Does Money Buy Happiness After All?

by Stephen Mills on December 19, 2011

I’ve always thought more money buys more freedom but I’ve also accepted the money / happiness correlations, or more properly the lack thereof that have been the subject of quite a bit of recent research.  I recently reviewed a copy of a forthcoming book that makes one think real hard about whether or not one really wants to be wealthy.  It’s did not paint a pretty picture of the lives of the rich.

Much has been made of the fact that poor Latin American countries often rate as high or higher on happiness scales as rich countries like Japan or the U.S.  GDP and happiness are not generally well correlated above a certain level.  I have encountered claims that after a certain level of income was reached, generally pretty low and little more than enough to ensure you could afford the basic comforts of life, higher income doesn’t correlate well with more happiness.  I know the research is  unsettled and recently I’ve come across something that suggests things aren’t as simple as is frequently reported.

Two researchers, Daniel Kahneman and Angus Deaton, analyzed a large amount of data from the 2008 / 2009 U.S. Gallup-Healthways Well-Being Index and have produced some interesting observations.  This is U.S. data only but I suspect it applies globally as well.  The GHWBI survey measures two different psychological factors:

  1. Daily emotional well-being (enjoyment, happiness, sadness, anger, worry, stress, etc.)
  2. Overall Life Satisfaction

Interestingly income in the U.S. affects daily emotional well-being (enjoyment, happiness, sadness, anger, worry, stress) up to about $75,000 of household income.  That’s not exactly a subsistence level of income and is significant in that 2/3 of U.S. households are below that level.   This indicates an increase in stable income would positively impact 2/3 of U.S. households in their day-to-day happiness levels.

The other indicator of overall life satisfaction is even more heavily correlated with income levels.  Life satisfaction continues to show strong increases in the U.S. up to household incomes of at least $160,000.   To understand the difference between the two think about how you might report you’ve been stressed or worried daily for the past few days, but you are very satisfied with your life right now.  People who raise children have higher life satisfaction levels but they have lower daily emotional well-being levels than those who have no children.  Raising children makes you less happier on a daily basis, but makes you more satisfied with your life.  I don’t think that surprises too many parents.

I’m not sure what all this means but it should give us pause before unthinkingly repeating that money doesn’t buy happiness because clearly it does.  At least in some ways that are more nuanced than the simplistic claims some, including myself, have made.  I suspect a poor Costa Rican may be as happy as a middle-class Japanese but a middle-class Costa Rican is probably happier than a poor one.  Much of how we feel unfortunately is related to how we view ourselves relative to those around us.  It’s hard not to notice what cars your neighbors drive and what kind of homes they live in.

You have to be careful about assuming that a correlation means a cause and effect relationship.  Maybe happiness causes incomes to rise or something else causes both.

Also At the risk of being politically incorrect I will make an observation about Hispanics in my city of residence – Houston, TX, that may say something about Latin Americans and happiness.  There is a very large Hispanic population here and there is a very large park that is densely wooded and has large undeveloped areas (no roads or facilities) near my home.  I love to visit this park to get my nature fix in the more remote areas.  It’s best to visit during the week as there are very few people there.  However, when I go on weekends or holidays and as I drive through the picnic areas the park is usually packed with Hispanic groups that appear to be made up of extended families and/or friends.  I’m always struck by how happy they look and how much fun they are having while I drive by in my nice car – alone.  In the end I think they may be holding the most important key to real happiness.



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{ 14 comments… read them below or add one }

Bethany December 20, 2011 at 11:18 am

I can’t answer for everyone, but money would make me happier. I am already extremely happy because I am married to the love of my life. We often talk about how we will spend our lottery winnings one day, and I can assure you that money will make us much happier! This is because my husband will not have to leave to go to his dangerous job everyday. We will be able to go on vacations and celebrate our anniversaries. We will buy a nice house with a pool and make sure that we skinny dip every single day. All of our bills we be paid off and paid on time. And we will be able to open up our animal shelter that we dream about. I don’t believe that money can buy happiness if someone is not already happy. Money will not solve a miserable life, unless the only reason that life is miserable is because someone doesn’t have enough money.
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ashwani kumar December 20, 2011 at 11:15 pm

Money is a very important factor in our lives. I don’t think money can buy true happiness, but it can reduce a lot of miseries and difficulties that are caused by the lack of it. Though money is necessary and important it shouldn’t be placed above other important things such as love, family, friends and relationships.
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daniella December 21, 2011 at 1:46 am

Money does not make people happy, as is well documented by seeing so many people with so much money that are so miserable. I think that as long as you have enough money to fulfill the needs of you and your family, you really don’t need much more. You don’t need a big house, or the latest cars, clothes and gadgets to make you happy. What you really need for happiness is to surroud yourself with those you love and care about and who care about you.
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Nea | Self Improvement Saga December 21, 2011 at 8:28 pm

This is very interesting. My thoughts would be that the correlation is clearly there. I believe that money really does make a difference for some people, but I don’t think money is actually the cause of happiness or that lack of it is the cause of unhappiness.

When a person has more than they can afford and they’re getting calls from bill collectors who want them to pay, they’re clearly unhappy. When a person is busy comparing themselves to others rather than appreciating what they have and who they are, they’re likely unhappy. The same is true of people who don’t realize their own power and resourcefulness AND those who lack the support of family, friends and community. In all of these situations and many more, people lust after money as the fix. It feels like it could be the answer that cures the fear of loss, the spirit of lack, the desire to measure up. But is it really ridding the problem? How long does it take before the person is, once again, believing they need more money to make life better? Could they be just as happy if they learned to trust themselves, to consume less, to appreciate what they have, to tap into the deeper sense of abundance that lasts a lifetime? I think so.
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Kellie December 22, 2011 at 12:14 am

Money can’t really buy happiness but it can buy things that can make you happy…
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judith December 22, 2011 at 5:01 am

Money does not make people happy, as is well documented by seeing so many people with so much money that are so miserable.

I think that as long as you have enough money to fulfill the needs of you and your family, you really don’t need much more. You don’t need a big house, or the latest cars, clothes and gadgets to make you happy. What you really need for happiness is to surroud yourself with those you love and care about and who care about you.
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Alaina December 27, 2011 at 9:38 am

I think money can buy you a lot of happiness, or the means to make yourself happier, but it cannot supply all that you need. True inner peace depends on more than financial status, after all. Wealth doesn’t guarantee health or long life (nature and death strike indiscriminately among the rich and poor alike). It cannot buy you true social acceptance, much less a long, meaningful friendship. And money never purchased anyone deep, lasting love, nor did it ever mend a broken heart.
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Felly December 28, 2011 at 9:17 pm

Money can’t buy us happiness but we can buy the things that make us happy and other people happy…
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