New! Wheel! More round!

Why Money Doesn’t Buy Happiness is a strange article in Newsweek explaining how psychologists have discovered that after a certain point you get less enjoyment from more money. This is the diminishing returns principle, applied to application of a resource (money) to gain a return (happiness) and is nothing new, having been first described in the 19th Century. What is interesting is the odd reasons they come up with for their being less return for money. According to the article the range of choices creates stress and therefore unhappiness. But surely you don't need to be a good earner to have access to such a bewildering array of choices? You don't, of course. You choose between 17 different cheap types of pasta instead of 17 different types of expensive pasta.

They seem to have missed the obvious answer, which is that relative wealth is important to us. Notice how the optimum happiness from wealth is around the comfortably middle earnings region? This point is also where you end up being relatively wealthier than most of the population, with a sharp decrease in numbers of people above you (those that are have a sharp increase in income). You're wealthier than most people but still part of the lumpen masses, with plenty of similar peers, which is what lots of us like. Notice how gap year kids (and backpackers generally) love living what would be described as itinerant, meagre lives, eating cheap crap and sleeping in bug infested hostels when in the developing world but would be mortified to do the same at home? Because their position in the society they are in at any one time is more important than the materials they own or have use of.

Keeping up with the Joneses, attaining or maintaining a good position in society, relative wealth are what drives us to work five days a week; not an intrinsic need for a Nintendo Wii or stuffed quails' eggs. Expanded choice isn't the cause of diminishing returns from greater wealth: the extra effort; the dislocation from your peers; the irrelevance of being more better off (once you're better off, that's the important thing) than the next chap is what reduces the return from money once you get beyond the upper quartile.