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.
"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...
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...
But to push my own biased opinion, I've often found that people who have positive attitudes, despite adversity, often do better in life-- both in happiness and relationships and career success.
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.
Only if the taxation and re-distribution wouldn't have big feedback effects.
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.
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.
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.
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.
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.
So yea, I'm with you. A little more money isn't going to make me happier. A LOT MORE will ;-)
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.
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.
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.
All these things can definitely make a person happier.
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:
 "A Christmas Carol" (Dickens)
 "Silas Marner" (George Elliot)
 Misers in art: http://en.wikipedia.org/wiki/Miser
 Elvis was super-rich and super-popular, but felt extremely lonely http://en.wikipedia.org/wiki/Elvis_presley#Memphis_Mafia (search for "lonely")
 Concerns of the rich: http://abcnews.go.com/Business/concerns-super-rich-wealth-br...
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.
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"
"The concepts of diminishing marginal returns on money" in simpler terms on a blog:
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).
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.
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.
One of my all-time favorite papers:
"If money doesn't make you happy, then you probably aren't
spending it right" http://www.wjh.harvard.edu/~dtg/DUNN%20GILBERT%20&%20WIL...
True, but not everyone, or even everyone with plenty of money, has the opportunity to spend it rightly.
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.
Your study looks at a different effect than the one they are discussing.
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.
> 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.
Try it with an infant, and you'll find the need to further qualify "people", because as you put it, the theory doesn't work out. So let's call them grown-ups, not referring to just being physically grown up either. Now, where do you draw the line, and how do you assess on which side of it a stranger is?
What I'm asking is, what makes you assume the person you see begging actually did have a fair shot at it? I don't deny that some of them did, but even if it was the majority; what make you assume that about every single one? That it's comfortable? That it couldn't possibly be that it is just LUCK that you weren't raped as kid and ended up as alcoholic with 12, or something like that? Just face it, as much as effort makes a difference, it's still luck to even have a chance. If everybody got what they "earned", all of us would have the same, namely non-existence. It's easy to forget privilege once you have it, and make that the cut-off point.
So personally I like to err on the side of compassion. I don't like drunks, alcohol is a black hole and to be honest, I consider some of them walking dead; I don't like being actively bothered too much, and professional beggers are air to me; but otherwise, giving a bit of change is sometimes just a way of not ignoring a person, and an opportunity to wish them a nice day. That doesn't change their life, but it's at least a tiny ray of light instead of yet another rain drop of being ignored, which is proportional to how little it costs me personally.
There are people who simply fell on hard times, and what the am I expected to ask of them so they can "earn" a few cents, or euros? To prove that it wasn't their fault, to have their papers on hand? To shine my shoes? To ask real nice? Sure, I'll admit, I like it more to give something to someone trying to sell those homeless people newspapers, or someone playing an instrument. But I rarely take the paper (though as far as newspapers go, they beat mainstream ones, they're way more interesting), and the crappier they are at playing the instrument, the more likely I am to give.
I'm not berating you for your choices, but I know why I make mine, and why I feel good about giving.
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.
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.
Maybe letting economists dictate the social agenda is the problem in the first place.