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Alamy Another salvo in the ongoing debate over whether money buys happiness: New research out of the Brookings Institution claims there is no ceiling above which additional wealth stops contributing to people’s sense of well-being.
The authors are Betsey Stevenson and Justin Wolfers, economists at the University of Michigan, and their primary foil is Richard Easterlin, who in 1974 proposed that increasing average income in a country is not associated with rising happiness — a notion that came to be called the Easterlin Paradox.
In cross-country comparisons, Easterlin found that the average reported national happiness level did not vary significantly with national per capita income. In addition, although the United States saw its per capita income rise from 1946 to 1970, there was no accompanying trend in the average reported happiness level, which actually declined during the 1960s.
Easterlin’s thesis was influential, sparking lots of subsequent inquiry in the field of “happiness economics.” Stevenson and Wolfers first challenged it in 2008, arguing that a review of “recent data on a broader array of countries” established “a clear positive link between average levels of subjective well-being and GDP per capita across countries.” They also found “no evidence of a satiation point beyond which wealthier countries have no further increases in subjective well-being,” and reported that economic growth is in fact associated with rising happiness.
Since then, Stevenson entered public service, working as chief economist at the Bureau of Labor under former Secretary Hilda Solis. Now she and Wolfers are taking another shot at the Easterlin Paradox in a paper titled “Subjective Well-Being and Income: Is There Any Evidence of Satiation?” Their conclusion: Easterlin had it all wrong. (Although, in fairness, he didn’t have access to as much data as they do.) “The relationship between well-being and income is roughly linear-log and does not diminish as incomes rise,” Stevenson and Wolfers contend. “If there is a satiation point, we are yet to reach it.”
The authors discuss a “modified-Easterlin hypothesis” — the idea that a link exists between income and well-being among the world’s poor, but that the correlation levels off or disappears above a certain income threshold. The so-called satiation point, at which rising income stops matching increased happiness across countries, has been identified as falling between $8,000 and $25,000 by other scholars.
Stevenson and Wolfers are having none of it. They say there is an association between income and happiness among the rich similar to that found among the poor, and that this link holds “in roughly equal measure” for cross-national comparisons between rich countries and poor ones. The two graphs below summarize their findings:
Here, income increases in rich countries — those with per capita GDP above $15,000 — are actually associated with a steeper rise in life satisfaction.
And here, although different countries display different slopes, in no nation does the money-happiness relationship disappear as income increases. The association appears instead to hold in roughly equal measure. (The scale is logarithmic; each mark on the horizontal axis denotes a doubling of income.) There is, in other words, no satiation point.
The authors acknowledge an “interesting” 2010 study which found that, in the United States, people who earn more than $75,000 do not seem to be happier than those who earn just less than that. But they believe that this result was based on “very different measures of well-being.”
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