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Does money buy happiness?

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On 7 September 2010, the journal Proceedings of the National Academy of Sciences published the following paper by Daniel Kahneman and Angus Deaton, titled “High income improves evaluation of life but not emotional well-being.”

PNAS abstract page
Full paper (pdf)

Kahneman and Deaton found that income improves emotional well-being (experiential happiness) up to a point – $75,000 per year, in fact – beyond which higher income no longer contributes to higher emotional well-being. Higher income does, however, improve evaluation of life (remembered happiness or life satisfaction) beyond the $75,000 level.

The applicability of the $75k limit across different countries and cultures aside, what’s interesting about the study is:

1. There appears to be a well-defined limit to income, and that limit is not some astronomical figure, beyond which having more money does not improve our emotional well-being or experiential happiness, i.e. how happy we are in our daily lives.

2. The distinctly different effects of income on emotional well-being and evaluation of life suggest that the two potentially valid forms of happiness are indeed quite distinct, and we may want to ask ourselves, which is more important to us?

Perhaps many people pay too much attention to evaluation of life (life satisfaction) and not enough attention to emotional well-being (everyday, experiential happiness), and for that reason, pursue income and wealth often at the expense of emotional well-being. (Being in a high income job that you hate would, I’m sure, very quickly generate diminishing marginal returns to emotional well-being.)

At least now we have some empirical data showing that money doesn’t buy happiness.

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Written by tokyotribe

September 12, 2010 at 3:11 pm

Posted in Economix