Mathematical formula that reveals the relationship between money and happiness / Argentina News

To many people it seems obvious that more money means more happiness. However, once the basic needs are met, things can take a surprising turn.

Our emotional relationship with income, debt, and loss is complex and nuanced.

Of course there is no doubt that money has great power and can influence people’s decisions and actions, and that it is an effective way of solving problems, especially in times of crisis.

It is “an enabler for people to live a decent life,” summed up Jan-Emmanuel De Neve, professor of economics and behavioral sciences at Oxford University.

But, according to research, it makes less of a difference in terms of happiness the richer you get.

The relationship between higher income and more happiness is ‘logarithmic’, explained De Neve.

And it wasn’t that we didn’t believe him, but that we didn’t fully understand him, so we asked him to explain a little more.

It turns out that if your annual income doubles, say, from $20,000 to $40,000, you’ll be happy. So far, there is no room for surprise.

But if you wanted to experience the same level of increase in your happiness and well-being again, another increase of $20,000 would not be enough. It will please you, but not as much.

To feel the same emotional reward again, you would need to double your income again, so if $40,000 made you happy, to experience that same degree of happiness again you would need to double your income to $80,000, and then , again, $160,000, and so on.

How much money does it take to be happy?

Despite the logarithmic relationship between money and happiness, there is a caveat. Research has shown that you could waste time constantly trying to double your salary, at least above a limit, which – to give you an idea – for the UK tends to be £120,000 (about $150,000).

Not many reach that level of income, but those who do reach what Professor De Neve calls “a plateau” above which “they will no longer detect a statistically significant relationship between more money and more life satisfaction.” And it is that happiness is not so easy to buy.

Experts affirm that happiness is not easy to buy.

While it is undeniable that people need to meet their basic needs (food, housing, health, etc.), there are, after that point, several factors that significantly contribute to well-being beyond income.

Mark Williamson, director of the Action for Happiness charity, identified some of them:

• Cultivate good relationships in the community (family, friends, co-workers), be part of something “bigger than ourselves”
• Resilience to challenging or unmanageable contingencies
• Autonomy (control over life choices)

In some countries, these types of factors are used to calculate the level of well-being of the population, a more immediate measure than trying to derive it from GDP (Gross Domestic Product).

happiness in the world

At the level of countrieshighlighted De Neve -one of the authors of the UN World Happiness Report-, a more egalitarian society is a key factor to keep the average well-being or life satisfaction of the inhabitants high.

In the report, the Nordic countries consistently appear at the top of the rankings and the professor indicated that this is due, among other things, to the fact that welfare states provide “a kind of psychological security” and there is confidence in fiscal plans. of the government.

Another interesting psychological quirk about money is that we hate losing money more than we love making it. While the diminishing emotional returns formula is true when we make more money, the opposite is true when we lose money.

Loss aversion, as it is known in behavioral economics, has been measured in several studies, says BBC Mundo.

According to the research, De Neve said, “well-being is twice as sensitive to loss of income or purchasing power compared to an equivalent gain.”