We are all familiar with the saying “money can not buy happiness.” It has been printed on bumper stickers, t-shirts and even pillows. People use it as a reminder to focus on the things they enjoy in life without a price tag, such as family and friends, rather than the material objects they can obtain with a swipe of their credit cards. But the link between happiness and money is complex, especially when it is evaluated on a worldwide scale.
The first person to develop a theory on the money-happiness connection was Richard Easterlin, a Professor of Economics at the University of Southern California. In 1974, Easterlin proposed that the wealthier people in a country are generally happier than poorer people in the same country, but wealthier countries, on the whole, are not happier than poorer countries. Known as the “Easterlin Paradox,” he found that the average reported national happiness level did not vary significantly with national per capita income.
The Easterlin Paradox is based on the difference between absolute and relative income. Happier people are those who are wealthier in comparison to their neighbors, and the divide between the rich and the poor is only widening in developed nations. According to a report released by the Organization for Economic Cooperation and Development (OECD) last year, the richest 10 percent of people across the 33 OECD member states earn 9.5 times the income of the poorest 10 percent.
So it is no surprise that people living in wealthier countries are consumed with “keeping up with the Joneses,” and, moreover, that this affects their happiness. According to licensed psychologist Beth Golden, Ph.D., happiness is found in wanting what you have, a concept commonly found in the philosophies of Dalai Lama.
“Cultural pressure that glamorizes and idealizes wealth and celebrities creates a sense of dissatisfaction and inadequacy for many people who buy into this illusion that wealth buys happiness,” said Golden.
A further impediment to happiness in wealthier countries is materialism. People in these countries have more aspirations because of advertising, social media, television and their peers to strive to acquire “things” or material wealth. “This may not exist in poorer countries where there is less exposure to technology and a great deal of daily energy is spent just trying to meet basic human needs for food, water, shelter and safety,” said Golden.
In 2011, Gallup conducted a poll which measured positive emotions in 148 countries and areas using five questions: (1) whether people experienced enjoyment the day before, (2) whether they felt respected, (3) well-rested, (4) laughed and smiled a lot, and (5) did or learned something interesting. The results were shocking to analysts who solely focus on “traditional economic indicators.”
Data showed that residents of Panama, which ranks 90th in the world in terms of GDP, reported the highest positive emotions with 85 percent answering “yes” to all questions asked. Residents of Singapore, which ranks 37th in the world in GDP per capita, reported the lowest positive emotions with only 46 percent answering “yes” to all questions asked. From the numbers, Easterlin appears to be right.
However, every survey has its flaws, and every theory has its challengers. In this case, the challengers are Wharton business and public policy professors Betsey Stevenson and Justin Wolfers, who published their own paper on the money-happiness connection titled “Subjective Well-Being, Income, Economic Development and Growth.”
In their paper, which analyzes data spanning over 40 years, 155 countries, and hundreds of thousands of individuals, Wolfers and Stevenson argue that “richer countries on average have higher levels of life satisfaction” and “as countries grow, their citizens report higher levels of life satisfaction.”
Wolfers and Stevenson maintain that absolute income is the strongest contributor to happiness while other aspects, including relative income, are of lesser importance. They further state that wealthier countries can afford investments in scientific research that contribute to lower child mortality and higher life expectancy rates, as well as improved public health.
Political leaders are also taking into account the strong link between a country’s level of economic development and the happiness of its people. British Prime Minister David Cameron regarded society’s sense of well-being as the “central political challenge of our times” and encouraged policies to focus “not just on GDP but on GWP–general well-being.” Initiatives to determine accurate worldwide levels of happiness have also increased in recent years.
But what really makes people happy? Though the answer is subjective, Golden believes that work that provides meaning and purpose and love through the availability of caring and supportive relationships is the key to happiness for many.
So can money buy happiness? The simple answer is maybe. But the connection between the two will only strengthen as national leaders begin to take “gross domestic happiness” into equal consideration to a country’s success as GDP.
– Abby Bauer