Does Money Buy Happiness? It Depends on What You Mean by Happiness
The question of whether money buys happiness is probably as old as the invention of money itself. The conventional wisdom these days, based on research by psychologists, is that beyond a certain level of income (somewhere between 75,000 and 100,000 a year) money has no effect on happiness. However, this conclusion begs the question, if money doesn’t provide happiness above that level, why do people go to such great lengths to earn higher incomes?
A recent paper by Nobel laureate Daniel Kahneman and Angus Deaton, an economist at Princeton, provides a potential answer. Kahneman and Deaton find that the effect of income on happiness depends on whether you ask people about emotional happiness at a given point in time or overall life satisfaction.
Like other studies, Kahneman and Deaton find that above an income of around 75,000 a year, emotional well-being does not increase with high levels of income. However, they find that life satisfaction increases steadily with income. Thus they conclude, “that high income buys life satisfaction but not happiness [emotional well-being], and that low income is associated both with low life evaluation and low emotional well-being.”
They also have a number of other interesting findings on the correlates of emotional well-being and life satisfaction:
“As might be expected, weekends are associated with improved affect [emotional well-being], especially with reduced stress. Physical illness, headaches, spending a day alone, and caring for an adult all have relatively larger adverse effects on emotional well-being than on life evaluation… At the other extreme, being a college graduate is associated with high life evaluation but has only a small association with positive and blue affect and a (perhaps) counterintuitive relation with stress; all other factors being equal, college graduates report more stress than nongraduates. The Gallup World Poll found high levels of stress in high-GDP countries (16). Religion has a substantial inﬂuence on improving positive affect and reducing reports of stress, but no effect on reducing sadness or worry. Females report slightly higher positive affect
and life evaluation, but also more blue affect and much more stress. The presence of children at home is associated with signiﬁcant increases in stress, sadness, and worry (6). As reported recently, older people enjoy greater emotional well-being, most notably a pronounced reduction in the experience of stress and anger (17). Smoking is an impressively strong predictor of low well-being—especially its emotional dimensions—even when income and education are controlled for. A propensity to smoke is in part genetically determined (18) and is a known indicator of a tense personality (19, 20).”