Does Money (and Economic Growth) Buy Happiness?

Sure, economic growth may allow us to buy more stuff, buy cooler stuff, help us to live longer, and give us the resources to solve big problems such as global poverty and climate change. That’s fine, I guess. But do the higher incomes that come from economic growth make us, you know, happier? Do they, as economists would put it, enable us to “experience a greater sense of emotional well-being?”

Until recently, anti-capitalists, degrowthers, and curmudgeons of all sorts could point to research finding that at some point enough is enough. In a 2010 paper, Nobel-laureate economists Daniel Kahneman and Angus Deaton found that once incomes hit a ceiling of $75,000, further gains do not make us happier. So Scandinavia and the US, well done. Time to dial things down. Less work, more leisure.

But maybe not. A 2021 analysis by Matthew A. Killingsworth, a senior fellow at the University of Pennsylvania’s Wharton School, suggested we should all keep on hustling and striving. Killingsworth created an app downloaded by 33,000 US adults that asked them how they felt at random points throughout the day.

After analyzing over a million real-time responses, Killingsworth found “no evidence of an income threshold at which experienced and evaluative well-being diverged, suggesting that higher incomes are associated with both feeling better day-to-day and being more satisfied with life overall. . . . [E]xperienced well-being rises linearly with log income, with an equally steep slope above $80,000 as below it. This suggests that higher incomes may still have the potential to improve people’s day-to-day well-being, rather than having already reached a plateau for many people in wealthy countries.”

So which study better describes the relationship between money and happiness? As it turns out, Kahneman and Killingsworth tried to answer that very question with an economist team-up, or what they describe as an “adversarial collaboration.” Their joint finding: “We discovered in a joint reanalysis of the experience sampling data that the flattening pattern exists but is restricted to the least happy 20% of the population, and that complementary nonlinearities contribute to the overall linear-log relationship between happiness and income.”

Or to put it another way, the study found that while higher incomes are associated with greater happiness for most people, there is a subset of individuals—about a fifth—for whom increased income above $100,000 does not lead to further gains in happiness. Their unhappiness is tied to other suffering that more money does not resolve. As the authors state: “This income threshold may represent the point beyond which the miseries that remain are not alleviated by high income. Heartbreak, bereavement, and clinical depression may be examples of such miseries.”

So more money, fewer problems? Well, in a way. At least for those of us making less than a half million bucks a year. The researchers didn’t have data for folks making above that level. So, top one percenters, we’ll have to take your word for your happiness level.