Scientific Evidence: Money DOES Buy Happiness

Discussion in 'Economics' started by JamesL, May 3, 2013.

  1. JamesL


    Science: Money makes you happier
    No limit to impact of increased wealth on satisfaction, research finds

    For those who haven’t won the lottery and have never sold a startup to Yahoo for $30 million, science has long offered a small consolation: At a certain point, earning more money won’t make you happier. But new research debunks such feel-good claims.

    There’s no end to how much happier money can make you, according to research to be published in the May 2013 edition of “American Economic Review, Papers and Proceedings” by economists Betsey Stevenson and Justin Wolfers, professors at the University of Michigan. “The relationship between well-being and income is roughly linear-log and does not diminish as incomes rise,” the study — Subjective Well-Being and Income: Is There Any Evidence of Satiation? — concludes. “If there is a satiation point, we are yet to reach it.”

    The correlation between increased income and increased happiness is no different with the rich than it is with the poor, the study finds. The “positive association between family income and reported well-being is remarkably consistent and shows no signs of petering out even at very high incomes,” the study reports. This proves as consistent when making cross-national comparisons between rich and poor countries as when making comparisons between rich and poor people within a country, Stevenson and Wolfers conclude.

    Specifically, just over one-third (or 35%) of Americans making less than $10,000 reported being “very happy” and just under one-quarter (24%) said they were “very satisfied” with their lives. Of those making over $500,000, 100% reported being “very happy” and said they were “very satisfied” with their lives. Outside the U.S., Stevenson and Wolfers found the same trends. “In particular, there is no evidence that the slope flattens our beyond any particular ‘satiation point’ in any nation,” they wrote.

    Why does more money mean more happy days ahead? Wolfers says he leaves that up to others to decide, but he has one theory: “It may be that the relationship is not between your income and the number of iPhones you can buy; it’s about the choices you can make.” And the more money you make, he says, the more choices open up. “But I would never say become a corporate lawyer and not work for a nonprofit if you found that more fulfilling,” Wolfers says.

    Stevenson and Wolfers’s study seems to contradict work in 1974 by economist Richard Easterlin, who argued that economic and happiness data suggested a “paradox” in which increasing income after a certain point did not increase well-being. Easterlin famously wrote that people in poorer countries were happier once they could afford basic necessities. A follow-up study by London School of Economics professor Richard Layard concluded that above $15,000 per person, “higher average income is no guarantee of greater happiness.”

    Easterlin, an economist at the University of Southern California, disputes the new research. “More Money does not make you happier when you look at what happens to people over time as their income trends upward,” he told MarketWatch. “If you compare people at a point in time, those with higher income are typically happier. But you cannot generalize from the point of time relationship to the relationship over time. That is what the Easterlin Paradox is all about.”

    Those banking on increased wealth as a path to happiness may be disappointed in other ways: Materialistic people are less happy than those who don’t care about being upwardly mobile, other studies show. Couples who say money is not important to them score about 10% to 15% better on measures of “relationship quality,” meaning they fight less and have more stable relationships, according to a 2011 study of 1,700 married couples by Brigham Young University and published in the “Journal of Couple & Relationships Therapy.” Jason Carroll, lead author of that study, cautions, “income level is different than materialism.”

    And Americans have not seen a bump in happiness since the recession. The Gallup-Healthways Well-Being Index, which has surveyed 1.7 million Americans since it began in 2008 and attempts to measure the happiness of residents in U.S. states, found almost no improvement over the past five years, despite signs that the economy is improving. The index asks respondents about well-being, physical and emotional health, work environment, and whether they worried or smiled the previous day. For the four consecutive years, Hawaii came in first and West Virginia came in last.
  2. Actually I've read alot of research on this. What makes you happy is what you believe makes you happy. Everyone sets up their own blueprint in their mind on what they think will make them happy. So if you think that money will make you happy and you are poor, you are not going to be happy. The reason that 100% of those people that make $500k per year all said they were happy is because they set up their own blueprint, then went after it and got it, so of course they are happy. The poor people that are not happy have likely set up their blueprint, but never too action to get it, possibly always giving excuses as to why they dont have what they want, but still wanting it.
  3. Eight


    This is some very welcome news to those of us that are working at trading to gain some wealth, no? That garbage about how happiness levels off after a certain level of wealth sounds like scammed research to encourage taxing the wealthy: their "excess" money isn't going to make them any happier anyhow, might as well pour it into the Public Sector's hands where it "will do some good".
  4. luisHK


    100% uh ?!? How many of those did they interview ? Many of those making 500K would say they feel they don't make enough money for instance, especially those who earn much less than they used to.

    Jeez I was just checking how much is needed to live decently in HK, and 500K a year would only pay for the house and maybe the espresso :( Housing there is a killer though, and it got worse recently, plus no matter the money, I'm not sure someone can be happy with his quality of life in HK.
  5. southall


    If 100% are very happy and very satisfied with their lives when on 500K a year, then making 1million a year or 10 million a year isn't going to make them much more happier, as there is not much happiness and satisfaction upside left.

    Which sort of proves the original point that wealth above a certain point doesn't make you any happier.

    Back in the 1970s that point was probably $100K a year, now with inflation it is $500K a year.
  6. luisHK


    Indeed, this and the 100% claim leaves doubt about the study.
  7. just like vitamins, everybody needs a minimum amount, but more won't make you healthier