Does money make you happy?

For over a generation, social scientists have discussed the ‘Easterlin Paradox’. One version of this is the commonly-held notion that above a certain threshold, GDP is uncorrelated with happiness.

This turns out to be wrong.

Income, Aging, Health and Wellbeing Around the World: Evidence from the Gallup World Poll
Angus Deaton 
During 2006, the Gallup Organization conducted a World Poll that used an identical questionnaire for national samples of adults from 132 countries.  I analyze the data on life satisfaction (happiness) and on health satisfaction and look at their relationships with national income, age, and life-expectancy.  Average happiness is strongly related to per capita national income; each doubling of income is associated with a near one point increase in life satisfaction on a scale from 0 to 10.  Unlike most previous findings, the effect holds across the range of international incomes; if anything, it is slightly stronger among rich countries.  Conditional on national income, recent economic growth makes people unhappier, improvements in life-expectancy make them happier, but life-expectancy itself has little effect. Age has an internationally inconsistent relationship with happiness.  National income moderates the effects of aging on self-reported health, and the decline in health satisfaction and rise in disability with age are much stronger in poor countries than in rich countries.  In line with earlier findings, people in much of Eastern Europe and in the countries of the former Soviet Union are particularly unhappy and particularly dissatisfied with their health, and older people in those countries are much less satisfied with their lives and with their health than are younger people.  HIV prevalence in Africa has little effect on Africans’ life or health satisfaction; the fraction of Kenyans who are satisfied with their personal health is the same as the fraction of Britons and higher than the fraction of Americans.  The US ranks 81st out of 115 countries in the fraction of people who have confidence in their healthcare system, and has a lower score than countries such as India, Iran, Malawi, or Sierra Leone.  While the strong relationship between life-satisfaction and income gives some credence to the measures, as do the low levels of life and health satisfaction in Eastern Europe and the countries of the former Soviet Union, the lack of correlations between life and health satisfaction and health measures shows that happiness (or self-reported health) measures cannot be regarded as useful summary indicators of human welfare in international comparisons.

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7 Responses to Does money make you happy?

  1. Verdurous says:

    Interesting.

    Perhaps all the sages and minstrels of the ages have been proven wrong. Though I believe there are still strong arguments about this.

    I wonder whether we can infer to the individual level from this macro information on national GDP or whether the ecological fallacy kicks in. Presumably people continue to examine differences in individual wealth and happiness within societies. What’s the state of play there Andrew?

    Noticed a recent article this week (book review) questioning whether happiness should be pursued or is too elusive. Are we able to truly pursue happiness or do we get sidelined by short-term gratification? It’s here:

    http://www.philosophynow.org/issue61/61kazez.htm

    At any rate, if Deaton is right (and I love the fact that he shares his name with a marvellous Cleese-esque British comedian) then we should all soon be wonderfully happy while those 30% of Earth’s species that don’t make it through to 2100 will not be there to share the laughs with us. (And I suspect those with real estate on the coast might be in a dour mood too).

  2. John Rawnsley says:

    I once heard someone say that money is not the root of evil but lack of money

  3. Leopold says:

    Hmmmm… aren’t there rather a lot of studies showing little or no correlation (above a certain level) between ‘subjective wellbeing’ and income? Not got the time to look it up, but I understood that was the case.

    Seems a bit hasty to throw away all such research on the basis of one paper, Andrew. Not that it would surprise me unduly if it were wrong, but you would surely need a bit more information.

  4. invig says:

    Andrew, you know how you’re always after a new trial so u can get data? Well I think I can help you out.

    OK, i fill in a survey for about how happy i am NOW and then AGAIN after you give me some money.

    We can repeat this a number of time to ensure accuracy.

  5. Andrew Leigh says:

    Leopold, the reason I place a lot of weight on this one is threefold: (a) this survey is more extensive than any previous study; (b) Deaton is seriously impressive; and (c) it accords with my own findings. (However, as soon as I get money to do an ARC research project with Invig, we’ll have better evidence still.)

  6. procrustes says:

    Leopold,

    Even before Deaton, there are plenty of papers that don’t accord with the Easterlin hypothesis. Have a look at Ruut Veenhoven’s world database of happiness website for a starting place. This is a subject where the money doesn’t buy you happiness types get quite a free kick in the chattering class media, so it’s good to see the Deaton article getting some attention.

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