Business Life: Money can’t buy love

8th February, 2008

First published in Business Life Magazine, October 2007.

“I don’t care too much for money, money can’t buy me love.” A great tune, but don’t believe everything you’re told by The Beatles. Money can buy you love, and it can buy you happiness as well.
The economist Lena Edlund (whose own greatest hits include an economic “Theory of Prostitution”) finds that wherever the men are rich, the women are plentiful. Women outnumber men in the cities of almost every developed country, which is why the girls from “Sex and the City” were always grumbling that all the good men are taken. In Edlund’s home country, Sweden, the towns with the highest average male income are the towns with the largest proportion of women aged 25-34. Still think that money doesn’t buy love?
More direct evidence comes from internet dating, where economists have shown that men who claim a high income get more “clicks” than their poorer – or more honest – rivals.
These findings probably won’t surprise the cynics, but economists have also been investigating the link between money and happiness. The conventional wisdom is that money doesn’t buy happiness. The truth is a little more subtle.
It is true that the citizens of countries like the US, the UK and Denmark claim to be no happier than their parents did in 1980 or their grandparents in 1950, despite being much richer. But in every country, in any given year, richer people also claim to be happier. Money isn’t everything, though: divorce, unemployment or ill-health are far more depressing than mere poverty.
“Happiness economics” is a booming field at the moment, but even its proponents would concede that findings are at an early stage. One promising approach is led by Daniel Kahneman, a psychologist who shared the Nobel prize in economics in 2002, and the economist Alan Krueger, both at Princeton University. Rather than just asking people how they feel about life in general – the survey approach which has produced most of the happiness data reported in the press – they ask a smaller group of subjects to think about specific episodes during the previous day, and how they felt.
This approach has yielded some surprises: praying is enjoyable, spending time with your children is not. It is no surprise to discover that having sex is lots of fun.And if Lena Edlund is right, that sort of fun isn’t cheap.

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