Warning: This post contains examples of misused economic terms and concepts. Those sensitive to the proper construction of financial principles would be advised to skip this entry.
I recently received an email from a user regarding a comment I left on a third user's blog. The letter was somewhat irate, in which I was accused of committing certain heresies against the orthodox of money and it's relationship to happiness. Below is my original comment, reproduced in full, from Purple Haze.
I think the evidence is pretty clear. Money can't buy you happiness. And yet, it seems obviously true that the more you have, the more likely you will be happy.
Money is an enabler. The ultimate enabler, in fact, at least in a capitalist society. Money allows you to do the things you want, or avoid those you'd rather do without. It converts actual time to personal time, real time to free time.
If you can't be happy with money, that speaks volumes about who you are as a person, but it doesn't say anything bad about money.
Just so there is no misunderstanding, I do not believe that money can itself guarantee happiness. Nor do I assert that rich people are necessarily thrilled with life. You can be poor and ecstatic, you can be loaded and miserable. Money is an it, a thing, a possession. It doesn't make anyone do anything. It can't make you happy, nor can it force sadness on you.
However, it is also undeniable that money plays a big role in most of our lives, and the inability to manage it or put it into proper perspective can lead to big problems, and that was the point of my comment. As I said, money is an enabler. It allows you to do things, and the more money you have the more options are available. But it does more than that.
Money is power, and with it you can reduce opportunity costs and limit unpleasant externalities. Financial means allows you to manage your time according to your inclinations, by providing alternative solutions to annoying but necessarily problems. After all, many rich people don't clean their own homes, and they convert the time that would be spent into other pursuits. This then brings me to my comment's second conceit.
If you are rich enough to where you can choose how to spend your time and you aren't happy, that is an indication of a serious deficiency. Where the fault lies would differ with each person, of course, but it should be manifestly obvious that someone relieved of financial concerns has a significant leg up in the pursuit of happiness.