Rich or Poor…

One of my mother’s favorite sayings comes directly from her father, a hard scrabble guy who was quick with a one-liner. Poppy used to say, “Rich or poor, I’d rather have money!” After reading up on recent research conducted on our attitudes about wealth, it seems that my grandfather and my mother may have been on to something.

Two young economists from the University of Pennsylvania (Betsey Stevenson and Justin Wolfers) have created a stir in the world of economics. As highlighted in the New York Times (Money Doesn’t Buy Happiness. Well, on Second Thought… by David Leonhardt), I learned that maybe the old phrase “money doesn’t buy happiness” is not entirely true. While the two economists probably did not set out to disprove that notion, they did find that “money tends to bring happiness, even if it doesn’t guarantee it. ‘The central message,’ Ms. Stevenson said, ‘is that income does matter.’” Wow, that kind of sinks the whole Pollyanna view of money.

Hold on one minute---I thought that it wasn’t the actual income that mattered but how people felt in relation to others. In other words, if you have the biggest house on the block, maybe you feel like a big shot, while if you are surrounded by those who have lots more money than you yourself have, it may make you fell less wealthy. Not so, at least as far as these results indicate. “Absolute income seems to matter more than relative income.”

From a purely non-academic standpoint, this is not my experience. I have seen hundreds of folks and spoken to thousands of people on the radio and invariably there are more than a few people who ask me: “how am I doing compared to those my age?” These are not people who have no means—in fact, this is a question that is usually posed by someone who has a few bucks. What is funny is that even when I tell the person, “Don’t worry, you’re doing just fine”, I sense that he or she really does want to know how fine, compared to the neighbors.

Of course if we were able to see a rundown of everyone’s net worth, that wouldn’t make you happy either. What is clear is that figuring out what you need to accumulate in order to make sure you can get where you want to go, can make you happier, simply by providing peace of mind. “Affluence is a pretty good deal” because it may allow you reach those goals faster, but it will not make you happy in and of itself. Then again, given the choice, who among us would choose to be less wealthy? Or as mom says, “Rich or poor, it’s nice to have money.”