Money compensates for poor human relationships

What is it about?

To what extent does money buy happiness? Our paper provides a new answer: it depends on one’s social and affective relationships (also called social capital or relational goods). Results indicate that individuals who are socially isolated attach more importance to money than others. The more socially active people are, the less money buys their happiness. This finding suggest that money offers a compensation for the discomfort created by poor social relationships. In other words, money is important in people’s lives because, at least in part, it is a refuge from the scarcity of social relationships. Hence, declining social ties and increasing loneliness – two issues affecting many industrial societies - may be the driving forces of overconsumption and overwork. Various social psychology studies on materialism support the idea that relational poverty and high importance of money in people’s lives are two sides of the same coin. This literature suggests that individuals prioritize money as a reaction to the insecurity generated by poor relationships. Happiness studies clarified that two aspects of income influence individuals’ happiness. The first is their own income, which reflects their purchasing power. The higher it is, the happier a person is because she can buy more. The second type of income is that of others, the Joneses, the group a person compares with. This type of income has the opposite effect on happiness: the higher it is, the less happy a person is. The reason are social comparisons, or the race “to keep up with the Joneses”: the better off the Joneses are, the worse one feels. This happens because it is the relative position in the income distribution that counts when it comes to social comparisons. In our study, we investigate whether having more or less rich social relations changes the importance of the two aspects of income for people’s happiness. To this purpose, we analyzed more than 500,000 individual interviews from representative samples of dozens of countries. We used data from various datasets (German Socioeconomic Panel, European Social Survey, European Union Survey on Incomes and Living Conditions and World Values Survey/European Values Study). Our measures of social and affective relationships include respondents’ trust in others, their frequency of meeting or helping friends, and their participation in social activities such as social gatherings, volunteering, or local political activity. To measure happiness we use indicators of subjective well-being, such as respondents' self-reports of life satisfaction, happiness or feeling depressed. We find that the positive correlation between own income and subjective well-being halves when individuals have rich social lives, compared to socially isolated ones. In other words, roughly 50% of the importance of own income for the subjective well-being of isolated individuals arises from their relational poverty. However, poor relationships amplify even more the importance of social comparisons. Whether the Joneses are better or worse off has little or no importance for the happiness of people with a rich social life. On the contrary, isolated people are the most concerned about their relative position in the economic ladder. This suggests that loneliness is a fertile ground for envy. These results are based on a number of different analyses. We analyze the relationship between our variables of interest within and across individuals. Moreover, comparing different countries we observe that money is less important for the happiness of citizens of countries where the relational fabric is stronger. Overall, whether comparing individuals, countries, or the same individuals throughout their lives, money is more important for happiness in a context of poor relationships. These results hold whether we use longitudinal or cross-sectional data, whether we consider nationally representative samples from developed and developing countries, and for a variety of wordings and measures of happiness, relationships and social comparisons.

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Photo by Mathieu Stern on Unsplash

Photo by Mathieu Stern on Unsplash

Why is it important?

Our findings imply that the extent to which income inequality translates into happiness inequality depends on social relations. In fact, poor relations expand the importance of income for happiness. In turn, the more important income is for happiness, the more income disparities translate into happiness disparities between income groups. International comparisons show that in socially rich countries the difference in happiness between rich and poor people is smaller than elsewhere. Our study suggests that this happens because good relationships make money less important for individuals. Relational affluence reduces the impact of income inequality on the distribution of happiness along the income ladder. An implication of our finding is that relational poverty fuels the hunt for money, and that the long-term decline of relationships plays a critical role in promoting the spending spree of industrial societies. This is relevant in light of the possibility to improve relationships through policies. Studies on urban planning, education, and advertising have highlighted a number of policies to promote good quality relationships. Our findings suggest that relational affluence would reduce in particular competitive spending, i.e. the spending generated by social comparisons. This would be great news for sustainability, given the strong contribution of over-consumption to pollution and natural resources use. As any other positional competition, competitive spending is a zero sum game (one can improve her position only if someone else worsens her position). Thus, the reduction in competitive consumption induced by greater sociability would come at no happiness cost.

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