New research points to high correlation between wealth and satisfaction
We like to think money doesn’t really make that much of a difference. The intuitive truth is that it does, but we must be careful not to jump to early conclusions.
In an article by David Leonhardt for the NY times titled “Maybe Money Does Buy Happiness After All” a new research by two economists from the University of Pensilvenya is discussed. I urge you to take the time and read the complete article but for the ones of you who are more pressed here are the main points of the research:
- The contrast between wealth and low satisfaction (demonstrated in post war Japan) was research by Richard Easterlin in 1974 and became known as the Easterlin Paradox.
- Mr. Easterlin also claimed relative income mattered far more than absolute income.
- The paradox became a social science classic for obvious reasons. We all like to believe we all have the same chance at happiness (I believe we do).
- In a new research, economists Betsey Stevenson and Justin Wolfers argue that money indeed brings happiness even if it doesn’t guarantee it.
- Furthermore, they argue absolute income is more important than relative income with a distinct correlation between income and happiness.
- The research was conducted at country level.
Some very interesting questions are left unanswered and will hopefully be followed through in future research. One significant question brought up by Mr. Easterlin himself is: Did satisfaction rise in individual countries as they grew richer? His answer for China and the US is: no. The researchers claim 8 out of 10 European nations indeed showed a rise in satisfaction.
I believe it’s still a matter of relative income for some very basic reasons. Think about yourself. Your goals, ambitions and hopes are mostly relative. Many of them stem from what is considered an achievement in your society and the accepted standard of living.
Naturally, global or country level satisfaction would also be relative leaving poor counties wanting for more as globalization opens their eyes to the wealthy western world.
Still, while absolute income makes you absolutely happier, we must not confuse this with more consumption. Higher incomes mean better healthcare, better education and better child care. Not necessarily the ability to purchase that 63” Plasma TV screen you saw yesterday.correlation, david leonhardt, Happiness, intuitive truth, Money, New, relative income, research, research economists, richard easterlin