We’re guilty at LearnVest of spouting the following scientifically proven (or so we thought!) wisdom about money and happiness: You need a certain amount of dough–$50,000, on average–to be happy.
But once you have north of $75,000, you won’t see much of a noticeable difference when it comes to your happiness quotient. The thought that a joyous life doesn’t necessarily lie in a bigger paycheck is comforting, right?
Well, it turns out that money does buy happiness–statistically, anyway. According to new research conducted by economists from the University of Pennsylvania and the University of Michigan:
- Richer countries are happier than poorer countries
- Richer people are happier than poorer people who live in the same country
- Countries grow happier as they become richer over time
What We Once Thought …
The prevailing view on money and happiness was popularized in the 1970s by researcher Richard Easterlin, who claimed that it was certainly better to be rich than poor (of course). But his research also found no statistical proof that, among rich countries, happiness rose with rising income–suggesting that happiness plateaus at a certain point.
The cause of this was thought to be a keeping-up-with-the-Joneses effect. That is, it’s all about relative income, not absolute income. So although everyone in America can afford a TV and air conditioning, having these items is such a normal thing that it doesn’t contribute to your happiness–especially when your neighbor’s TV is 20 inches larger.
This was essentially the party line for the next 48 years.
The Research That Could Change Our Thinking
According to a new study, it turns out that there’s a lot more to it. When Daniel W. Sacks and Justin Wolfers of the University of Pennsylvania and Betsey Stevenson of the University of Michigan dug into the data anew, they found something very different than what Easterlin had found.
Easterlin didn’t have access to the kind of information that we have today, such as the yearly Gallup World Poll that asks about well-being and precise GDP measures that span decades for dozens of countries and millions of people. In fact, Easterlin looked at such a small sample of countries that it’s not entirely surprising that he couldn’t find statistical proof that happiness rises with income.
Here’s what the new research shows to be true: