In one of his regular New York Times columns, Paul Krugman criticized Republican plans to cut taxes for the very rich. Allowing the rich to be a little richer won’t increase their happiness, he writes, while the cuts in services for the poor and middle class that would balance them out would ramp up America’s misery quotient.

Krugman’s basic idea is that greater wealth gives rise to greater happiness, up to a certain point. He cites a global study, which has a handy chart measuring income against “happiness” in countries around the world. Sure enough, as incomes go up, so does happiness – but each extra dollar of wealth produces a little less happiness than the last, so the effect slows down. (And, as Krugman points out, it doesn’t really tell us much about what happens when you give very rich people more money.) So if we’re going to be shifting wealth around in society, he says, we’d get more happiness if we push it down toward the poor rather than up to the rich.

Is He Right?

Yes and no.

The situation is a little more complex than he lets on. The study he refers to – that money only makes us happy up to a certain point – is similar to a very famous one conducted by Ed Diener and published in 2010. (You can find the abstract here.)

The picture Diener paints is rather nuanced, and that’s because “happiness” itself is a vague and nebulous concept. Diener looked at two different ways of measuring happiness – one that relates to emotional experience, and one that always gets referred to as global life evaluations.

Emotional experience is a fairly straightforward measure of happiness. People were asked about the emotions they’d experienced the previous day – what proportion were positive, how many negative. This basically gave Diener a snapshot of people’s emotional states. As you might expect, as people went from poor to working class to middle class, negative emotions (on average) decreased and positive ones went up. A certain amount of money can be used to solve problems, avert impending crises, and decrease worries. After a certain point, though, money has solved all the problems it can, and different issues come into play. Money can buy you paints and an easel and the free time to delve into your art, but it can’t get you written up in the Times the next Picasso. So Money buys happiness, but the amount of happiness it buys levels off somewhere in the area of $75,000. (This strikes me as a little too exact, considering all the different challenges people face, but it’s a place to start.)

Sitting On the Ladder

The other measure, global life evaluations, is a weird one, at least according to me. It’s based on Cantril’s Ladder, which just strikes me as an odd metaphor to use to measure happiness. This measure has exactly two questions. Here are the instructions:

• Please imagine a ladder with steps numbered from zero at the bottom to 10 at the top.
• The top of the ladder represents the best possible life for you and the bottom of the ladder represents the worst possible life for you.
• On which step of the ladder would you say you personally feel you stand at this time? (ladder-present)
• On which step do you think you will stand about five years from now? (ladder-future)

So, why, exactly, is this a ladder? If you’re staying there, isn’t this more like a shelf? But being on a shelf wouldn’t make you happy at all. There’s the “corporate ladder” metaphor, but that’s always pretty abstract, and not really related to this. A happiness ladder? Whatever.[1]

What does matter is the fact that it asks people to rate the quality of their lives on a scale from 0 to 10, and then to assess their future prospects. In Diener’s study, this measure produced a different result from the first one: as people got richer, their ideas about their lives and prospects just kept going up.

My thought about that first ladder question is: What, exactly, is this measuring? Is it gratitude for what you have? Is it about fulfilling your goals? Is it a covert way for people to express their social status? Confidence in your security? A combination of these things, and probably a bunch of others as well? Unless researchers ask for something more than a rung number, there’s no way to know.

I’m a little more comfortable with the second question. It’s basically a measure of optimism, as far as I can see. Will your life get better, worse, or stay the same?

But that raises a question, too: what makes us optimistic about the future? Diener feels that the answers they got reflect the expectations people have learned from their societies:

We started with the question of why money is associated with well-being. In retrospect, it is difficult to imagine it otherwise for life evaluations in the modern world of market economies. Money is an object that many or most people desire and pursue during the majority of their waking hours. Thus, it would be surprising if success at this pursuit had no influence whatsoever when people are asked to evaluate their lives. [p. 59]

So this raises an important question: does wealth actually increase happiness, or does it just increase people’s sense that they’re supposed to be happy?

Buy Stuff, Feel Good

Around the turn of 20^th century, a major change took place. As technology improved, people’s abilities to produce goods skyrocketed. In 1885, James Buchanan Duke, owner of the American Tobacco Company, bought two of the first cigarette-rolling machines. Those two machines could produce 240,000 cigarettes a day – which was more than Americans actually smoked in 24 hours. Instead of living in a world defined by scarcity, Americans suddenly found themselves swamped with stuff. And it wasn’t just cigarettes, either – with the assembly line came cars, of course, and then just about everything else.

So suddenly, society was faced with a question: if it takes less time to produce what we need, should we all work less, or should we make more stuff than we need? Should we all work shorter hours so we don’t end up with warehouses overfilled with cigarettes, Christmas ornaments, and giant striped Victorian-era full-body bathing suits, or should the bosses just pay everyone more for the same amount of work, and let shoppers absorb the excess until it no longer feels excessive?

You know the answer.

Basically, it was easier to adjust pay to the market than it was to increase and decrease the work-week as demand shifted. Besides, more sales meant more profits for the owners.

But then, this lead to an actual problem that we don’t think much about today: how do you convince everyone that they had to buy the surplus stuff that they knew they didn’t actually need? After centuries of just getting by, most folks were naturally thrifty, cautions consumers.

Enlightened Shoppers

Thus began the difficult task of enlightening people about their needs. Rodney Cross explains it this way:

Newly enabled by preservatives and far-flung distribution networks, Domino Gold Syrup sought in 1919 explicitly to “educate” people that syrup was not only for wintertime pancakes. Said the sales manager, “Our belief is that the entire year is syrup season and the people must be educated to believe this is a fact.”

In fact, these selfless providers of commodities/educators with no possible ulterior motive beyond the chaste generosity of their corporate hearts (*cough cough*) had a lot of work to do to inform people that they had actual needs of which they were heretofore unaware for some reason. In 1901, Thompson’s Red Book on Advertising explained, “Advertising aims to teach people that they have wants, which they did not recognize before, and where such wants can be best supplied.”

So benevolent of them, wouldn’t you say? (*cough, ahem*)

At any rate, it worked. Over the last century, American society – or at least enough of it – has chosen more money over more free time; the reward was supposed to be wealthiness for everyone.

Basically, we made a deal. It was obvious at the time, but for many decades now it’s been implicit, less often articulated: workers and corporations agreed that they would give up the freedom that comes with free time in exchange for the freedom that comes with extra income.

And for a long time, that equation – more productivity for more pay – worked. As wages rose, people have found happiness in things previous generations never really imagined – in televisions, Slankets, and fancy cars.

But at some point along the way, we began to lose track of what our ancestors knew a century ago: that workers participate in the growth of wealth and should be rewarded accordingly. Instead, we began to think of ourselves more as consumers who work to enjoy the end-products. The paths of increased productivity and increased pay began to separate in 1973, and really took off around 1980. Since then, worker productivity has gone up about 150%, but income has risen a measly 10-15%.

For most people's adult lives, we’ve gotten the worst of both worlds: we gave up our free time for more money, but then, once we started to assume that life at the office or the factory was just par for the course, and forgot that, if we were sacrificing in this way we could also demand more. And so we ended up not getting the benefits of our extra productivity, either.

There are lots of reasons for this, of course – but one of them has to do with the fact that we began making a stronger, more direct connection between being happy and being able to buy things beyond what we need. Once people thought they needed the stuff they saw advertised, the theory goes, those extra work hours became something people wanted, not something they could leverage for a greater stake in the game.

So maybe that explains why people seem to climb up Cantril’s Ladder as they get wealthier, even though the well-off don’t seem happier day to day – and also why so many people seem to feel like the American dream has left them behind.

Is there a fix for this? Well, sure – but that’s a story for another day.

[1] My concern is that, when people use ladders as metaphors, they’re almost always going up. That fact could encourage people to place themselves higher than they otherwise would.