The ‘money illusion’

From Richard A. Easterlin’s “The Economics of Happiness” [full text]:

“Each of us has only a fixed amount of time available for family life, health activities, and work. Do we distribute our time in the way that maximizes our satisfaction? …We decide how to use our time based on a “money illusion,” the belief that more money will make us happier, failing to anticipate that in regard to material conditions the internal norm on which our judgments of well-being are based will rise, not only as our own income grows, but that of others does as well. Because of the money illusion, we allocate an excessive amount of time to monetary goals, and shortchange nonpecuniary ends such as family life and health. 

As evidence of the perverse effect of the money illusion, let me cite, finally, a survey reported by sociologist Norval Glenn. In this survey Americans were asked about the likelihood of their taking a more highly rewarding job that would take away family time, because it would require both more hours at the office and more time on the road. Out of four response options, not one of the 1200 respondents said it was “very unlikely” he or she would take the job, and only about one in three said it was “somewhat unlikely.” The large majority of respondents said it was either “very likely” or “somewhat likely” that they would take the job, each of those categories accounting for about one-third of the respondents. Most Americans, it would seem, would readily sacrifice family life for what they think will be greater rewards from their working life, not knowing that these rewards are likely to be illusory [and many of us with ‘highly rewarding’ jobs are just in it for the money].”

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