Money doesn’t buy happiness, but success does. Capitalism, moored in values of hard work, honesty, and fairness, is key.

On July 23, 2000, a forty-two-year-old forklift operator in Corbin, Kentucky, named Mack Metcalf was working a 12-hour nightshift. On his last break, he halfheartedly checked the Sunday paper for the winning Kentucky lottery numbers. He didn’t expect to be a winner, of course—but hey, you never know.

Mack Metcalf’s ticket, it turned out, was the winner of the $65 million Powerball jackpot, and it changed his life forever. What did he do first? He quit his job. “I clocked out right then, and I haven’t been back,” he later recounted. In fact, his first impulse was to quit everything, after a life characterized by problem drinking, dysfunctional family life, and poorly paid work. “I’m moving to Australia. I’m going to totally get away. I’m going to buy several houses there, including one on the beach,” he told Kentucky lottery officials.

Metcalf never worked again. But he never moved to Australia. Instead he bought a 43-acre estate with an ostentatious, plantation-style home in southern Kentucky for more than $1 million. There, he spent his days pursuing pastimes like collecting expensive cars and exotic pets, including tarantulas and snakes.

Trouble started for Metcalf as soon as he won the lottery. Seeing him on television, a social worker recognized him as delinquent for child support from a past marriage, resulting in a settlement that cost him half a million dollars. A former girlfriend bilked him out of another half million while he was drunk. He fell deeper and deeper into alcoholism and became paranoid that those around him wanted to kill him. Racked with cirrhosis of the liver and hepatitis, he died in December 2003 at the age of forty-five, only about three years after his lottery dream had finally come true. His tombstone reads, “Loving father and brother, finally at rest.”

Did millions of dollars bring enduring happiness to Mack Metcalf? Obviously not. On the contrary, those who knew him blame the money for his demise. “If he hadn’t won,” Metcalf’s former wife told a New York Times reporter, “he would have worked like regular people and maybe had 20 years left. But when you put that kind of money in the hands of somebody with problems, it just helps them kill themselves.”

So what’s the moral of the story? Is money destined to make us miserable? Of course not. Mack Metcalf’s sad case is surely an aberration. If you hit the lottery, it would be different. You would give philanthropically and do all kinds of fulfilling things. Similarly, if your career suddenly took off in a fantastic way and you earned a great deal of money, you would get much happier. And what is true for the parts must also be true for the whole: When America experiences high rates of economic growth, it gets happier. America is not a nation of Mack Metcalfs, and money is a smart first strategy for attaining a higher gross national happiness.

Right?

You’ve heard the axiom a thousand times: Money doesn’t buy happiness. Your parents told you this, and so did your priest. Still, if you’re like me, you would just as soon see for yourself if money buys happiness. People throughout history have insisted on striving to get ahead in spite of the well-worn axiom. America as a nation has struggled and striven all the way to the top of the world economic pyramid. Are we suffering from some sort of collective delusion, or is it possible that money truly does buy at least a certain amount of happiness?

Americans have on average gotten much richer over the past several decades than they were in previous generations. The inconvenient truth, however, is that there has been no meaningful rise in the average level of happiness.

In 1972, 30 percent of Americans said they were very happy, and the average American enjoyed about $25,000 (in today’s dollars) of our national income. By 2004, the percentage of very happy Americans stayed virtually unchanged at 31 percent, while the share of national income skyrocketed to $38,000 (a 50 percent real increase in average income). In some countries, there is even some evidence that economic growth can create unhappiness. This is generally the case for nations experiencing rapid and chaotic development and thus opportunities for great wealth for the first time. Post-Soviet Russia is an example of this phenomenon. In the 1990s, after the fall of the Soviet Empire, a few entrepreneurs made vast fortunes in markets for oil and other primary resources. Yet post-Soviet Russia is a miserable place in which only about one in five citizens say they are very happy about their lives. Some development economists believe that cases of a few lucky entrepreneurs suddenly amassing large fortunes raised unreasonable expectations among ordinary Russians, creating a sense of extreme unfairness and leaving them deeply dissatisfied with their meager lot. And in this way, money created unhappiness.

So individual countries don’t seem to get much happier as they get richer. But are rich countries happier than poor countries?

The answer to this question depends on how poor a “poor country” is. People in poor countries where much of the population lives below subsistence level are much unhappier than people in rich countries, on average. International comparative studies of happiness consistently place the poorest nations of the world—especially the countries of sub-Saharan Africa—at the very bottom.

In 2006, one study ranking countries in terms of happiness found that Zimbabwe and Burundi were the unhappiest places on earth. And this makes sense, of course: It is ridiculous to imagine that illiteracy, high child mortality, and the threat of starvation are any more pleasant or bearable to a Burundian than they would be to an American. But once countries get past the prosperity level that solves large-scale health and nutrition problems, income disparity pales in comparison with other factors in predicting happiness, such as culture and faith.

For example, compare Mexico and France. The cost-of-living difference between the two nations is vast, so economists don’t compare raw income; rather, they compare the “purchasing power” of citizens. In Mexico—a nation in which most people live above the level of subsistence but still are much poorer than residents of the United States or Europe—the average purchasing power was about a third what it was in France in 2004. And yet Mexicans, in aggregate, are happier than the French. In Mexico, 63 percent of adults said they were very happy or completely happy. In France, only 35 percent gave one of these responses.American communities are like countries when it comes to happiness. Like happy Mexico and unhappy France, the happiness of American communities—all of which are above the level of subsistence—depends very little on their comparative prosperity. There are abundant examples of unhappy high-income communities and happy low-income communities. Take eastern Tennessee (which includes the cities of Chattanooga and Knoxville, but is mostly rural), where people are 25 percent likelier than people living in tony San Francisco to say they are very happy, despite earning a third less money on average. Obviously, it is more expensive to live in San Francisco than it is to live in Tennessee, but San Franciscans still enjoy more than 30 percent more disposable income.

Like nations and communities, as long as they don’t start out dangerously impoverished, individuals get little or no extra happiness as they get richer—even massively richer. In a classic 1978 study, two psychologists interviewed 22 major lottery winners and found that the joy of sudden wealth wore off in a few months. Further, lottery winners have a harder time than the rest of us enjoying life’s prosaic pleasures: watching television, shopping, talking with friends, and so forth. It’s as if the overwhelming experience of winning the lottery dulls the enjoyable flavors of ordinary life.

This story opened with the sad tale of Mack Metcalf. In truth, it doesn’t necessarily destroy your life to win the lottery, as it evidently did his, but it won’t make your life better either.

So it’s true: Money doesn’t bring enduring happiness for countries, communities, or individuals, except perhaps when people start out in abject poverty. Why not? The answer has to do with what psychologists call “adaptation.” Humans tend to adapt psychologically to their circumstances—including their monetary circumstances—and do so very quickly.

Perhaps you’ve walked into a chain-smoker’s home and wondered how on earth he could stand to live with such a stench. The answer, of course, is that he is used to it. For the most part, the same is true of economic gains and losses in our lives: They give us pleasure or pain when they happen, but the effect wears off very quickly. Adaptation makes money unsatisfying per se because we get used to it quickly. Almost immediately, an increased income becomes the new “normal.”

For individuals, communities, and nations, economic growth is like being on a treadmill, and getting richer is like speeding up the treadmill: We never get any closer to bliss.

According to the great economist Adam Smith, an early proponent of the benefits of pursuing personal economic interests for the common good, “the mind of every man, in a longer or shorter time, returns to its natural and usual state of tranquility. In prosperity, after a certain time, it falls back to that state; in adversity, after a certain time, it rises up to it.”

Indeed, economists even refer to our tendency to adapt as the “hedonic treadmill.” They have found ingenious ways to illustrate how it works. In 1978, for example, researchers presented a sample of adults with a list of 24 big-ticket consumer items (a car, a house, international travel, a swimming pool, and so on). They were asked how many of these items they currently possessed; they were also asked, “When you think of the good life—the life you’d like to have—which of the things on this list, if any, are part of the good life as far as you are personally concerned?”

Inevitably, people felt that the “good life” required more things than they currently possessed. Among the people between 30 and 44 years old, the average number of items owned was 2.5, while the ideal number was 4.3. The same people were interviewed 16 years later, in 1994, and presented with the same list. Naturally, most people had more items; the ones formerly in their 30s and early 40s (now in the next age category, 45 to 59 years old) had 3.2 items, on average. They were closer to the good life, right? Wrong. Their requirements for the good life had now shifted, to 5.4 items. In other words, after 16 years and lots of work, the “good life” deficit had stayed almost exactly the same. The more stuff you have, the more you want. This is strange, because we know that money by itself doesn’t bring much happiness. Many economists look at these facts and conclude that though we really don’t care about having money for its own sake, we do care about having more money than others. In other words, my money only makes me happy when I notice that I am richer than you. Or that you are poorer than I, of course. (Like the old saying goes, “It’s not enough to succeed—your friends have to fail, too.”)

Some studies appear to back up this idea. For example, in one experiment from the early 1990s, human subjects were presented with two job options, both at magazines. At Magazine A, they would earn $35,000 while their colleagues earned $38,000. At Magazine B, they would earn $33,000 while their colleagues earned $30,000. Most of the participants chose the higher-paying job at Magazine A—the rational choice. However, two-thirds said that, notwithstanding their choice, they would be happier at Magazine B.

In another study involving faculty, staff, and students at Harvard University, participants were asked to choose between earning $50,000 per year while everyone else earned $25,000, or earning $100,000 per year while others made $200,000. The researchers stipulated that prices of goods and services would be the same in both cases, so a higher salary really meant being able to own a nicer home, buy a nicer car, or do whatever else they wanted with the extra money. But those materialistic perquisites mattered little to most people: 56 percent chose the first option, hypothetically forgoing $50,000 per year simply to maintain a position of relative affluence.

Could it be that what we care most about is not material comforts, but one-upsmanship? Perhaps out of our primeval past comes the urge to demonstrate that we are better than others. A hundred thousand years ago, it would have given us happiness to have more animal skins than the troglodyte in the next cave; this would help ensure mating prospects, which would keep our genetic lines going. Still programmed in this way, we get unexplainable pleasure from having a better office than our coworkers and a bigger house than the guy next door, even if we don’t “need” the space.

This theory may sound good, and it is quite common to hear, but it is not the explanation best supported by the evidence. Rather, what the data tell us is that richer people are happier than poorer people because their relative prosperity makes them feel successful. Think for a moment about your last big pay raise. Why did you feel such joy over it? Most likely, it was because of what your higher pay represented to you—evidence that you had succeeded, that you had created value. That’s why you enjoyed the raise more when you first were offered it than when you started spending it. It is success (not money) that we really crave.

Imagine two people who are the same in income as well as in education, age, sex, race, religion, politics, and family status. One feels very successful and the other does not. The one who feels successful is about twice as likely to be very happy about his or her life than the one who does not feel successful. And if they are the same in perceived success but one earns more than the other, there will be no happiness difference at all between the two.

The upshot: If you and I feel equally successful but you make four times as much as I do, we will be equally happy about our lives. Of course, successful people make more money than unsuccessful people, on average. But it is the success—not the money per se—that is giving them the happiness. I have no doubt that some people do get pleasure from lording their higher incomes over others. But the evidence says this is not the biggest reason that having more than others gives us happiness.

Financial status is the way we demonstrate to others (and ourselves) that we are successful—hence the fancy watches, the expensive cars, and the bespoke suits. We use these things to show other people not just that we are prosperous, but that we are prosperous because we create value.

There is nothing strange about measuring our success with money; we measure things indirectly all the time. I require my students to take exams not because I believe their scores have any inherent value, but because I know these scores correlate extremely well with how much they have studied and how well they understand the material. Your doctor draws your blood to check your cholesterol not because blood cholesterol is interesting in and of itself, but because it measures your risk of having a heart attack or a stroke. In the same way, we measure our professional success with green pieces of paper called “dollars.”

What scholars often portray as an ignoble tendency—wanting to have more than others—is really evidence that we are driven to create value. Wanting to create value is a virtue, not a vice. The fact that it also brings us happiness is a tremendous blessing.

Have you ever wondered why rich entrepreneurs continue to work so hard? Perhaps you’ve said, “If I had a billion dollars, I’d retire.” This is what Mack Metcalf actually did when he won the lottery. But if he had earned that money doing something creative and productive, things would almost certainly have gone differently for him. People who succeed at what they do tend to keep doing it. The drive to succeed, as opposed to just having more money than others, explains why the super-rich—who already have so much more than virtually everybody—continue to work.