According to this theory,the individual propensity to happiness is a personal trait of largely genetic origin and influenced by personality. The explanation for the stagnation of happiness is that happiness is a stochastic phenomenon. Chance distributes unequal amounts of happiness among people’s genetic codes ,leaving the average level unchanged. The decreasing marginal utility of money.
This idea- that of a progressive saturation of needs,or at least of those needs that can be satisified by marketable goods-is general and is consistent with a variety of approaches,including mainstrain growth theory. It may wvoke an image of societies that are affluent and stated with regard to material needs,but in which individuals can not buy what they truly need. This idea is compatible with a broad variety of critiques of materialism and consumerism and also with a large body of studies.
Mainly psychological,which emphasize the primarly importance of the quality of the relational world in which individuals live in determining their happiness. and it is further more consistent with several other explanation furnished by pshcologists and sociologists. Adaptation An increase in income has only temporary effects on people’s happiness because they progressively adapt to the new circumstances. This theory is often presented as the flip side of coin of one of the keys of human evooluntionary success,the elevated capacity to adapt.
That which saves up from sinking into despair in the face of adversity also prevents us from elevating ourselves to a more stable,higher plane of experience under favorable circumstances. Adapation theory is some times presented in conjunction with set point theory:the effects of external circumstances on happiness are temporary and its long-term level is determined by biology and personality. However,these two the ories are compatible but nevertheless distinct.
It is in fact possible that the effects of an increase in income on happiness are temporary,but that the long-run level of happiness is determined by factors other than genes and personality. The importance of relative position. There is a proliferation of terms in economic theory that refer to the same idea:namely that relative position matters in individual preferences,if it is a person’s relative position that counts,then a general increase in income cannot increase the happiness of everyone because his or her relative position remains unchanged.
Indeed the lack of correlation between income and happiness is explained in both cases by the fact that aspirations increase with income. The first three explanations are different versions of the ideas that money cannot buy happiness. This idea is common to all three theories,although it is based on completely different considerations in each of them. In the set point theory,the contention is that no external factor is able to exert a permanent influence on happiness because the latter is a invariant trait. In the second case.
Growth cannot increase happiness beond a certain level because needs become saturated =or at least those needs whose satisifations can not be bought. In the third case,it is the constant adaptation of aspirations to the growth of income that renders money unable to purchase anything but temporary happiness. Any money-cant-buy-happiness theory,therefore is consistent with the lack of correlation between income and happiness,but it has a problem:such consistency is obtained at the price of counterfactual predictions regarding the trend in work and saving.
In fact,these theories tend to predict that people’s interested in money will diminish through time because of the disappoint,they will tend revise their choices and reduce their efforts to acquire money. In other words,if people realize that their happiness depends on,say. personal traits,or that money cannot satisfy needs that are essential,they will react by reducing their efforts aimed at making money . In short,if money cannot buy happiness ,the labor supply and the saving rate will be highly responsive to variation in labour producetively and wealth.
As we have seen,this prediction is counterfactual. Of course,money –cant-buy-happiness theories may provide a different prediction if they included as theory of failure of rationality,which shows that individuals systematically overestimate the impact of consumption on their happiness. But,as we shall discuss below,these theories generally do not include such a theory. Thus,these explanations of trend of happiness are obtained at the price of counterfactual predictions,as far as people’s interest in money is concerned .