Ok, so everyone knows it doesn’t, but most people still behave as if it did. Daniel Gilbert makes a very good case for why this is in Stumbling on Happiness—incidentally, the best book I’ve read so far this year. It boils down to a basic human inability to accurately remember what made us happy in the past and to predict what will make us happy in the future. We convince ourselves that money will provide us more options (true) and that the more choice we have the happier we’ll be (surprisingly untrue). Says Gilbert:
Psychologists have spent decades studying the relation between wealth and happiness, and they have generally concluded that wealth increases human happiness when it lifts people out of abject poverty and into the middle class but that it does little to increase happiness thereafter.
This is all expanded on in a Newsweek piece, “Why Money Doesn’t Buy Happiness“.