L4 Income and Money Flashcards Preview

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Flashcards in L4 Income and Money Deck (14):

The economist model

People make choices to maximize their utility
Higher income maximizes the number of choices people can make and things they can get and experience, therefore they are able to make better choices
Income = happiness (utility)


Declining marginal utility

The more you have, the more it takes to make a difference
Income and SWB in different groups
- US probability sample 0.12
- Calcutta slum dwellers 0.45
- Calcutta sex workers 0.67


The wealth of nations

Money matters, 0.83 correlation with life satisfaction


Why are rich nations more satisfied?

Healthcare, more possibilities, security


Easterlin's Paradox

Income and rising aspirations in the US
Most findings show that more nations increase in SWB as income rises, but there are many exceptions
As the comparison standard increases, based on wealthiest nations, and as the world gets richer, people are barely more satisfied, they want more
Frustrated achievers


Happiness and money

Difference between basic needs and modern conveniences / luxuries
- both affect life satisfaction
Basic needs (like food, shelter, health)
- can be fulfilled- finite
- can be satisfied
Beyond basic- aspirations
- can be limitless- infinite
- can always be dissatisfied


The Law of Expanding Expenditures

Herbert Hoover
Just when the ends meet, someone moves the ends


Two types of wealth

Psychosocial wealth-- enjoyment
- ex. friends you can count on
Monetary wealth-- life satisfaction
- ex. electricity, basic needs
Both crossover


Toxic effects of materialism

Wanting money more than other values
Being materialistic decreases life satisfaction



Effective at creating goods and services, creates new desires through marketing


How money is spent matters

Spending on others and giving increases SWB- Dunn
Experiential purchases, like trips, are also good- Van Boven

Spending money on luxury goods often have a lesser effect


Money and Lottery Winners

4.0 vs. 3.8 on scale ratings
Slightly happier byt new problems


Income inequality

Top incomes much high in poor nations is associated with lower LS and higher NA
Inequality is associated with lower SWB, but this is buffered by income redistribution
When economic growth ends up in wealthier hands, there in no benefit to life satisfaction
- but when economic growth is distributed across the population, there is an increase in LS



Lowers SWB substantially, don't ever fully recover