How much of your happiness is tied to money?

“Blessed with riches and possibilities far beyond anything imagined by ancestors who tilled the unpredictable soil of medieval Europe, modern populations have nonetheless shown a remarkable capacity to feel that neither who they are nor what they have is quite enough.” – Alain de Botton, philosopher and author of Status Anxiety

Apparently, everything is relative.

Whether we’re talking money or sex appeal, the research is crystalline – we measure our success in life against our “reference group,” that is, our neighbors, our work colleagues, our relatives and closest friends. And while these comparisons serve us well at times (e.g., motivating us to do our best), they by and large create a healthy dose of unhappiness.

Said psychologist Carlin Flora, in a piece written for Psychology Today: “At the end of the day, we're concerned with our immediate reference group—one made up of about 150 people.” In her piece, Flora quotes economist Robert H. Frank, of Cornell:

 “When you see Bill Gates' mansion, you don't actually aspire to have one like it. It's who is local, who is near you physically and who is most like you – your family members, coworkers and old high school classmates – with whom you compare yourself. . . . If someone in your reference group has more, you get a little anxious."

Our sense of envy (a product of “social comparison theory”) often leads to Status Anxiety, and its pervasive reach dominates much of our life experience.  Its historical roots seem clear enough (we were, after all, focused exclusively on survival not too long ago). Yet now, in the modern era, these roots persist and studies continue to affirm what we know instinctively: it’s more important for us to outperform our “reference group” than to have more (money, material goods, sex appeal) in absolute terms.

Said author and philosopher Alain de Botton: “Wealth is not an absolute. It is relative to desire.”

Two studies, cited by Flora, support this notion of relativity. Wrote Flora:

“In the 1980s, Frank dismantled a premise central to economic theory: People will always choose the greatest absolute amount of wealth. Landmark research shows that our preferences are actually quite relative. We'd rather make $50,000 while living in a neighborhood where everyone else makes $40,000 than earn $100,000 among those who are raking in $150,000.”

In a similar vein, Flora added: “Women are more envious of other women's good looks, say evolutionary psychologists, because appearance is an important marker of youth and fertility. In a beauty-contest version of the economist Frank's salary preferences breakdown, women in Buss and Hill's survey reported they would rather be a ‘5’ among ‘4s’ than an ‘8’ among ‘10s’.”

Here’s a glimpse at the pros and cons of Status Anxiety:

THE PROS

Said Psychologist Camille Johnson, in a piece for Psychology Today: “Envy has its benefits . . . if channeled in the right way: Research in educational contexts by Hart Blanton of the University of Connecticut and in business contexts by John Schaubroek at Michigan State University has demonstrated that people who look upward, despite the potential pain, are more successful. As another adage goes, ‘the pain is temporary, the pride is forever’."

Quoting Yale professor Peter Salovey, Flora wrote: 

“Just as with anxiety, says Peter Salovey, professor of psychology at Yale, a mild dose of envy can energize us and concentrate our efforts: ‘If I really wish I had a car like my neighbor's, then that will motivate me to put my nose to the grindstone and earn more money in order to be able to buy that car’. ‘Envy helps us know what's really important to us,’ he says. If we consistently feel envy toward classmates who earn perfect grades or climbers who summit mighty peaks, these must be the domains on which we stake our reputations.” 

THE CONS

Psychologist Daniel Crosby highlighted the darker side, explaining:

“Studies show that the most noticeable way in which money impacts happiness is negatively! We see that the very rich enjoy a slight bump in happiness given their comparative superiority, but the ‘have nots’ are made absolutely miserable as they look up at their better resourced counterparts. Given that the increase in happiness is slight and that the rich make up a small fraction of the total population, in general, the tendency to view money in comparative terms is the source of a great deal of woe.”

Crosby argues that the American tendency to “flaunt it,” may not be a simple matter of human nature.  His argument?  “Switzerland is just one example of a very wealthy country with a philosophy diametrically opposed to showy wealth. As opposed to the American mantra of, ‘if you’ve got it, flaunt it,’ the Swiss take an ‘if you’ve got it, hide it’ approach so as not to provoke envy in others.”

Here’s where Flora agrees, saying: “Envy is ultimately isolating.” Warns veteran journalist and author Chris Hedges: “Envy pushes us away from what's most precious, and that is love. Those who are lonely, who lack close personal relationships, are most susceptible to status anxiety.”

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Author's Note: If you’d like to explore how your spending decisions affect your happiness, check out the website “Beyond The Purchase” (http://www.beyondth epurchase.org/), which analyzes how your values and personality “interact with spending decisions” to impact your happiness.