NCPA - National Center for Policy Analysis


August 24, 2004

The assumption that more money equates to more happiness is true to a point -- but other factors contribute to happiness as well, according to the Wall Street Journal. Psychology professors Ed Diener of the University of Illinois, Urbana-Champaign and Martin Seligman of the University of Pennsylvania-Philadelphia analyzed 150 studies over 20 years that measured happiness.

According to the researchers:

  • On a happiness scale of 1 (least happy) to 7 (most happy), the 400 richest Americans average 5.8 on the happiness scale, while homeless people in Calcutta, India average 2.9.
  • However, cattle-herders in Kenya (who do not have modern conveniences) and the Inuit people of Greenland also average 5.8 on the happiness scale.
  • Income is an accurate measure of happiness when it moves individuals from abject poverty to being able to afford basic needs.
  • Nonetheless, among higher income individuals, happiness comes from intangibles such as relationships, a sense of purpose in one's life, civic participation and enjoyable work.

Economic theory assumes that the more money people have, the more their needs are met; hence, the happier they are. Indeed, the higher a nation's gross domestic product (GDP), the happier people generally are. But psychologists also attribute greater happiness to the fact that wealthier nations tend to have more human rights, a fair legal system and better to access to health care -- factors that are not measured by economic indicators.

Moreover, studies that measure happiness are often ambiguous on whether money creates happiness or vice versa. People who are happier do tend to earn higher incomes, but the ability to earn a higher income could be based on first being happy, which would lead to more productivity and a sense of well-being, conclude the researchers.

Source: Sharon Begley, "Wealth and Happiness Don't Necessarily Go Hand in Hand," Wall Street Journal, August 13, 2004; and Ed Diener and Martin E.P. Seligman, "Beyond Money: Toward an Economy of Well-Being," Psychological Science in the Public Interest 5, No. 1, July 2004.

For WSJ text (subscription required):,,SB109234085670790101,00.html


Browse more articles on Economic Issues