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Money can buy happiness (economist.com)
171 points by mckee1 1257 days ago | hide | past | web | 160 comments | favorite



The income scale is logarithmic, so the apparently linear lines that you see are actually curved. The returns in happiness per $ earned fall off significantly towards the top of the scale (which incidentally is capped at a fairly low $128,000). I don't really see how this new data contradicts the generally accepted view (mentioned in the article) that money increases happiness up to a point.


>I don't really see how this new data contradicts the generally accepted view (mentioned in the article) that money increases happiness up to a point.

The article shows a logarithmic trend (i.e. doubling your income increases your happiness by a fixed amount), which is a straight line on the log plot. This insinuates (if the trend continues, which is assumed from the results) that there is no point at which increased income won't make someone happier.

The traditionally-held view is that there is an income (I've heard something like 70k in the USA) where the plot should become a horizontal line, i.e. increasing your income increases your happiness by zero.

These are very different conclusions. The plot isn't really falling "significantly towards the top of the scale". Log is the correct way of looking at income, because people consider changes to their income proportionately to their current income (for example, a 5% raise to someone making 1M dollars a year is about as significant to his life as a 5% raise for someone making 100k, even though the actual additive amounts are very different).


The traditionally-held view is that there is an income (I've heard something like 70k in the USA) where the plot should become a horizontal line, i.e. increasing your income increases your happiness by zero.

This might seem like a strange view, but the notion is not that money ceases to increase happiness, but rather increased happiness costs associated with earning that increased income start to negate the gains.

Anyway, this graph is self-reported life satisfaction. We would need to examine the metric used in the studies that came up with the ~70k number to see if we can even compare the two studies.


The data I've seen shows the income where happiness flattens is around 100k rather than 70k so cutting off at 128k doesn't seem high enough to disprove the established research.


Remember that both Easterlin's studies and the one in this article have been done in many countries and not just the US though. The $128k cap may seem limiting for the US but it is not for Nigeria or the other lower-income countries, yet they still show the same patterns.


"The $128k cap may seem limiting for the US but it is not for Nigeria or the other lower-income countries, yet they still show the same patterns."

And that's why the cap for Nigeria is at $8k...

In fact, as someone else has commented: https://news.ycombinator.com/item?id=7047548

"According to the paper (page 13), they only look at incomes between the 10th and 90th percentiles. That's why they cut off at $128,000 for US residents"

In my opinion, ignoring data from the top 10% earners is the perfect way to get plots that seem to disprove a paradox that states "Become rich enough, and a bigger paycheque no longer leads to more happiness".


> These are very different conclusions.

They are not; in the real world, logarithmic growth and bounded growth are essentially the same because the possibilities for income growth are severely limited, and you reach a point where any realistic increase in income cannot yield a measurable increase in happiness.


I can see where you're coming from, but I also see two problems.

Firstly, you're generalizing towards the origin from a relatively high section of the graph. Leaving aside the relative happiness, a 5% increase in income is actually much more significant in someone's life when they make $10,000 a year than when they make $100,000. There are thresholds established by absolute resource requirements. This makes it dangerous to reason from the 'flat' part of the curve downwards. Relevant analogy: transistor response curve.

Secondly, insofar as income represents a portion of an absolute resource [ie to some extent], some information is obscured that would otherwise be intuitively and immediately available. It's remarkable that the money required to increase a person's happiness by one unit is, in every case, enough money that another person could share their initial happiness. A graph with a linear relation would demonstrate this as an (immediately obvious) diminishing return on a finite resource. A graph with a log relation presents a diminishing return as natural and efficient. In this way, the choice of scaling method significantly biases the meaning attributed to the data.


a 5% raise to someone making 1M dollars a year is about as significant to his life as a 5% raise for someone making 100k

Are you asserting that as fact? Where I live, someone making 100K is just getting by and not saving very much, even with the 5% raise (he certainly couldn't buy a house), whereas for someone making 1M, the extra $50K is "free" money.


WHERE you live, or HOW you live?

I've seen many people complain about not making enough to live where they live, when I clearly see lifestyle changes that would fix the income problem, and I see people living alongside the first who make less and save more.

I don't know you. Or your life circumstances. It might not be true for you. But "$100k/year isn't enough to survive" is the kind of claim that I've learned to be automatically suspicious of.


I could see a family (of even 3) struggling to live a middle class lifestyle on 100K a year in the more expensive cities in America.

There's a huge difference between 100K in Tennessee vs 100k in NYC or SF.


This depends on your expectations about what a "middle class lifestyle" includes.

Let's take NYC. The fact is that in New York City, the median household income is about $50k/year. (Last year it was $50,895.) So if we define a "middle class lifestyle" as that which those in the middle can afford, well, by definition you're going to get by very well following that lifestyle while making $100k/year! Even if your household has 3 people in it.

But if you define "middle class lifestyle" according to the way you think that you peer group is living, well, I've known people making $200k+ who experience "trouble getting by".

Now I can understand making more, choosing to live better, and running into financial trouble because of it. But if you do that and blame anyone but yourself, well, I've got nothing in the way of sympathy for you.


This is precisely what Easterlin says: a relative increase in income has little effect on happiness past a certain point. This competing model (the one in the article) says that no, there is no saturation point and there is a logarithmic relationship between income and happiness where the effect of a %age change in income has a constant effect on happiness.


It is partly a fixed cost versus variable cost argument, although these guys don't express it that way. (And I realize that fixed isn't really "fixed.")

If you can't afford decent housing, adequate healthcare, and a good education for your kids, of course more money will buy you happiness. And in the US, the income at which you can afford those three ... is high and increasing fast.


I imagine there is a threshold where percentile wealth increases make the ultra-rich happy again. Whenever it grants you a noticeable increase in power and influence to increase your wealth, you kind of want to maximize it to maximize power and influence.

There is just a vast gap between the point where you stop spending money for consumption and when you can start spending money for influence.


> incidentally is capped at a fairly low $128,000

Maybe they don't have data for people making more than that? There are relatively few people with incomes that high, and their time is probably valuable enough that they're disinclined to waste it filling out happiness inventories.


> There are relatively few people with incomes that high

The chart is of household income, not individual income. There are plenty of households who break that mark.


If we ignore many countries where $128K+ is quite rare, at least. In the US, about 14% of the households earn that much or more. However, the breakdown is more interesting here: Only ~1% of households in the US earn between $125-130K, compared to ~5% earning between $35-40K. The groups do become quite a bit less representative as you climb the income scale.


> I don't really see how this new data contradicts the generally accepted view (mentioned in the article) that money increases happiness up to a point.

It doesn't - the title of the article and the interpretation provided with in is almost as misleading. They start off quickly by telling you about the 'Easterlin paradox' - that is what they have specifically found evidence against. i.e. 'more money makes you happier' is backed by evidence.

The fact that more money makes you happier does not mean that any amount of money can make you as happy as you want though...

This is not surprising - its probably common sense.


"that more money makes you happier does not mean that any amount of money can make you as happy as you want"

And "more money" is not always the easiest or most available "life hack."


According to the paper (page 13), they only look at incomes between the 10th and 90th percentiles. That's why they cut off at $128,000 for US residents.

With that said, I do think it'd be interesting to see a graph that continues past the 90th percentile.

The paper: http://www.nber.org/papers/w18992?utm_campaign=ntw&utm_mediu...


That link has started charging since I posted it. You can get the paper for free (legitimately) here: http://www.brookings.edu/~/media/research/files/papers/2013/...


The graph shows a decreasing level of extra happiness per additional dollar earned, and caps out at $100k. The data here does not support the article at all, it supports the mainstream view. What a rubbish article.


This poll is bullshit.

They are asking people to imagine what their life would be if they have more money. Of course they say they would be satisfied (up to a point).

However, what people say they want are not necessarily what they need or feel. Contentedness doesn't come from having everything you need, it's a feeling that can be generated from within and rested upon, whatever the situation you are in.

What generates a lot of confusion and suffering comes from the difference between the imagined happiness ("If only ...") and the ability to be content in the present moment. (And sure! "Present moment" can be anything from sitting quietly outside and listening to skydiving). As long as you have an imagined happiness, that "if only X, Y, and Z happens", then you will never be satisfied.

It's totally crazy. People can just be happy right now, and go on with their lives, instead of twisting themselves up inside.


You have misunderstood. They ask people to report their actual income and their actual life satisfaction.


Fair enough, however, when I reread the post it says:

"They use a trove of data generated by Gallup, a polling firm, from its World Poll. Gallup asked respondents around the world to imagine a "satisfaction ladder" in which the top step represents a respondent's best possible life. Those being polled are then asked where on the ladder they stand (from zero to a maximum of 10), and how much they earn."

Not quite the same thing I said, but it still introduces a bias. The people are asked to first imagine what a "10" -- that is, their ideal, imagined happiness -- before rating their happiness. It is essentially still the same mechanic, imagining a happiness before putting your "actual" happiness against that scale.


It's not bullshit, it's interesting. But comparing this result to the previous results is not valid considering the very strong framing device they used to get that result.

They are basically getting people to judge their happiness against a hypothetical future rich self, when we already know that people have a bias to assuming more money would make them much happier than it actually would.

If I wanted to "prove" money made you happier I would construct a poll exactly like this (or at least I hope I would have been smart enough to come up with this). The fact that it worked is still interesting however.


People become acclimatised to 'new wealth'. One thing I learned from life experience, and then actually understood after studying Buddhist philosophy, is that it's very easy to enter a repetitive cycle of desire, some achievement, then more desire ... one yearns to make more money, makes it (via payrise or other successful project), gets used to having that money, wants more, makes more, and so on. The trick is to be satisfied / happy with what you have; it's not practical or very likely that your income will keep increasing 'forever'.

I can honestly state that I'm happier now making less money, not owning a house, nor having many of the trappings of 'success' that I had 10 years ago. I admit, however, some ill-placed desire to see if I might be happier now 'making money' than I was in the past; my healthier (IMO) life outlook might be simply as a result of more wisdom rather than less money.


Great point. The perspective you have for life, its what matters the most.. to do this research well they should detect different "life philosophies" or paradigms.. like "materialist type", "spiritual type", "dionisiac type", "apolinian type".. etc.. and also measure them in diferent points in life..

for instance, when younger is cool to be dionisiac.. you will be happy than.. but as you grow up.. different things matter most.. and or you will shift paradigms or you will get more unhapier with time. As a example of why do periodic research based in paradigms is important..

I think this is a complex matter to be viewed so trivially.. i dont think it proves much anything of value, in the way this research was conducted.


I like the whole ascetic lifestyle philosophy but I find it harder to follow with a family and kids. At this point I'm perfectly fine with doing a number of distasteful materialistic things such as taking on debt or owning a house, because it benefits the kids and they don't have to know about the decisions.


The Economist article actually conflates two happiness metrics, happiness as measured by emotional well-being and happiness as measured by life evaluation. Money buys happiness as measured by emotional well-being up to a point (that point being $75K for US residents), but higher income continues to increase life evaluation.

More details can be found in Daniel Kahneman's 2010 study, "High income improves evaluation of life but not emotional well-being"(http://www.pnas.org/content/107/38/16489.full), where he uses the results of 450,000 Gallup poll responses to analyze the effects of income on both happiness metrics.

Kahneman defines emotional well-being as "the emotional quality of an individual's everyday experience—the frequency and intensity of experiences of joy, stress, sadness, anger, and affection that make one's life pleasant or unpleasant." Life evaluation, on the other hand, refers to the thoughts that people have about their life when they think about it."

In the study, emotional well-being is captured via series of yes/no questions of the form "Did you experience a lot of stress yesterday?" or "Did you smile or laugh a lot yesterday?" The goal is to assess their emotional well-being on the previous day. Life evaluation is measured by asking respondents to rate their lives on a ladder scale from 0-10, where 0 is “the worst possible life for you” and 10 is “the best possible life for you.”

The data showed that for individuals earning below $75K, logarithmic increases in income (i.e. doubling one's income) positively correlate with scores for happiness, enjoyment, and smiling and negatively correlate with scores for sadness, worry, and stress. At $75K, you have enough to pay life's bills and still have discretionary money to go out and spend time with friends. The effects of income on emotional measures saturate at $75K because money no longer becomes the limiting resource for achieving more happiness, even though life satisfaction continues to rise when plotted against log income. "We conclude that high income buys life satisfaction but not happiness, and that low income is associated both with low life evaluation and low emotional well-being," Kahneman writes.


The participants were not asked how happy they were, they were asked where they stood on a 'satisfaction ladder' with the best life they could imagine at the top. Many people may be perfectly happy, but they know their position on the wealth scale and imagine that they would feel more satisfied at the top of that scale.


people are actually pretty bad at defining where they are on the wealth scale. For example, loads of very rich Americans seem to think they're middle class (the WSJ once portrayed a middle-class family as earning $100000 a year, which actually places them in the top quintile).

This article describes how it is a relatively universal factor though (everyone thinks they're kinda in the middle)(http://economix.blogs.nytimes.com/2011/04/27/everyone-is-mid...)


You seem to under the misapprehension that middle-class refers to a median income grouping when that's not actually the case:

http://en.wikipedia.org/wiki/American_middle_class


What you call a misapprehension I would instead call "identifying a delusion." The faux-classlessness of American society is one of the weirder and to my mind deleterious aspects of the American character, in part because I think it feeds into Steinbeck's temporarily-embarrassed-millionaires phenomenon (the rush of actual middle-class people to defend the people who will profit from their defense).

And I don't think it holds true, anyway. I don't have the same problems as someone making $25,000 a year (approximately the 48th percentile as per Wikipedia), though they are recognizable to me in the abstract. I also don't have the same problems as someone making $200K a year and they are utterly foreign.


$100k/year is very much in line with what an actual sociologist would describe as middle class. Most of the upper quintile is part of the middle class. Most sociologists describe the top 1-5% as upper class. The next ~45% is middle class, then the next 30-40% is working class, then the remaining 10% or so is poor/lower class[1].

The upper class is made up of capitalists, high-level executives and people with inherited wealth. People who work in professional occupations such as doctors or engineers are not part of the upper class.

[1] http://en.wikipedia.org/wiki/American_middle_class#Academic_...


Another way to interpret it is the higher your income, the less you expect to be able to advance in the future on sort-linear-log scale. Or the poorer you are, you tend to feel poorer (than you actually are) on a sorta log scale.

There are no poor people in America, only temporarily inconvenienced millionaires.


This appears on HN coincidentally after the discussion on rating differences between cultures[1], so that different countries may have different views about what a scale of 1-10 means.

A 7 in Brazil might not be a 7 in India, for example.

[1] https://news.ycombinator.com/item?id=7044833


The graph in the linked article uses separate lines for each country. The position of each line is different but the slope is surprisingly similar.


This is by far the biggest issue I have with any sort of international "happiness" scale. Some people like to complain a lot more than others, and culture-wide differences can be huge.

For example, the Economist had an article on the general malaise that hits the French (http://www.economist.com/news/christmas-specials/21591749-bl...).


It would be nice to see the "income" axis adjusted for cost of living.


Money can buy security and that security increases your happiness. Not having money can make you unhappy. Sustainable happiness is recognizing what is truly valuable in life and appreciating it.

For me this is:

1) No debt

2) Full stomach/quenched thirst

3) A warm place to sleep

3) Meaningful intimate loving relationships

4) A sense that I am valuable (adding value to the world or some subset)

5) Freedom to indulge my curiosities through exploration/experimentation/participation.

6) And in its most abstract definition, freedom to experience a spiritual life.


1. No debt is fairly expensive in this world. Either you need a nontrivial income or a fairly high threshold for ascetic living.

2. Full stomach/quenched thirst is trivial if you don't mind tap water and simple starches, but once you add (depending on your taste) a complement of steak, quinoa, fresh fruits, beer and/or wine - then you run into a little money.

3. Warm place to sleep - anywhere near work? public transport? "good" schools (however you define that)? Gets expensive quick.

3bis. Meaningful intimate loving relationships are easier to maintain if you have at least one weekend day off (i.e. don't have to work 2 or more jobs) and have at least a little cash to go out on the town at least once in a while.

4. Sense that I am valuable - to me, this has always been difficult without a modestly good set of clothes, shoes and a haircut. Others don't feel that way (but less than you'd think). But maintaining a personal sense of one's value is at least somewhat correlated with others' sense of ones' value. And others' sense of one's value is never completely monetarily free.

5-6. Freedom to indulge curiosities and spiritual life - on a low income, you'd better be single and childless. And even then, it's a challenge.

I very much doubt the average person could fulfill those goals to any degree of satisfaction on less than 50k as a single person in a major metro area, not a ton less in the boondocks, and not much less than double that with a partner or spouse.


I have no debt and significant savings/investments but that is because I don’t own a house. We have this social expectation in the USA that one must be a homeowner or they are nobody or haven't made it. Even those who can't afford a house have one. I also paid only 12,000 for my small car that is extra fuel efficient instead of buying an expensive car or SUV even though I could afford one.


Good move. IMHO homeownership is inadvisable where it can be avoided.


When I comment on this site I try very hard to say exactly what I mean and nothing more. I believe, but may be mistaken, that you have made some assumptions about what I was saying.

Above I asserted an objective truth, and followed it with my list of subjective truths.

Objective truth: Sustainable happiness is recognizing what is truly valuable in life and appreciating it. To elaborate, to evaluate the value of everything in life based upon its monetary value would be a mistake and limiting.

Then came my list of subjective truths which I prefaced with "For me this is". By subjective I mean I acknowledge that while I hold these to be true, I am unable to prove to you that they are.

To address your points: I really need to get back to coding my startup. I will revisit this later. I hope that you continue to discuss this with me even though no one else will care by the time I get back to it. (From the HN community perspective this thread will be most likely dead before this evening)


Slurry Discussion Continued:

If you are making the argument that there is a monetary threshold that needs to be met in order to be happy (for a normal person) I would agree. What that exact threshold is I am not sure. In my youth I had enough to be happy on 40k a year even though I wasn't, but this was due to a lack of understanding/perspective.

If you are making the argument that money directly buys happiness, I would say this is a short sighted and incorrect view.

Did I summarize your point in either case above? What was your exact point? I'd like to discuss further.

Also, pertaining to the specific article, satisfaction and happiness (while similar) are two different things for me. I am not sure why they took a survey concerning satisfaction and assumed that "satisfaction" is synonymous with happiness for all participants.


Not sure we actually disagree. I wasn't taking issue with your main point or your list so much just costing it out (roughly) for my own amusement. Both a sense of perspective and a modicum of cash are necessary but not, imho, by themselves sufficient to be happy. Together maybe they are enough? Maybe not? Idk.

Appreciate your continuation of the discussion.


Thanks for the clarification.

"Both a sense of perspective and a modicum of cash are necessary but not, imho, by themselves sufficient to be happy."

I am 100% in agreement with this.


Once you have no debt and a place to sleep, the rest of it is pretty cheap and easy to obtain. I own my house with no debt - a minimal income is quite enough for me.

(I'm in the UK, so the NHS deals with health care.)


Isn't this a bit like saying once you have a killer jump shot, basketball is easy? A lot of things are pretty easy once you've got an extremely hard part out of the way.


Poor countries and poor indiviudals tend to have low debt levels.


Being poor is expensive.


That is pretty much Maslow's pyramid.


I'm not sure if your comment trivializes or validates mine. But in any event, I am very much a student of the school of hard knocks. Everything I mentioned above are my conclusions derived from over a decade of failures, successes, & self reflection.


It was meant to be an observation, no judgement or opinion. Now that you have provided some background, it is interesting that you produced the same set of priorities in the same order.


I'd agree with all of that, very well put. Perhaps it would be worth extending point 2 to include health in a more general sense.


Should probably put health somewhere near (1).


Good point and you are correct. I would do that, but I think you just did it for me. Thank you.


The richest in India are less happy than Brazil's poorest.

But leave it to the economist to find that money makes you happy while ignoring that some countries seem much happier.

If you were to pick a country where you could randomly end up anywhere on the income scale, which would you pick? Of the countries listed, I'd pick the United States, followed by Brazil, Britain and Mexico.


I'd pick somewhere in northern Europe probably. I might take the U.S. option if you could guarantee I was in the top 75% of the U.S. income scale. If I could really be randomly assigned anywhere on the scale, though, the U.S. seems too risky, because the low end of American lifestyles is really low, not even reaching the level of first-world poverty. Driving through parts of Mississippi was pretty surprising for someone who had never been there before: actual dilapidated shacks without running water, like you see on National Geographic documentaries about poor parts of the world. And urban American poverty, while it has running water, comes with too high a risk of violence.


At the same time, your reference points are a very small % of the American population, not the bottom 25%. Only 5% to 10% of the poor live the way you describe.

America's poor is on average equivalent to France's middle class. Once our healthcare system is properly in place, that will be even more accurate.

http://www.heritage.org/research/reports/2011/09/understandi...

The average person in the bottom 25% also collects over $30,000 per year in government benefits, from housing to food to healthcare.


The claim that the American poor are wealthier than the French middle class is rather loaded, and looking at it from a specific set of norms. I've spent considerable time living in both the U.S. and Europe, and in some ways Americans are indeed wealthier, but in some ways even America's middle-class doesn't live up to what Europeans expect of a middle-class lifestyle. That report seems to be measuring solely ownership of some material goods. But some of them are negatives from my perspective! I do not want many of those goods, and many Americans are essentially forced to buy them, whether they like it or not. That makes the American of the same income live less well off, because they have to spend their money on them.

Example: you have to own a car in most parts of the U.S. to get anywhere (such as work), because transit sucks. You don't in most of Europe. When I moved from California to Denmark, I sold my car, dropped my insurance, and don't pay for maintenance anymore. That former money-pit is now extra disposable income for me. With the same income, I feel wealthier. In practice, this is a huge problem for my poorer American friends: car payments, insurance payments, car repairs, etc. are a huge issue for them. If something breaks they have to come up with money to repair it ASAP or they can't get to work and they might get fired. Whereas poorer Danish people don't have this headache; to get to work all they have to come up with is a bike, or money for the monthly transit pass (I pay $50/mo for mine).

Not to mention that Americans have an endless list of other expenses: they're expected to pay for their kids' college, their own health insurance, they don't get maternity/paternity leave or daycare provided, etc., etc. Even the middle-class Americans I know seem poor compared to an average Dane, in the sense that they don't feel economically secure, and are constantly stressed about money and the future. Whereas even a lower-middle-class Dane generally has smooth sailing and an economically secure lifestyle. Sure, fewer microwaves and cars, but who cares? Since this thread is about money buying happiness, it doesn't seem to have translated into Americans being happier than Danes.

But mostly what appalls me about the U.S. is that it doesn't really seem first-world if you walk into poorer areas. Stuff looks incredibly run-down, and people literally fear for their lives! Right in the middle of major cities, too. When I lived in Atlanta, I had to be very careful about which streets I walked on after sundown (and not only because of the tripping hazard, since the sidewalks were all in disrepair).


"But leave it to the economist to find that money makes you happy while ignoring that some countries seem much happier."

From the article: "Though some countries seem happier than others, people everywhere report more satisfaction as they grow richer."

So I wouldn't say they ignored it, it's pretty explictly mentioned AND talked about in the same sentence that they say that satisfaction scales with income.


Fair enough; mentioning it in passing is not completely ignoring it.

Yet a realistic headline would have best been: "For happiness, your country is more important than your income".

It seems to me that any intellectually honest and curious person looking at the data - instead of trying to prove their pet theory - would immediately remark on that most salient feature.


I think you misunderstand the context of the article. It's not "here's interesting information about wealth vs. happiness".

It's "remember that theory about wealth and happiness that is generally accepted as true by everyone? Well, guess what, it's wrong". Which is a lot more interesting/important than the other questions the article raises, although they are of course also important.


US? Mexico?! Ignoring the graph, you want to end up in a company with strong social services and wealth redistribution - Norway or somewhere similar. The US is not the best place to be poor.

It also depends who "you" are. Are you black? A woman? Gay? Other countries may have a relative advantage over the US.


The US is still upwardly mobile. If you have any ambition at all, it's possible to rise. It's not easy, but it's far from impossible.

http://www.nationalreview.com/article/367903/white-ghetto-ke...

This article on the poorest county in the US is very interesting, while they're very poor, it's not like anyone's starving, the food stamp program seems to support them well enough.


Stats actually seem to show that mobility is lower in the US than in the nordic countries:

http://en.wikipedia.org/wiki/Social_mobility#Country_compari...

Of course the US is a very different place, too.


Not just lower than the nordic countries but a lot of other countries: "There is more intergenerational mobility in Australia, Sweden, Norway, Finland, Germany, Spain, France, and Canada than in the U.S. In fact, of affluent countries studied, only Britain and Italy have lower intergenerational mobility than the United States does."

And also: "In spite of this low mobility Americans have had the highest belief in meritocracy among middle- and high-income countries."

TL;DR: Tell the same lie enough times and people will start believing it.


And when enough people believe it, it stops being a lie.


Why is the US not a good place to be poor?

The average poor person in America owns a car (75% of all poor people) and either owns a home or lives in a clean apartment (83%), according to the US Census Bureau.

Ever look at the massive wealth redistribution from the top 75% to the bottom 25%? Or the total dollar value of government benefits that the average person in the bottom quarter receives in the US?

It far exceeds Norway's progressiveness. In fact, America is the most progressive country on earth in terms of wealth redistribution, just take a look at the % of taxes paid by the top 1% / 10% / 25%.


A problem easily avoided by simply not being poor.


Why not Australia or Canada?


I am in Canada :)

It just wasn't in the chart.


Abstract of the cited article (http://www.nber.org/papers/w18992?utm_campaign=ntw&utm_mediu...):

Many scholars have argued that once “basic needs” have been met, higher income is no longer associated with higher in subjective well-being. We assess the validity of this claim in comparisons of both rich and poor countries, and also of rich and poor people within a country. Analyzing multiple datasets, multiple definitions of “basic needs” and multiple questions about well-being, we find no support for this claim. The relationship between well-being and income is roughly linear-log and does not diminish as incomes rise. If there is a satiation point, we are yet to reach it.



thanks!


This seems obvious. Having no money is very stressful. Stress not only makes you generally very unhappy - it actually damages your brain (http://www.ncbi.nlm.nih.gov/pubmed/15511597). Stress is an unhealthy thing to experience, especially when it is constant and your mind and body do not have time to recover. In small doses, a little stress keeps you moving, but its benefits drop off pretty quickly the more stress you experience. Thus it stands to reason that if a major source of stress is removed (a lack of financial stability) that your overall happiness level goes up.


Depends on where/how you live and how much "value" you place on money. I think one could also argue that money causes stress depending on how much you have and how you got/maintain it.

Here's what I think:

- If you're born into money, money = happiness if you follow & believe in what the family wants you to do.

- If you started a business that made you money, money = happiness more than half the time

- If you got huge amounts of money suddenly, money = problems.


There are communities that doesnt even have a economy based on money, and are pretty happy.. there are indigenous people in reserves here and brazil and also some remote parts of africa that i know of.. (i imagine theres even more samples)

If you start to look to them, they have a pretty smart way to achieve happyness without money.. they are very collective types in nature.. and not individualistic as we do.. the nature gives them everything they might need.. they dont have the same views on posession as we do.. like indians in brazil sleep in big open houses(ocas) with a little community in each one.. they even have rituals to exchange sexual partners (they do not possess each other like we do with engagements or marriage)..

So their reality are pretty different from our own.. and the white man doom their type of civilization, with the concept of money, properties, and greed basically..

So the lack of money is only stressful for people who need to care about money..


yeah, the noble savages are very serene....until you notice the infectious disease and children and mothers constantly dying in childbirth.


just to make it clear: im not saying they live the perfect life.. but both types of civilizations have things to teach one another.. we have things to teach, but we also have things to learn.. things that we lost in the way..

What we constantly see, is the "white man" notion of superiority, and therefore that he has nothing to learn, from "primitives"..

But the irony is that they have a lot to teach us..

Our societies are very complex, and one of the reasons for that is the infinite chain of the desire and need.. need this, need that.. never satisfied, never happy..

Being poor its not the problem, the problem its us.. the way we think and reproduce our lives and destiny.. looking at them can teach us a lot about ourselves and where we are doing wrong


I agree, work/life balance has gone to shit since the agricultural revolution.


I may sound like a conspiracy theorist but oh well:

The cynic in me says such graphs are (figuratively) propaganda by the 1% (of 1% in wealth, not income), in that now we can define what the masses are "ok" with while we, the 1% of the 1%, can accelerate our gains further. Let the rest of them have crumbs and be content.


The cynic in me is actually thinking it's interesting that the Scandanavian countries are left off the charts. They are usually touted as being amongst the happiest countries in the world, despite rather aggressive tax regimes to pay for it. Perhaps there is some cherry picking going on here? Either as propaganda to show that the US is the happiest, or to show that money equals happiness - which might not be true in the more socialist, high tax/lower net income Scandinavian countries.

I'm probably being too cynical though. It's just surprising given the reputation of countries like Denmark and Norway for being happy, that any study could possibly leave them out.


They are usually touted as being amongst the happiest countries in the world, despite rather aggressive tax regimes to pay for it.

Or, according to the World Happiness report 2013: 1. Denmark, 2. Norway, 3. Switzerland, 4. The Netherlands, 5. Sweden. The US ranks 17th.

Source: http://unsdsn.org/files/2013/09/WorldHappinessReport2013_onl...


The paper is linked, available here (http://www.nber.org/papers/w18992.pdf?new_window=1)

The graph they have included the 25 most populous countries, and is already a mess (lots of overlapping things). The Scandanavian countries didn't even make the cut on that one, the Economist probably took the ones that were the furthest apart. Maybe if all the Scandinavian countries fused together they could have made it?


Yeah, it'd be interesting if there was a study on population size vs. happiness. I imagine there would be an inverse correlation (smaller population, more happy). But whether you could isolate the cause would be a different matter.

For example: is Norway happy because they have a small population with massive, well-managed oil reserves to pay for their social services? Or are they happy because with a smaller population it's easier to gain a consensus vote for alternative ways of life (eg. social democracy)? Whereas say, the USA might always be stuck with a capitalist democracy because the large population is too big to influence easily.


> For example: is Norway happy because they have a small population with massive, well-managed oil reserves to pay for their social services?

The oil reserves don't pay for the social services. Some of the reserves are spent in the budget, but that is mostly skimming off the "interests", and there are restrictions put in place on how much you can use (maybe you already knew this; your wording was a bit ambiguous).


Yeah I did, I was just trying to point out a potential difference between being a rich country and happy vs. a small, politically engaged country and happy.


Here are some interesting figures on that.

http://en.wikipedia.org/wiki/Household_income


The Nordic countries were featured in an article a year ago.

http://www.economist.com/news/leaders/21571136-politicians-b...

If there is an agenda somewhere, it's probably not on the part of The Economist (I don't know enough about The Economist to comment on more than their apparent public face overall).


Yeah I doubt there's an agenda, I was being cynical just because there was a potential point to make.

It's almost impossible to find an article about countries overall happiness without discussing the Scandinavians at the top, so their absence was conspicuous. Add in the fact that the article is pro-capitalism / money making, and the US are at the top of their happiness scale... It's contrary to the usual message, so I thought it worth pointing out.


On a similar note I've seen it said the prevalent theory on money-happiness (that money can only buy happiness up to, conveniently, the middle class boundaries), is just propaganda to make the poorer classes feel better about their lives.

The common money-happiness theory seems pretty ridiculous. As though people are happy earning $65k a year and paying on their mortgage for 30 years, worrying about education for their kids, worrying about saving a few grand, worrying about paying the car payment, etc - versus making $500k a year and not having a mortgage at all, sending your kids to Stanford, and never worrying about The Bills.


The study uses an odd and rather dubious measure of "happiness":

Gallup asked respondents [...] to imagine a "satisfaction ladder" in which the top step represents a respondent's best possible life. Those being polled are then asked where on the ladder they stand

What the results may show is that fantasies about happiness, such as "if only I had more money", lose power as one gets more money. If you run out of fantasies about how you might be happier, it does not follow that you are happy. It could be the opposite! Perhaps the article should be titled, "Money weakens the imagination".

In any case, studies that define "happiness" very differently should not be described as "casting doubt" on one another.

Edit: looking at the paper itself, the "imaginary ladder" was one of two questions asked; the other was (paraphrased) "how satisfied are you on a scale of 1 to 10?" I don't know how the data differs between those two questions.


There appears to be a single main diagonal that includes China, Russia, Italy, France, and Germany.

Above that diagonal are countries where it takes less money to achieve that same satisfaction as those on the main diagonal. Apparently, Brazil, Mexico, India, and Nigeria get more satisfaction for the same level of income. That leaves Japan and Iran as the outliers where you get far less satisfaction for a given income level.

The slope of the lines is also interesting. Nigeria and Brazil stand-out as two places where income matters less it does others. The US and UK are also flatter (less income elastic) than the main diagonal.


Money is like engine oil. An engine without enough runs poorly, but it doesn't take all that much to get it to run smoothly. More than that doesn't help or hurt, it just sits in a reservoir somewhere. You can get a bigger engine that uses more oil, but beyond some point it just doesn't matter much.


"Even more striking, the relationship between income and happiness hardly changes as incomes rise. Moving from rich to richer seems to raise happiness just as much as moving from poor to less poor."

That's misleading (to be charitable...). Doubling your income seems to raise happiness as much, whether you're moving form poor to less poor or rich to more rich, within the ranges looked at. Adding $5000 means a lot more happiness for the poor than the wealthy.


This is one of the big controversies in happiness economics.

I wonder if this effect (which directly contradicts Easterlin's findings that money has no effect on happiness past a certain point; here, they contend that there is no saturation point and that happiness evolves with the logarithm of income) could be somewhat due to the way they framed the question: "assume you are on a ladder of happiness with 10 steps, which one would you say you are on; then tell us how much you earn". It is widely known in behavioral economics that framing effects can have a huge effect on the way people respond ([1] [2], and so on), so I wouldn't be surprised than the way you ask people to evaluate their own happiness could explain at least part of the difference.

One of the conclusions of the Easterlin Paradox is that people care more about how much they earn compared to their neighbors than the actual amount. I feel like asking the question this way (imagining their happiness as a ladder with 10 steps, then thinking about their income) would directly lead to people implicitly internalizing this comparison in some kind of mental model where higher wealth = more happiness because they're trying to imagine what the best life possible could be: "ah I'm pretty happy right now, but if I had a twice as much money I think I would be happier though, so surely I can't be at the last step at the ladder. Actually, people who have twice as much than that should be even happier, so I'll add some steps on top and say I'm a 6 right now".

This sounds plausible to me because while the authors conclude there is no saturation point where income doesn't bring more happiness, this is a scale from 1 to 10 so surely some people must rate themselves a 10. What would those who earn twice as much as them think then? This solution could be that "being on top of the ladder" in people's mind is somehow conflated with "being on top of the income distribution", with all the other levels being computed relatively to that. In other terms, this framing may incite people to evaluate their happiness on a cross-sectional level, with Easterlin's Paradox being precisely that the income-happiness relationship exists only at the cross-sectional level but not at the longitudinal level.

The debate between the two models (Easterlin vs. Stevenson and Wolfers) has been a longstanding debate in happiness economics, with both sides having confirmed their findings with multiple data sets [3]. Maybe they're both right in a sense and the answer just depends on which definition of happiness you're asking people to evaluate themselves with (relative vs. on an absolute level)?

[1] http://economistsview.typepad.com/economistsview/2006/08/the...

[2] http://www.adsavvy.org/the-power-of-framing-effects-and-othe...

[3] http://en.wikipedia.org/wiki/Easterlin_paradox


> money has no effect on happiness past a certain point

The question is where that "certain point" is. Obviously happiness as measured on a finite scale must level off somewhere. But apparently "somewhere" is north of $128k/yr.


No, the models proposed by Easterlin is a fundamentally different model of happiness economics than the one proposed by the researchers in the article (I updated my comment to flesh this out a bit). Basically, Easterlin's research hints that happiness increases with income only at a cross-sectional level (by comparing different people at a given time) but not at the longitudinal level (the same people wrt to their changes in income). What I'm saying is that maybe the way the question is framed has a fundamental effect on the way people would rate their happiness: "I rate 7/10 in Happiness vs. I'm happy but less than if I made double the money".


I agree. The first thing I thought was that this framing is really just showing people think they'll be happier with more money, which is the orthodox that the 70K study claims to refute.


> people care more about how much they earn compared to their neighbors

Evolution should select for this "comparative success" behavior, possibly even if its only advantage is as a signal for mating.


Regardless of any competitive or status-based desires, income relative to your neighbours (everyone in your city) is a big part of actual purchasing power.

In most cities, housing prices are based on land value, not construction costs. And land value is entirely based on demand: what your neighbours are willing to pay for the same lot.

And most services are priced based on the salaries of your neighbours - the more you earn relative to them, the more of their time you can afford.


This does not necessarily conflict with the diminishing returns theory. If you are 4x as rich as your neighbours, you will probably want to move to a more affluent area. At which point you will have richer neighbours (i.e. stronger competition.) There's a good chance you will again be dissatisfied with your relative wealth and be motivated to increase it further.


Evolution and (what you presumably refer to as) natural selection don't work that way. It is a pernicious mistake to apply 'evolution' and 'natural selection' to everything. In the interest of good science and the society's well being [1] we should resist the temptation to unscrupulously apply 'evolution' in non-specific, and non-evolutionary biology contexts. Social Darwinism is especially pernicious.

[1] http://io9.com/how-the-pseudoscience-of-social-darwinism-nea...


I think it's less that "money buys happiness" as it is that "poverty causes unhappiness".


In regards to subjective happiness and income, I like to pose the question:

Would you rather earn $80,000 and live in a neighbourhood of those earning $100,000, or would you rather earn $100,000 and live in a neighbourhood of those earning $80,000. Money and happiness is entirely subjective according to your environment.


I guess you mean: "Would you rather earn $800,000 and live in a neighbourhood of those earning $1,000,000, or would you rather earn $100,000 and live in a neighbourhood of those earning $80,000."


Maybe I'm missing something, but I don't see either this or the original even remotely as a difficult question.

Making 80% of the median income is completely within normal ranges; it seems to me it would be barely noticeable in both cases. On the other hand, the difference between US$100,000 and US$800,000 is gigantic, it's a complete change in lifestyle and security.

Seriously, does anyone here actually find either question to pose a true dilemma?


Take a village. Everyone earns $100,000 except you. You earn $80,000. How do you feel?

Now reverse it. You earn $100,000. Everyone else earns $80,000. How do you feel?

Those base feelings explains consumerism and envy.


I'd rather make $100K than $80K. Period. At those ratios, my neighbors just don't enter into the equation.

Now, I might be uncomfortable making $100K when my neighbors made $400K. That's an identifiable difference, and it would really mark me as the poor person in the neighborhood. But a 20% difference from the mean? I wouldn't even notice it.


What? Does anyone choose the first option over the second one? The second one seems unequivocally better.


No I agree with you. From what I've seen most families income could fluctuate that much between husband/wife work situations. Pay cuts, or bonuses, etc.


Yes I think that's how it went!


this is a highly personal answer. it depends on a person's specific mechanisms of motivation and satisfaction. i realize this is a hypothetical "thought experiment", but you can see how this actually plays out in reality.

i've done both. i've lived in areas where i made significantly more than my neighbors (regular apartment complex in the middle of LA/hollywood), and now i live in a place where i make significantly less (i live in a modest condo next to giant $5-10M houses in santa monica and ultra-mansions a short distance further - think 'lower pac heights' in SF-speak)

it's obviously better living next to rich neighbors. everything in the neighborhood is much nicer, and i get to enjoy a lot of their wealth indirectly. for example, i live next to some of the best hospitals in the country. the public parks are ridiculously nice and all the streets are basically perfectly conditioned. seeing nice things/home/cars and rich people is also an aspirational trigger for me. also, for a very slightly higher prices on the things i actually buy, i get to enjoy better food and shopping.

in the other, poorer neighborhood where i made more money, everything was shitty (for US standards). the roads were in disrepair, there was crime, the food wasn't nearly as good, there was constant police activity, the roads would be blocked for public events, etc. seeing broke or down-and-out people everywhere bumemd it out. it was just an overall hassle.

if you took the median income from both areas, it probably wouldn't deviate by more than 50 grand. there are rich people in both areas. but one is significantly better than the other.

i really wouldn't understand the opposite point of view, that living next to poorer people is somehow better. perhaps if you lived in an imginary WORLD where you made significantly more than the rest of the people, but in the real world it's all about locales.


It's really just an thought experiment in understanding why events rise such as extreme materialistic consumerism and social envy: if all factors are irrelevant the experiment makes sense in explaining otherwise inexplicable consumerist behaviour such as that we might generalize from the lower socioeconomic classes watching reality tv.


Re-phrased: Would you rather make $100k in San Francisco, Pittsburgh, Miami, or Havana?


You could buy half of Havana on an income like that.



Depends on where you are. After all, living in a rich environment might get you better public services. And it's not like you exchange salaries with everyone you meet.


It's a thought experiment. Assume that both neighbourhoods provide the same services.


Does it even matter what your neighbours are making? I've made four figures living among millionaires and I've made six figures living among people living on welfare. I didn't really feel any different in either spot.

Challenging yourself to earn more, and actually seeing the numbers rise, is where the joy comes from, at least in my experience. If you are challenging yourself and your income isn't rising (or falling, even) it is pretty disheartening. If you aren't challenging yourself, I expect life becomes pretty boring. Either way, I can see why happiness is linked to income deltas, even once the basic means are covered and presumably people with higher incomes have seen more changes.


The more well-off people around you are, the less-well-off you are, since their increased wealth increases demand and prices rise. See, for example, Bay Area home prices.


I don't necessarily feel this way either however it's a thought experiment to pose in regards to the concept of "keeping up with the jones's" and explains a large part of the population's consumerist drive.


"I've made four figures living among millionaires and I've made six figures living among people living on welfare. I didn't really feel any different in either spot."

Then for better or worse, you are unusual. Most people notice disturbances when they are significantly different from their peers in this regard.

However, I wonder if location is having less of an impact now that we connect with our peers over technology instead of physical location (IE, neighbors).


"Does it even matter what your neighbours are making?"

Yes. If you make significantly more than the people around you, it's more difficult to make friends with the people in your community. If they know, people will ask you for money, treat you differently, and some will be jealous. It's sad..but true.

"If you are challenging yourself and your income isn't rising (or falling, even) it is pretty disheartening"

Welcome to pretty much every 9-5 job.


It's really impossible to rate your life numerically in relation to a "best possible life", so in order to give some kind of answer to this vague question, respondents fall back on some quantifiable measure like money.

A separate issue is that the question "How satisfied are you WITH your life?" is not the same as "How satisfied are you IN your life?". It's possible to have high moment-to-moment happiness, but have a negative view of one's life; or vice versa. Daniel Kahnemann explains this in this TED talk (13:30):

http://www.ted.com/talks/daniel_kahneman_the_riddle_of_exper...

He even mentions the Gallup World Poll.


I think the evidence they show is actually very compelling. Even though there are clearly country fixed effects, the graph shows that both within and across countries.

Of course what self reported happiness really measures is another matter...


The distinction between INCOME and WEALTH here is important, a distinction which the title/thesis of this article ignores.

The title implies that simply POSSESSING money (wealth) is positively related to happiness, whereas the survey could only support the claim that EARNING money (income) is positively related to happiness.

I would argue that income is a much better proxy for the value a person creates in the world than is wealth (though both are deeply, deeply imperfect). I would much more readily believe a survey which implies 'people who believe they create more value in the world are more likely to be happy'.


Maybe it can't buy happiness, but it can definitely rent it.


Only as means to provide changes in people's lives, not necessarily only your own. It has nothing to do with possessions or consumption, and especially this exhibitionistic, public consumption which is pushed by the media.

Giving a new pair of boots or a new jacket to some poor school children in Nepal or India will definitely buy some happiness. New iPad for oneself, of course, won't. A long journey to different lands as a CBT for an addict will buy some happiness, while visiting the most distant and expensive to reach island in Pacific won't. Traveling remote Indian/Nepali/Tibetan villages will buy some happiness, while stupid yoga course won't.

I'm mountaineering guide and ex-addict, that's why I know.


I'm curious what the result show if you did not have to work for your money? While money does not make you happier when you work for it I wonder what portion of that is due to the additional stress, long hours, and responsibility that comes with high income jobs.


Another peculiar interpretation of the same data: People segregate strongly by income, and you're happier if your neighbors are wealthy rather than poor. Not just crime but schools and parks and services.


People should know that Rotschild owns part of the magazine The Economist. http://en.wikipedia.org/wiki/The_Economist


The slope of the lines indicates how big an impact different incomes have. Contrast India and Nigeria, for example. A Nigerian needs a lot more to have the same incremental in increase in satisfaction as an Indian. Interestingly, Germany, Russia and India seem to be about parallel, even though the income ranges are different. Is that just coincidence? Or is there an underlying cause? Also, how well does the question itself translate among different languages and societies? Can the same concept be put across effectively?


Maybe it can't buy happiness but it can definitely buy off unhappiness, some of it anyhow (adapted from a line in "Psycho").


Some alternative titles: "People with a bitter taste for life are not making money" or "People who make a lot of money tend to be pretty pleased with themselves" or probably most accurately "People with a lot of money are pleased because it turns out our economic structure favours their particular skills or interests"


Correlation ≠ causation.

If you live in a society where the propaganda tells you that wealth = success & value & esteem, then of course there's some connection. Maybe if we really lived in a culture where hoarding wealth was considered shameful, it would make people less happy to do so.


I always wonder how easily scientists (and journalists) fall for the correlation vs. causality trap. It looks like that scientific community lost the critical thinking. I always think the other way around when I read a "scientific" study and ask (in this case): "Do people with higher life satisfaction earn more money?" (=the cause of the better earnings is the satisfaction, not the other way around). Without reading the study it's impossible to tell that the researchers ruled this out, but it is imaginable that this is the case, too.

And it could be that there is a factor that is invisible to the study (maybe... IQ, height of the person, shoe size, ...?) that influences BOTH.


Bypass paywall (maybe the paywall only starts after 1 day?):

http://www.google.com/url?q=http://www.economist.com/blogs/g...


I find the conclusion that there is no cap where more money won't buy you more happiness a bit funny, when there's an explicitly defined cap in the question itself. No amount of money will make you any happier when you've already reached level 10.


Money can buy the appearance of happiness, but happiness comes from inside, not from outside. It's a skill one can develop.

Recommended reading: Matthieu Ricard's book "Happiness: A Guide to Developing Life's Most Important Skill"


Obligatory: https://www.youtube.com/watch?v=S63kIH96Bi0

"They say money can't buy happiness? Look at the fucking smile on my face".


Am I wrong to dismiss just about anything that depends on asking people? I don't have good ideas on how to measure happiness, but even the worst of them seems better than asking and leaving it at that.


The survey measures people's self-perceived satisfaction. I have no difficulty believing that richer people think they're happier, but the survey tells little about whether they actually are.


One could maintain the manipulative fiction that money is unrelated to happiness above some nominal level (around $75,000) as a pretext to keep wages low for only so long.


Whenever I see rich people, they don't see to smile a lot.


Smiling may be an indicator of other things besides happiness. It's been proposed (see e.g. http://www.epjournal.net/wp-content/uploads/EP10371397.pdf though I make no claim that that particular article proves it) that one function of smiling is an acknowledgement of lower social status than the person one's smiling at. If something like this is right, then rich people might smile less at any given level of happiness.

(Or: they may smile less in public, which will have a large influence on your perception of rich people's smiling if you don't happen to spend a lot of time in personal interactions with rich people. Or: they may in fact be less happy and therefore smile less -- though the evidence seems to be against this.)


The Economist needs to understand the difference experiencing happiness and remembering happiness. Behavioral economists have done years of research differentiating the two. It makes no sense to talk about happiness otherwise.

The incomes in the range of 60k - 70k (in US) beyond which happiness plateaus out is valid in the context of experiencing happiness. Its fair to say that middle income people would be unhappy when they think about the fact that they are not millionaires/billionaires, but they are not thinking about that most of the time, and during that time, they are just as happy as millionaires/billionaires.


I know that if I had just £1,000 that I'd be a lot happier. I'd be able to focus on recovery rather than all the nonsense that I worry on at the moment.


What is happiness? It's pretty subjective, therefore the title isn't even proper, since it assumes a generalization.


Notice Japan - they work too damn much to be satisfied with their lives.


Now chart the medication of psychotropic drugs in those countries.


satisfaction != happiness


Satisfaction is an element of happiness. I can't imagine someone being super happy if they are fundamentally dissatisfied with their life.


...It buys a WaveRunner


I hope so.


This is actually true at some point but there are really genuine happiness that money can't buy like love, friendship, loyalty and trust.




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