Does money make you happy?

Research offers some surprising answers. A closer look at the measurement error of materialism.

from the June 24, 2008 edition

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Money is a measure of success, and a handy one at that. But there is a dark side to this fact: People tend to forget that money is only a measure. Some people focus on money for its own sake, forgetting what really brings the happiness.

No doubt you've met people who appear to be trapped in an unsatisfying cycle of materialism and unhappiness. They confuse money for what it is supposed to measure and thereby maximize the wrong thing.

Among other things, they leave out of the equation all of the kinds of success – in our family lives, in our spiritual lives, in our friendships – that money does not measure. And even their work choices reflect the sad mistake of forgoing what they love doing for what brings in the most monetary compensation.

The evidence on happiness is clear that we should avoid the measurement error of materialism.

Some believe market capitalism is to blame, and here is what they advocate: Tax away our incomes at very high rates so that money and success were no longer so highly correlated. Then, that money (if we still bothered to earn it) could be spent on public goods and services instead of big houses and other ostentatious displays of our success. We would be happier if we were forced out of the capitalistic consumers' arms race that we have (literally) bought into. And as a bonus, we could enjoy all the good things the government would give us.

Simple, it seems – but misguided. Although consumerism does not buy happiness, government spending does not, either. On the contrary, it makes us less happy in general.

Government spending doesn't help

In 1972, the federal government devoted about $4,300 to each American (in 2002 prices). By 2002, spending had risen to $6,900 per person. Yet we have not gotten any happier. In 1972, 30.3 percent of Americans said they were very happy. In 2002, that percentage was still exactly 30.3. Even worse, research shows that higher government spending turns out to be pushing average happiness down, not up.

The market system, which often rewards success with dollars, can create the tendency to confuse success itself with money. But allowing the government to take more of our hard-earned money will not fix this; on the contrary, government would only make things worse for us if it tried to adjust our values through taxation and public spending. The moral confusion of materialism is one best left to ourselves, our families, our communities, and our faiths to resolve.

Alexis de Tocqueville wrote in his 1835 classic "Democracy in America" about the tendency toward "excessive individualism" in an atomistic American society.

Tocqueville noted, however, that the remedy lay not in reordering the American system, but in the institutions of civil society: families, churches, charities, and friendships, which are the connective tissue between people that help us avoid errors in our values.

In other words, markets are not enough – we need morality as well, and the institutions that make it possible to express this morality.

Free markets and morals

Free markets allow us to live the way we want – giving most people maximum buying power and allowing citizens to find jobs that match their skills and passions.

How we use this power and freedom is up to us, and depends on our values: We can make decisions that lead to happiness or make us miserable.

But to weaken free market capitalism because it does not bring happiness directly would be senseless: It would be like throwing out your computer because it didn't make your coffee.

The fact that some sick or disabled or otherwise-challenged people struggle to provide for themselves in a free-market system does not mean there is something wrong with our system – it means there is something wrong with our morals.

In a moral society, these people should be aided by the rest of us in a way that preserves dignity and avoids dependence.

The fact that money doesn't buy happiness is no indictment of capitalism. On the contrary, capitalism is the best – actually, it's the only – framework for allowing people to succeed on their merits – and we know success is vital to happiness.

Capitalism, moored in proper values of honesty, fairness, and charity, is a key ingredient in our gross national happiness.

• Arthur C. Brooks is a professor at Syracuse University's Maxwell School and a visiting scholar at the American Enterprise Institute. This article is adapted from his new book, "Gross National Happiness" (Basic) and an essay in the May/June issue of The American magazine ( american.com ).

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