness.”The study, which was led by Jacinth Tan, an assistant professor of psychology at Singapore Management University, contradicts decades of social science research that shows a weak relationship between money and happiness, particularly in wealthy societies, the authors say.“The size of the relationship we observed in our study has policy implications in the sense that lawmakers must acknowledge that the relationship between money and happiness remains consequential and cannot be ignored,” said Kraus. “Policy considerations that help people obtain good jobs and protect people from financial ruin during this pandemic may have an added benefit of improving people’s happiness.”<div data-sign-up-widget=""><button data-sign-up-widget-toggle="" aria-expanded="false" dir="ltr">
 
 
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 </button></div>The new research was motivated by an apparent disparity in previous research that has showed weak links between income and happiness and the idea that many people actively seek out prestigious jobs and higher status, the authors say. Moreover, as inequality has increased in some societies (including the United States), overall happiness has declined. That outcome wouldn’t be expected if wealth and material resources were inconsequential, the researchers say.This gap between research findings and observation suggests the possibility that objective measures, such as income, do not adequately capture the influence of money on happiness, the researchers said. They wanted to test the idea that happiness is more dependent on what people think they have compared with others than how much they do have.For the study, the researchers performed a meta-analysis of 357 different studies that have examined questions related to associations between objective and subjective measures of socioeconomic status and people’s subjective wellbeing — their sense of happiness and life satisfaction. Collectively, those studies involved data from more than 2.3 million participants gathered in publicly available datasets, such as the World Values Survey, as well as in private datasets.In their analysis, the researchers applied the MacArthur Scale of Subjective Status — a 10-rung ladder in which people indicate their perceived social status — to test the association between comparative resources and happiness. Their findings suggest that that social comparison is an important driver of how much money or material resources will increase happiness.The researchers also found that the effect of social comparison was stronger in countries, such as Singapore, with high population density. This finding makes sense, the researchers say, since there often is greater competition for resources in places where population density is high.Tan pointed out that social comparison can lead to unhappiness when a person determines their status compares less favorably to others. She cited a quote attributed to Mark Twain: “Comparison is the death of joy.”“Our findings also suggest that improving from past levels of material resources alone is insufficient for increasing happiness,” she said. “Even if people today are earning higher wages or attaining higher educational levels than their parents or compared to 10 years ago, there is going to be limited impact on their happiness if they are not doing at least as well as, if not better than others at the present. <a data-twitter-hashtags="" href="https://twitter.com/intent/tweet?text=In%20people%E2%80%99s%20minds,%20social%20mobility%20is%20not%20simply%20the%20ability%20to%20ascend%20one%E2%80%99s%20own%20socioeconomic%20ladder,%20but%20also%20to%20ascend%20the%20ladder%20of%20the%20broader,%20collective%20society.&amp;url=https://insights.som.yale.edu/insights/key-factor-in-well-being-others-apparent-wealth" title="Tweet this" dir="ltr">In people’s minds, social mobility is not simply the ability to ascend one’s own socioeconomic ladder, but also to ascend the ladder of the broader, collective society.</a>”<div> Written by Mike Cummings.
</div>

Money may not lead to happiness, but according to a new study co-authored by Yale SOM’s Michael Kraus, our perceived wealth and status relative to others does affect how happy we are. 

Money

Money may not lead to happiness, but according to a new study co-authored by Yale SOM’s Michael Kraus, our perceived wealth and status relative to others does affect how happy we are. The findings may help explain why happiness has fallen as income inequality has grown.

Money might not buy love, but a new study suggests that it is more strongly related to happiness than some people think — particularly when people compare their income with someone else’s.

Writing in the journal Psychological Bulletin , researchers describe an association between people’s subjective socioeconomic status — how they perceive their own income, education, and occupation standing in comparison with others — and happiness.

That association, they say, is significantly larger than the connection between people’s objective socioeconomic status — as measured by income and educational attainment — and their level of happiness.

“There is a conventional wisdom in social science that relationships and experiences are more important than money in producing happiness,” said co-author Michael Kraus, associate professor of organizational behavior at the Yale School of Management. “But we found that when people consider their wealth relative to others, there is a stronger association between money and happiness.”

The study, which was led by Jacinth Tan, an assistant professor of psychology at Singapore Management University, contradicts decades of social science research that shows a weak relationship between money and happiness, particularly in wealthy societies, the authors say.

“The size of the relationship we observed in our study has policy implications in the sense that lawmakers must acknowledge that the relationship between money and happiness remains consequential and cannot be ignored,” said Kraus. “Policy considerations that help people obtain good jobs and protect people from financial ruin during this pandemic may have an added benefit of improving people’s happiness.”

The new research was motivated by an apparent disparity in previous research that has showed weak links between income and happiness and the idea that many people actively seek out prestigious jobs and higher status, the authors say. Moreover, as inequality has increased in some societies (including the United States), overall happiness has declined. That outcome wouldn’t be expected if wealth and material resources were inconsequential, the researchers say.

This gap between research findings and observation suggests the possibility that objective measures, such as income, do not adequately capture the influence of money on happiness, the researchers said. They wanted to test the idea that happiness is more dependent on what people think they have compared with others than how much they do have.

For the study, the researchers performed a meta-analysis of 357 different studies that have examined questions related to associations between objective and subjective measures of socioeconomic status and people’s subjective wellbeing — their sense of happiness and life satisfaction. Collectively, those studies involved data from more than 2.3 million participants gathered in publicly available datasets, such as the World Values Survey, as well as in private datasets.

In their analysis, the researchers applied the MacArthur Scale of Subjective Status — a 10-rung ladder in which people indicate their perceived social status — to test the association between comparative resources and happiness. Their findings suggest that that social comparison is an important driver of how much money or material resources will increase happiness.

The researchers also found that the effect of social comparison was stronger in countries, such as Singapore, with high population density. This finding makes sense, the researchers say, since there often is greater competition for resources in places where population density is high.

Tan pointed out that social comparison can lead to unhappiness when a person determines their status compares less favorably to others. She cited a quote attributed to Mark Twain: “Comparison is the death of joy.”

“Our findings also suggest that improving from past levels of material resources alone is insufficient for increasing happiness,” she said. “Even if people today are earning higher wages or attaining higher educational levels than their parents or compared to 10 years ago, there is going to be limited impact on their happiness if they are not doing at least as well as, if not better than others at the present. <a data-twitter-hashtags="" dir="ltr" href="https://twitter.com/intent/tweet?text=In%20people%E2%80%99s%20minds,%20social%20mobility%20is%20not%20simply%20the%20ability%20to%20ascend%20one%E2%80%99s%20own%20socioeconomic%20ladder,%20but%20also%20to%20ascend%20the%20ladder%20of%20the%20broader,%20collective%20society.&amp;url=https://insights.som.yale.edu/insights/key-factor-in-well-being-others-apparent-wealth" title="Tweet this">In people’s minds, social mobility is not simply the ability to ascend one’s own socioeconomic ladder, but also to ascend the ladder of the broader, collective society. </a>”

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A Key Factor in Well-Being: Others’ Apparent Wealth

The Apparent Wealth Of Other People

Wealth Is Relative

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Bite-sized knowledgeto upgradeyour career

A Key Factor in Well-Being: Others’ Apparent Wealth

The Apparent Wealth Of Other People

Wealth Is Relative

IDEAS ABOUT

MORE LIKE THIS

Can't buy me meaning? Money cuts a quicker path to happiness

No Matter What We Earn, We Believe Our Richer Neighbors Have More to Give

Online and Off, We Are Drawn Toward Those with Similar Writing Styles

It's time to

READ

LIKE

A PRO!

Bite-sized knowledge
to upgrade
your career