What does wealth mean to you?

In light of the recent news on the huge bonuses that Wall Street investment bankers are taking home this year, I decided to reflect on what “wealth” means to me.

Interestingly enough, I came upon this little snippet from economist Dr. Wheelan that sums up a study on how American’s percieve wealth.  It is amazing to me how we think about money and how competitive we, as a society, are…

There’s a very interesting strain of economic research showing that our sense of well-being is determined more by our relative wealth than by our absolute wealth.
In other words, we care less about how much money we have than we do about how much money we have relative to everyone else. In a fascinating survey, Cornell economist Robert Frank found that a majority of Americans would prefer to earn $100,000 while everyone else earns $85,000, rather than earning $110,000 while everyone else earns $200,000.

Think about it: People would prefer to have less stuff, as long as they have more stuff than the neighbors.

The point — and this is still a nascent field — is that a nation may be collectively better off (using some abstract measure of well-being) with a smaller, more evenly divided pie than with a larger pie that’s sliced less equitably. Reasonable people can and should argue about that.

This is a sad, but revealing, story about our culture.  It seems that it really isn’t about money, but being perceived as “better” or “richer” than someone else that is the holy grail.  Sad. Very sad indeed.

2 comments

  1. Whats so sad about this survey? The results are pretty obvious, if everyone is earning 200k and you are making 110k, that just means inflation caught up to everyone else except you.

    I am pretty sure your buying power would be much less with the 110k scenario vs. the 100k scenario. Based on that yes I’d definitely go for the 100k while everyone else makes 85.

  2. Cash,
    You are fundamentally correct. In relative terms everyone would rather make more than their peers and have more buying power. However, I was thinking in terms of everything else being constant (buying power, inflation etc.) that people would rather make more than others than simply make more total money.
    From this point of view, I think that it is sad. From your point of view, you are correct, it is an obvious choice.
    Thank you for the feedback, you point is valid and well taken.
    Have a great day,
    Tyler

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