Does Money Buy Happiness? – Econlib

Reason magazine has an article entitled:

More Money Does Buy More Happiness

But the article itself is more nuanced:

A new study in the journal Emotion presents a challenge to the Easterlin finding. Jean Twenge, a psychologist at San Diego State University, and A. Bell Cooper, a data scientist at Lynn University, examined data collected from 44,000 adult respondents to the General Social Survey (GSS) between 1972 and 2016 and found that more money does, in fact, correlate with more happiness.

I know that “correlation doesn’t imply causation” has become a cliché, but it remains an important concept.  I actually see two problems with the “money buys happiness” claim:

1. I would expect happy people to be richer than unhappy people, even if wealth had no causal impact on happiness.  Depressed people often lack ambition, feeling fatalistic about life.

2. Happiness is difficult to define.  One definition relates to mood—happy people are people in a cheerful mood.  Another definition relates to general life satisfaction.

I know some grouchy people who are satisfied with what they have accomplished in life.  Are they “happy”?  I suppose it depends how one defines happiness:

Nevertheless, Easterlin and other scholars continue to argue that the “Easterlin Paradox” is real. Some cite 2010 research in the Proceedings of the National Academy of Sciences by Princeton economist and Nobelist Angus Deaton and his colleagues that supposedly found happiness does not increase once an individual’s income reaches about $75,000 per year. What the study actually found is that more money does not affect the level of day-to-day joy, stress, and sadness but does correlate strongly with rising measures of overall life satisfaction.

If I were to suddenly lose 98% of my wealth, I might tell pollsters than my “life satisfaction” had gone down.  But back when I actually had 98% less wealth than today, my mood was about the same is it is now.

I remain agnostic on the question of whether wealth increases happiness.  I am more sympathetic to the claim that freedom increases happiness, and I also believe that freedom leads to higher wealth.  So I’m not at all surprised by the fact that international comparisons show a positive correlation between wealth and happiness.