Money really does buy happiness, claim economists

Two US academics publish research showing higher incomes are associated with greater happiness.But does money really buy happiness?

The old saying that "money doesn't buy you happiness" may be under threat, as two American academics claim to have revealed a link between higher incomes and improved levels of happiness.

What's more, the more money you have, the better you feel, according to new research from the University of Michigan.

Wealth and well-being

At the University of Michigan, associate professor of public policy Betsey Stevenson and professor of economics and public policy Justin Wolfer have been examining links between money and happiness.

Researchers working for the pair interviewed 1,014 US adults across a wide range of incomes to investigate any links between earnings and happiness. They found that the proportion of respondents who described themselves as 'very happy' rose as incomes increased. In other words, the richer a group of individuals, the more likely they are to categorise themselves as happy.

Here are some of the data from the study:

• Household income under $10,000: 35% are 'very happy', 44% 'fairly happy' and 21% 'not too happy', while 24% are 'very satisfied' with their lives, 19% are 'somewhat satisfied', 25% are 'somewhat dissatisfied' and 32% are 'very dissatisfied'.
• Household income between $10,000 and $20,000: 42% are 'very happy' and 47% are 'very satisfied'.
• Household income between $30,000 and $40,000: 55% are 'very happy' and only 4% are 'not too happy'.
• Household income between $100,000 and $150,000: 60% are 'very happy', 40% are 'fairly happy' and none are 'not too happy'.
• Household income of $500,000 and over: All are 'very happy' and 'very satisfied' with their lives. (Then again, note that there were only eight people in this income band.)

Although this study took place only in the US, a Gallup World Poll conducted in 2007 reported similar patterns worldwide.

Examining incomes and well-being across the world's 25 most-populous countries (including the USA, UK, France, Germany, Italy and Spain), Gallup found a strong link within nations between rising incomes and rising happiness. Again, Gallup found that as incomes rose, so too did levels of well-being -- with no observed upper limit on this improvement.

In other words, even the rich get happier as they become super-rich!

Correlation does not imply causation

While this latest study from the University of Michigan reports a positive correlation between levels of income and happiness, this is merely an association. What this report does not claim is that higher incomes cause greater happiness, or vice versa. What it shows is that as one factor increases, so too does the other.

What's more, it is entirely possible that, instead of money creating happiness, it could be the other way round. For example, it could easily be argued that happier people are more confident, work harder, achieve more and go further in their careers, thus earning higher wages.

In addition, both factors (income and happiness) could be improving simultaneously purely because of the influence of a third factor. For example, legislative changes to improve social inequality could raise both incomes and well-being within a country, raising both at the same time.

Contradictory research

Furthermore, this latest research by Professors Stevenson and Wolfer appears to contradict a long-established economic theory known as the Easterlin Paradox.

In 1974, Richard Easterlin, professor of economics at the University of Southern California, produced an influential report into 'happiness economics'. Easterlin found that, within a given country, those with higher incomes were more likely to rate themselves as happy.

However, in international comparisons, average happiness levels did not vary much with national average incomes in countries where earnings were sufficiently high to meet basic living standards (a home, clothing, food and so on). In other words, Easterlin found that richer nations were not necessarily happier countries.

Likewise, though the average US income rose steeply in the post-war years from 1946 to 1970, reported levels of happiness showed no long-term upward trend and, indeed, declined during the 1960s.

Another general problem with these studies is that they are built on self-reported happiness.

For instance, while adults may privately believe themselves to be broadly unhappy, they may 'put on a brave face' for researchers by inflating self-reported levels of happiness. Likewise, well-off individuals may feel substantial social pressure to claim higher levels of well-being in line with their social standing.

What's your secret to happiness?

For me, this report doesn't really ring true, because it assumes that money is a proxy for personal success and fulfilment. This is not always the case, as high levels of divorce and relationship breakdown among wealthy couples demonstrates.

Also, levels of anxiety and depression among well-off folk are similar to those of the population as a whole. Similarly, levels of alcohol and drug misuse are sometimes higher among the well-heeled.

For me, happiness is all about balancing life between work, family, friends and 'me time'. Also, I prefer the thrill of experience, rather than the burden of ownership that comes from acquiring possessions. I regard increasing wealth solely in terms of increased financial and family security, rather than an opportunity to own yet more goods.

Finally, mark the words of the late, great comic Spike Milligan: "Money can't buy you happiness, but it does bring you a more pleasant form of misery."

How do you feel? How much more income would make you a much happier person? What is your advice for those seeking greater happiness? Please leave your comments in the box below!

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