Study: More Money Never Stops Buying More Happiness

Happiness and wealth
Another salvo in the ongoing debate over whether money buys happiness: New research out of the Brookings Institution claims there is no ceiling above which additional wealth stops contributing to people's sense of well-being.

The authors are Betsey Stevenson and Justin Wolfers, economists at the University of Michigan, and their primary foil is Richard Easterlin, who in 1974 proposed that increasing average income in a country is not associated with rising happiness -- a notion that came to be called the Easterlin Paradox.

In cross-country comparisons, Easterlin found that the average reported national happiness level did not vary significantly with national per capita income. In addition, although the United States saw its per capita income rise from 1946 to 1970, there was no accompanying trend in the average reported happiness level, which actually declined during the 1960s.

Easterlin's thesis was influential, sparking lots of subsequent inquiry in the field of "happiness economics." Stevenson and Wolfers first challenged it in 2008, arguing that a review of "recent data on a broader array of countries" established "a clear positive link between average levels of subjective well-being and GDP per capita across countries." They also found "no evidence of a satiation point beyond which wealthier countries have no further increases in subjective well-being," and reported that economic growth is in fact associated with rising happiness.

Since then, Stevenson entered public service, working as chief economist at the Bureau of Labor under former Secretary Hilda Solis. Now she and Wolfers are taking another shot at the Easterlin Paradox in a paper titled "Subjective Well-Being and Income: Is There Any Evidence of Satiation?" Their conclusion: Easterlin had it all wrong. (Although, in fairness, he didn't have access to as much data as they do.) "The relationship between well-being and income is roughly linear-log and does not diminish as incomes rise," Stevenson and Wolfers contend. "If there is a satiation point, we are yet to reach it."

The authors discuss a "modified-Easterlin hypothesis" -- the idea that a link exists between income and well-being among the world's poor, but that the correlation levels off or disappears above a certain income threshold. The so-called satiation point, at which rising income stops matching increased happiness across countries, has been identified as falling between $8,000 and $25,000 by other scholars.

Stevenson and Wolfers are having none of it. They say there is an association between income and happiness among the rich similar to that found among the poor, and that this link holds "in roughly equal measure" for cross-national comparisons between rich countries and poor ones. The two graphs below summarize their findings:
more money more happiness

Here, income increases in rich countries -- those with per capita GDP above $15,000 -- are actually associated with a steeper rise in life satisfaction.

more money more happiness

And here, although different countries display different slopes, in no nation does the money-happiness relationship disappear as income increases. The association appears instead to hold in roughly equal measure. (The scale is logarithmic; each mark on the horizontal axis denotes a doubling of income.) There is, in other words, no satiation point.

The authors acknowledge an "interesting" 2010 study which found that, in the United States, people who earn more than $75,000 do not seem to be happier than those who earn just less than that. But they believe that this result was based on "very different measures of well-being."

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Forget happiness. Money can buy peace of mind. When you have to worry about how you are going to put new tires on your car, or how you can afford a certain medical procedure, it affects your happiness and peace of mind.

May 01 2013 at 10:29 AM Report abuse rate up rate down Reply

Rich or poor it is good to have money. Since most people cant control how much money they earn it is better to focus on what you do with the money. If you save it and build a nest egg then you can relax and enjoy more of what life has to offer. If you are a spender then you will always have to owe money. Some people dont mind debt others hate it and only pay for things they can afford right now. Happiness is the ability to have some control over your life............

May 01 2013 at 9:55 AM Report abuse rate up rate down Reply

P.S. I love it that Craigslist has a bartering section. Plus bartering is fun.

May 01 2013 at 9:49 AM Report abuse rate up rate down Reply

Notice the authors seem to make no difference between well being and happiness. These are two very different words with different meanings. If the authors are so loose as to not differentiated between these words there findings are probably flawed. I find it probable according to the article if a person is happy with 1 million dollars he/she will be happier if they had 2 million dollars which is just a head game. So if head game is the real answer to rise in happy this article is seriously flawed.

May 01 2013 at 9:49 AM Report abuse rate up rate down Reply

You know these days the American dollar is not worth much. Money all over the world is going bust. Sorry to sound like Debbie Downer. Loneliness kills people more then money. I will never be owned by bankers again. I love having
a Homestead. Along with all the animals. I would never trade our Homestead
for a million dollar home. I also don't care if people laugh at simple lifestyles.
It way better then the Rat Race. People need to do what makes them happy.
Money don't always cure the blues. Money can help for awhile. I think
the world should go back to bartering.

May 01 2013 at 9:47 AM Report abuse rate up rate down Reply
Bill Ridenour

Money can't buy love-BUT it can buy everything else-including a reasonable facsimile of love.

May 01 2013 at 9:21 AM Report abuse rate up rate down Reply

For starters, money gives a person a choice. No money, no choice. People are afraid to want more, some of us are told we are not deserving or too lazy. America is place, we all should be wealthy and a govenment that is not so divided on that subject. We have become a country of the have's and the have not's.

May 01 2013 at 8:16 AM Report abuse rate up rate down Reply

If you are basically a "happy" (whatever that means) person, more $ tends to enhance your existing "happiness." If you are basically "unhappy," more $ tends to enhance that condition.

Now, if we could just define "happy"...

May 01 2013 at 7:02 AM Report abuse rate up rate down Reply

Very dumb article.

May 01 2013 at 2:08 AM Report abuse rate up rate down Reply

I disagree with those saying that with the right attitude you can be poor but happy. I'm not wealthy and there is always a yearning to have more. I would love to travel with my 3 kids...can't afford that. Would love to have a fancy cell phone...nope not that either, would love to help my kids more with college...nope, they need to take out loans. I could go on and on. Call me materialistic, but I bet most people scraping by feel exactly the same.

May 01 2013 at 12:07 AM Report abuse rate up rate down Reply
1 reply to sjk09s's comment

A fancy cell phone would make you happy? You gotta be kidding me. I have a fancy cell phone but it didn't make me happy. It was nice, but no way did it make me happy. The important thing is, does the cell phone you have get the job done. Just like a car. Does your car get you where you need to go without problems?

May 01 2013 at 2:11 AM Report abuse -1 rate up rate down Reply