NCPA - National Center for Policy Analysis


April 18, 2008

New research challenges the notion that economic growth does not bring happiness, arguing that money indeed tends to bring happiness, even if it doesn't guarantee it, according to Betsey Stevenson and Justin Wolfers of the University of Pennsylvania. 

They point out that it has been 34 years since Richard Easterlin published his famous theory which posited that relative income -- how much you make compared with others around you -- mattered far more than absolute income, and an explosion of public opinion surveys has allowed for a better look at the question.  The central message is that income does matter, say Stevenson.

If anything, Stevenson and Wolfers say, absolute income seems to matter more than relative income:

  • In the United States, about 90 percent of people in households making at least $250,000 a year called themselves "very happy" in a recent Gallup Poll.
  • In households with income below $30,000, only 42 percent of people gave that answer.
  • But the international polling data suggests that the under-$30,000 crowd might not be happier if they lived in a poorer country.

The researchers acknowledge that the data on individual countries over time is messy, but they note that satisfaction has risen in 8 of the 10 European countries for which there is polling back to 1970.  It has also risen in Japan.

The fact remains that economic growth doesn't just make countries richer in superficially materialistic ways:

  • Economic growth can also pay for investments in scientific research that lead to longer, healthier lives.
  • It can allow trips to see relatives not seen in years or places never visited.
  • When you're richer, you can decide to work less -- and spend more time with your friends.

Source: David Leonhardt, "Maybe Money does Buy Happiness After All," New York Times, April 16, 2008.

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