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Thought-Provoking Thursday: How Much Money Makes You Happy?

Conventional wisdom — or pop culture, at least — says that money does not buy happiness: you can’t buy the Beatles’ love, rapper Macklemore likes his thrift shop and pop star Jessie J just wants everyone to forget about the price tag and make the world dance. Yet, for every song or work of art eschewing materialism, there seems to be at least two more extolling the virtues of richesse; Madonna is, after all, just a material girl, and Bruno Mars wants to be a billionaire so very badly. So who’s right: Team Beatles, or Team Bruno?

One new study from Brookings released last month gives an edge to Team Bruno. Economists Justin Wolfers and Betsey Stevenson took data from 155 countries — 95 percent of the world’s population — and found that as people get richer, they report feeling happier. The results are consistent across the countries they analyzed, which is to say that rich countries are happier Wolfers Stevenson Money Satisfaction Tablethan their poorer counterparts, and they say there is no level at which happiness tops off.

“If there’s a satiation point, we’re not yet there,” Wolfers said in a recent phone interview. He and Stevenson analyzed happiness levels of people earning incomes of less than $10,000 all the way up to half a million dollars per year and found that with each new level of income, there was a higher level of reported happiness. As the table to the left shows, 42 percent of people earning $10,000 to $20,000 annually reported feeling “very happy,” compared to 83 percent of people earning between $250,000 and $500,000.

These results seem to contradict previous research that has suggested once a certain level of income is hit, more money doesn’t bring more happiness. One commonly-cited study by Nobel laureate Daniel Kahneman and Princeton economist Angus Deaton found that $75,000 in annual income is the “sweet spot” and additional income doesn’t provide additional emotional well-being.

But in their paper for Brookings, Wolfers and Stevenson noted that their study is based on different measures of well-being than the Kahneman-Deaton study, so the two sets of results are not “necessarily in tension” with each other. As they show in the data, happiness and life satisfaction aren’t the same thing (more people earning $50,000 reported feeling “very satisfied” than “very happy”), and Wolfers noted that he and Stevenson haven’t studied the same affective measures (like experiencing lower stress or not feeling blue) that Kahneman and Deaton have.

As for the other studies that suggested happiness levels don’t rise with income? Wolfers points to the fact that he and Stevenson gathered more data.  “We have data on 160 countries. It’s very clear rich countries are happier than poor. If you only have a few countries, there’s not as much data [to go off of].”

It’s important to note that Wolfers is careful to say his research results do not simply mean “money buys happiness.” Instead, he thinks something a little more complex is at play.

“I’ve seen headlines [saying] ‘More Jimmy Choos Make You Happy.’ I don’t think there’s any sense in which that is the case,” he said. “Those of us who live in the developed world find ourselves blessed with a wonderful array of choices, and we can choose a career that we find meaningful… I think it’s a mark of having choices of ways of doing things that make you happy. By no means is our advice that you should become an investment banker on Wall Street.”

“Most people I’ve talked to think this is mindblowingly obvious,” Wolfers added. “I’ve certainly not heard from millionaires saying ‘money doesn’t matter and you can have half of my wealth.’” As for the money and happiness discussion? That, we’re sure, will be continued…


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