More About Money and Happiness

Jul 6, 2010 • Behavioral Economics, Households, Thinking Economically • 113 Views    2 Comments

If you want to know whether money relates to happiness, you might first decide what makes you happy. A Gallup World Poll of 136,000 people in 132 countries from 2005-2006 focused on 2 variables: “life satisfaction” and “enjoyment of life.” Those people who use how much money they have earned as a “scoreboard,” profess to greater life satisfaction because of higher earnings. By contrast, happiness on the “enjoyment of life” scale, which included laughter, friends, and meaningful family connections did not relate to money.

This Gallup Poll is one of many happiness studies we have posted during the past several years. In one previous post, high income people experienced more happiness than low income individuals. We can, though, qualify the high income earners’ happiness with a study that concluded income increases had no impact on happiness. Qualifying it further, we also found a study that contradicts the first one. Then, yet another study asserts that lower quintile earners are happy when upward mobility is feasible. Also, however, a different study demonstrated that happiness comes from earning more than your “neighbor”. Consequently, people preferred lower earnings over higher earnings when the lower number exceeded an associate’s income. Finally, researchers concluded that overworked women, more recently, have become less happy than men.

The Economic Lesson

Thinking economically typically requires looking at the margin. The margin is that imaginary line where we find something extra. For example, marginal revenue is extra money that a business receives for each additional sale. When a business sells a computer, the price of the computer becomes its marginal revenue. For happiness studies, we are at the margin, asking if extra money (at the margin) means extra happiness (at the margin).


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  • akaiser

    I agree with Gabby; those who have a higher income do not have to deal with some of the problems those with a lower income have to worry about. They do not have to worry about not making enough money or finding a job. Thus, they do not have to stress out and can have a good time.

  • sherg11

    I think that happiness comes from a higher income only because, in that case, having enough money is one less thing a person has to worry about. Therefore, there is room elsewhere for that person to find happiness in the “enjoyment of life”. However, if a person earns more in comparison to the people around them, or their “neighbor”, it might make them concerned that they earn too much. It is the same situation when a person earns less than their neighbors, because either way they feel out of place and that takes away from their happiness. I think that if a person earns enough money so that they don’t have to worry about having enough, their “life satisfaction” is fulfilled and they then have the freedom to fulfill their “enjoyment of life”.

    -Gabby S.

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