

Richer countries are happier than poorer ones. Richer families are happier too - MikeCapone
http://www.theatlantic.com/business/archive/2013/04/money-buys-happiness-and-you-can-never-have-too-much-new-research-says/275380/

======
jdietrich
This research says nothing of the sort.

It identifies a correlation between income levels and life satisfaction. It is
by no means trivial to assume the causal direction. People with high incomes
are far more likely to be in satisfying careers, far more likely to have had a
stable childhood and a good education. With the exception of the oil-rich Arab
states, high income tends to be a result of a long period of good governance.

This data could indicate that money does indeed buy happiness, or it could
indicate that the factors that create life satisfaction also tend to increase
earning power. It would be reasonable to assume that it's probably a bit of
both.

~~~
lambdasquirrel
The data also literally doesn't say it. Sneaky of them to plot income on a log
scale so you don't see diminishing returns.

~~~
danenania
Wow, that's sneaky indeed. The writer of the article doesn't seem to realize.

"If extra income didn't matter for well-being, you'd expect the line to
flatten. Instead, it steepens."

Yeah, a log scale on the x axis will do that...

~~~
pfedor
Yeah, they clearly don't realize that, that's why the article says,
"Statistical note: This graph is logarithmic. That means doubling your income
from $1,000 to $2,000 raises satisfaction by the same amount as doubling your
income from $10,000 to $20,000."

~~~
danenania
Sorry, I read too quickly and missed that. In that case, I suppose the writer
does realize that it's a log scale, but proceeds to make incorrect inferences
from the slope of the line anyway, which is even more baffling.

~~~
DalekBaldwin
What kind of correct inference could possibly be drawn? The data is
arbitrarily scaled to begin with. By criticizing the interpretation of the log
graph, it seems to me you've implicitly accepted that the authors'
quantification of happiness is a meaningful measure, that it makes sense to
say that one level of happiness is twice as much as another and that asking
someone to imagine a ladder can establish that.

Tucked away in a footnote in the paper: "We should add a caveat, that this
inference of 'diminishing marginal well-being' requires taking a stronger
stand on the appropriate cardinalization of subjective well-being (Oswald
2008)." You say caveat, I say giant ontological turd hitting the fan...

------
guylhem
If your money doesn't buy you happiness, you are spending it wrong.

It's a well known fact that GDP per capita is well correlated with other
indicators made by organisations with a liberal agenda, such as the HDI - so
much that it is problematic both for these organisation, and for a usual
neoliberal opinion (with diminishing marginal returns).

Maybe they are diminishing marginal returns with money - just like with human
life, after the 1000th year we might get bored, but we don't see them because
we look at a too small scale (a mere 75 years of life, with many disabilities
in the end)

EDIT : As usual, I don't care for the downvotes down to -1, but instead of a
lazy click, could you please take 10 seconds to expose facts if you want to
refute my points?

Downvoting means "does not bring anything to the discussion", it does not
means "I hate what you think". Facts please. Please bring me shame for how
wrong I am, (with references if possible).

Until then, here are my references:

First hits on google : correlation between GDP per capita and HDI : "Human
Development Index HDI is advanced as being a better indicator than GDP per
capita... BUT look at a plot of the correlation between HDI and GDP/capita or
all countries... There is today a very strong correlation"

[http://www.gapminder.org/news/hdi-surprisingly-similar-to-
gd...](http://www.gapminder.org/news/hdi-surprisingly-similar-to-gdpcapita/)

"The concepts of diminishing marginal returns on money" in simpler terms on a
blog: [http://www.getrichslowly.org/blog/2010/06/16/the-marginal-
ut...](http://www.getrichslowly.org/blog/2010/06/16/the-marginal-utility-of-
money/)

~~~
schiffern
> _It's a well known fact that GDP per capita is well correlated with other
> indicators made by organisations with a liberal agenda, such as the HDI - so
> much that it is problematic both for these organisation, and for a usual
> neoliberal opinion (with diminishing marginal returns)._

Why would that be problematic for those organizations?

Saying "GDP is correlated with happiness" (what you're saying) is a looong way
from "Impact on GDP is the best metric for determining policy" (what would
refute the 'liberal' GDP replacers).

~~~
guylhem
HDI and others were created because it was said that GDP per capita was not
measuring happiness well enough, and was too economic.

But now we realize they are correlated, which begs the questions : are the
parts about education, healthcare etc. within the HDI so unimportants ? (ie
why did bother creating the HDI if GDP/capita works just as well on most
cases)

But if works so well, shouldn't we also see diminishing marginal returns in
GDP per capita ? (in neoclassical theory, diminishing marginal returns are
everywhere !)

Some studies have added ad-hoc trigger points (up to $75k and you'll be happy,
then not so much) but still from what I get it's a weird situation, and we are
still learning important facts about the utility of money. It's quite
interesting.

EDIT: Marking normative suggestions with regards to GDP per capita - I don't
think I would, cause that's quite a bit off my league. There are different
models, and many variables - not one simple solution.

~~~
schiffern
> _why did bother creating the HDI if GDP/capita works just as well on most
> cases?_

Because using GDP maximization to decide policy in those _other_ cases results
in lower overall happiness.

I would have no problem if economic policy-makers were content to merely
_correlate_ their decisions with increasing the GDP. Using it as the only end-
goal, though, is foolish, and using it in those exceptional cases is, by
utility maximization standards, evil.

------
205guy
The whole article is really poor in my opinion. It ostensibly tries to
disprove (or get you to believe that some research disproves) previous
research that earnings beyond $75K per annum in 1st world countries does not
make people happier. To do this, it shows 2 graphs where 99% (my
approximation) of the data points are for 2nd world countries or 1st world
countries with earnings below 64K.

To prove their thesis (and disprove the previous research), they would've
needed straight lines for 1st world countries that continue straight up
between 64K and 128K. There is only one that I would say looks statistically
significant (USA), but it is balanced by one that definitely looks like its
not straight (could be Japan).

In the second graph, I am very skeptical of how they determine where that line
bends. If you ignore their lines, you could draw a straight line through the
data points. By what statistical method did they determine that a bent line
approximated the data better and that this particular bent line was the best.
Essentially, saying that this data should be represent by a bent line instead
of a straight one seems like an economist's trick.

And in the end, the author trots out the 75K figure and pretty much agrees
with it. The income redistribution statement is odd but further proof: taxing
the rich (above 64K) and "giving" it to the those below 64K would have the
biggest happinss effect.

About all I take away from this article is that Brazil and Mexico have the
happiest inhabitants on very low wages.

~~~
eru
> And in the end, the author trots out the 75K figure and pretty much agrees
> with it. The income redistribution statement is odd but further proof:
> taxing the rich (above 64K) and "giving" it to the those below 64K would
> have the biggest happinss effect.

Only if the taxation and re-distribution wouldn't have big feedback effects.

------
achille
Actual paper:
[http://www.brookings.edu/~/media/research/files/papers/2013/...](http://www.brookings.edu/~/media/research/files/papers/2013/04/subjective%20well%20being%20income/subjective%20well%20being%20income)

Things to note: their "very rich household of >500k" sample size is very
small: 8 households, most of the other data seems to max out at 64k.

Also according to them: _In an interesting recent contribution, Kahneman and
Deaton (2010) have shown that in the United States, people earning above
$75,000 do not appear to enjoy either more positive affect nor less negative
affect than those earning just below that. We are intrigued by these findings,
although we conclude by noting that they are based on very different measures
of well-being, and so they are not necessarily in tension with our results._

The difference between a country where everyone makes 60k and 30k means
everyone is better off this residually more happy. They don't say anything
about the happiness level improving after a single household goes from one
income to another.

------
rattray
>Gallup question wording: “Please imagine a ladder with steps numbered from
zero at the bottom to ten at the top. Suppose we say that the top of the
ladder represents the best possible life for you, and the bottom of the ladder
represents the worst possible life for you. On which step of the ladder would
you say you personally feel you stand at this time, assuming that the higher
the step the better you feel about your life, and the lower the step the worse
you feel about it? Which step comes closest to the way you feel?”

This doesn't seem to me like a good measure of well-being, but rather a
measure of how well people can tell what their income is relative to their
peers.

If I see much richer people than myself all the time I'll assume I'm halfway
down the ladder. That doesn't mean I'm actually unhappy, just that when I look
around, I think I could probably be happier.

~~~
greggman
I had that experience living abroad.

I lived in a city, Tokyo, (though I believe Shanghai, HK and SG are all
similar) where the majority of foreigners are "expats" where expat = Person
sent to foreign country by their homeland company and given a benefit package
that includes reproducing their homeland lifestyle in the foreign country.

I was not an expat by the definition above. I was paying $1k a month for
studio apt, sleeping on the floor. No complaints. But, 95% of all services
directed at foreigners in those countries are targeting the expats so anytime
I'd pick up a magazine or browsed a website targeted at foreigners I'd see ads
for tons of things 5x to 10x out of my reach. Lots of companies pushing
apartments starting at $4k a month and up. Companies for investing. Dating
services that expected their clients to have a salary of $200k+. Etc...

The point being, I was not unhappy until seeing all these ads made me feel
like I was at the bottom of the heap instead of above average as I had felt
before I came.

------
nilkn
I'm at the point where a bit more money wouldn't really increase my happiness
or fulfillment. For that to happen, I'd need a _lot_ more money.

I was just thinking about this the other day. If you've ever read Pride and
Prejudice, it says that Mr. Darcy makes about 10,000 pounds a year in passive
income from land he owns. Today, it turns out that's a bit over $800,000. Mr.
Darcy derived a _passive_ income of $800k. That's how rich he was.

That sort of wealth would definitely increase my happiness and fulfillment.
I'd probably transition into philanthropy, something I simply couldn't do
right now on any large, meaningful scale.

~~~
TillE
That seems about right. I make decent money, I buy what I want, and I can't
imagine that I'd change my life significantly if I made 2x or 10x what I do
now. Big house, fancy car? Meh, who cares.

But give me 100x or 1000x my current income, and things start to get
interesting. There are plenty of things I'd like to invest in and make happen,
if I could easily throw around a few million here and there.

------
pfedor
It is worth repeating that the original paper, by Kahneman and Deaton--the one
everyone likes to cite to support the opinion that happiness doesn't increase
with salary above $75k--said nothing of the sort, unless you accept a very
peculiar understanding of the word "happiness". The paper introduces two
concepts, "Emotional Well Being = the quality of a person’s everyday
experience such as joy, fascination, anxiety, sadness, anger, and affection",
and "Life Evaluation = a person’s thoughts about his or her life (on a longer
time scale)." The first one, K&D found, is only affected by money up to $75k a
year. The second is improved with more money at all levels.
[http://wws.princeton.edu/news/Income_Happiness/Happiness_Mon...](http://wws.princeton.edu/news/Income_Happiness/Happiness_Money_Summary.pdf)

So unless you're going to insist that the word "happiness" only pertains to
temporary feelings, as opposed to how you feel about your life overall in the
long-term, the claim about $75k and happiness never had any basis in data.

------
columbo
While I do kinda-sorta believe that wealth increases the odds of happiness I
-really- don't get the question. For all we know richer people are conditioned
to say they are content because of the social stigma of being a depressed-rich
individual.

I always thought that the trick to getting to the truth of the matter was to
ask a question that couldn't have a negative consequence. The more neutral a
question feels the more likely you are going to get an honest answer. "Are you
happy" isn't as good as "What's the funniest movie you saw this year".

The ladder question, as I read it, says more about where you think others
would see you. It isn't a question I'd answer honestly. I'd think about my
wife, kids, house, and all my privileges before even thinking "am I actually
happy".

When I used to work for a company that did personality inventory testing the
neutral sounding questions (True|False I enjoy dressing up to work) were
always the ones that carried weight, and the over-the-top questions
(True|False I've thrown a punch at my boss) were just a coarse filter.

~~~
brc
So... does enjoying dressing up for work count as a personality plus or minus?

~~~
columbo
Honestly it depends on what the goals of the test are.

Ask 10,000 people in <x position> the same generic question. So ask 10,000
Sales Managers if they like dressing up for work , look for a correlation,
compare the correlation to performance, get your answer.

Out of 10,000 sales managers, 3,000 said they enjoy dressing up for work. Of
those three thousand managers 2,600 are top performers and get high marks from
their coworkers. From this you can make a very slight up-tick towards someone
answering true to them having the possibility of being a top performer. This
would just be one question over hundreds of similar questions so it isn't
going to be a deal-breaker.

Of course, ask 10,000 programmers and "false" might be the correct answer.
That's what makes these questions powerful. There is no correct answer.
There's only a relationship.

------
photorized
It's not money (or material possessions), it's freedom. Freedom to pursue your
ideas, freedom to have options, freedom to do your own thing, freedom to give,
or not to waste time on things you hate.

All these things can definitely make a person happier.

~~~
arcM
Money can be the limiting constraint on having more options or freedom. Now
the study only shows a correlation with between log-income and happiness but
it's not crazy to assume that having health insurance, a savings account,
money for flexible travel, all increase your freedom and thus happiness.

------
consz
Honestly, it surprises me when people say money doesn't buy happiness.
Obviously I can only speak for one person, myself, but I've absolutely become
happier as I've made more and more money.

~~~
prewett
I'm assuming the saying is because of all the stories about wealthy people not
being as happy as you would assume. Stories about unhappy, but rich misers
have been around a long time, so I'd guess that there's some truth to them.

Money buys experiences and comfort, but it can't buy true relationships. Money
doesn't fix the selfishness or unforgiveness that destroys your marriage.
Money doesn't make up for all the time you spent working instead of relating
to family and friends.

I've heard some stories about rich men dying unhappy, but I can't find any on
Google. Here are some other references: [1] "A Christmas Carol" (Dickens) [2]
"Silas Marner" (George Elliot) [3] Misers in art:
<http://en.wikipedia.org/wiki/Miser> [4] Elvis was super-rich and super-
popular, but felt extremely lonely
<http://en.wikipedia.org/wiki/Elvis_presley#Memphis_Mafia> (search for
"lonely") [5] Concerns of the rich: [http://abcnews.go.com/Business/concerns-
super-rich-wealth-br...](http://abcnews.go.com/Business/concerns-super-rich-
wealth-bring-happiness/story?id=13167578#.UX9ijytsOp0)

~~~
consz
Are you seriously using A Christmas Carol as evidence? Come on now.

------
jfoutz
I might be reading that graph wrong, but it looks to me like the chart stops
at 128k. Bill Gates has talked about the 5-10 million dollar range of wealth,
and saying that buys real lifelong security. Beyond that, "hamburgers taste
the same when you're a billionaire"

That said, i bet all the toys are fun, but they're still just toys. We all
have our xboxes or Ferraris.

So, i wonder if it's really exponential forever like that graph suggests or if
it turns into a natural log at 5 million or so.

~~~
jvm
That's actually log income that they're comparing to life satisfaction there,
so they're clearly indicating that returns will diminish up to the point where
their measures aren't sensitive enough to detect it.

~~~
guylhem
So it's a problem of scale. That I can believe. There are dimishing marginal
returns, but if we zoom on a flat part of the graph we may not see them
properly.

------
hkmurakami
"in a vacuum".

If gaining more money brings stress/fatigue/conflicts/loss-of-time that isn't
perceived by the person to be more worthwhile than the input needed to gain
the money, then this isn't going to hold.

If he could say "give me $XYZ" and our bank accounts magically increased by
that amount, no cost, no questions asked, no nothing, then _of course_ we
can't have enough money. It's all about the "cost" we pay to trade for that
money.

------
merciBien
I wonder what's meant by "income redistribution" in this article. In my
experience with my family, giving people money they didn't put effort into
earning makes them less happy, and less able to provide for their own needs.
Is this anyone else's experience?

~~~
artsrc
The mathematics looks like this, money adds happiness on a log scale. So going
from $1K to $2K gives you as much additional happiness as going from $128K to
$256K. So if you tax those with $256K at 50% and give $1K to to 128 people who
have $1K you create 128 times as much happiness as you destroy.

Your study looks at a different effect than the one they are discussing.

~~~
guylhem
That's following a given theory.

Other theories exist - such as that people resent being taxed, with reduces
their utility more than what they paid, or that people resent being given
underserved money, which raises their utility less than what they received.

Also, it one admits diminishing marginal returns on money, what about
diminishing marginal returns on utility ?

Maybe there comes a point where, instead of finding Kaldor Hicks optimums of
Pareto efficiency, one cares more about fairness, and see this redistribution
as unfair. And Kaldor Hicks is about redistribution as can be.

~~~
artsrc
I am interested in any study that actually measures the effect of rates of tax
on overall happiness.

> Other theories exist - such as that people resent being taxed

That part is a fact in my experience. Some people resent being taxed. I think
all people seem to resent some tax or another.

> with reduces their utility more than what they paid, or that people resent
> being given underserved money, which raises their utility less than what
> they received.

I inferred that kind of thing from the grandparent comment.

Perhaps the solution to this problem is just in better marketing, rather than
in not doing the transfer.

Convincing/structuring payment so that people think they are deserving can't
be that hard.

>Maybe there comes a point where, instead of finding Kaldor Hicks optimums of
Pareto efficiency, one cares more about fairness, and see this redistribution
as unfair. And Kaldor Hicks is about redistribution as can be.

Thanks for this reference. I just looked up Kaldor Hicks and think it is an
interesting tool.

------
eksith
Are we sure it's wealth that makes them happy or the ability (or willingness)
to utilize said wealth? There's something to be said of old-money vs. new-
money where often, new-money is self-made and tends to be spendthrift whereas
old-money tends to be more cautious (probably the reason they're "old").

There's still a huge difference between "spending" and "buying". Did those
economists make a distinction? I haven't seen many people "buy" (as in product
or service) into happiness, but some folks seem to become happy by spending.
I.E. Parties, charity or some combination of both.

------
hpaavola
<http://en.wikipedia.org/wiki/Easterlin_paradox>

When GDP rises above certain level, nation as a whole does not get any
happier. Individuals do get happier when their income rises above their peers,
but on the other hand, their peers lose some happiness.

------
benjamincburns
All poorly titled summary articles aside, money may or may not buy happiness,
but it can buy some pretty sweet vacations.

------
smegel
Its odd they don't consider the correlation between anti-depressant use and
country wealth. Oh sorry I forgot, that's just because were all stressed from
working so hard in order to earn more money so we can be happy!

Maybe letting economists dictate the social agenda is the problem in the first
place.

------
npguy
Many of these studies try to generalize the subjects too much: the fact of
life is that everyone needs more money. That is just how we as humans have
chosen to structure the world around us. And happiness cannot be measured in
any objective way anyways.

