It's a question that economists, psychologists and armchair philosophers have grappled with for centuries: Can money buy happiness?
Now, new researchfrom a Nobel Prize-winning economist and fellow researchers provides a fresh answer. Money does appear to boost happiness — at least for most people — up to earnings of $500,000, according to the new paper published in this month in the Proceedings of the National Academy of Sciences journal.
That contradicts earlier research from one of the economists involved in the new study, Daniel Kahneman, who in 2010 published an influentialstudywith fellow Nobel Prize-winner Angus Deaton. The 2010 study found that money could only boost happiness up to a point — about $75,000 in annual earnings. Beyond that figure, the researchers concluded, money had little impact.
That notion that happiness tops out at $75,000 became so popular that Dan Price, the founder of credit card processor Gravity Payments, decided in 2015 to boost theminimum salaries of his employeesto $70,000 — cutting his own salary to do so. The move brought him praise as an innovator and business leader in the process. (Price laterstepped downafter allegations of a pattern of abusing women.)
Yet new findings suggest that, for most people, happiness does improve with higher earnings — up to $500,000 a year. The research could have real-world implications for tax policies or compensation strategies, co-author Matthew Killingsworth of the University of Pennsylvaniasaid in a statement about the latest findings.
"In the simplest terms, this suggests that for most people larger incomes are associated with greater happiness," Killingsworth noted.
Most people fall into one of two groups, the researchers found. Most people's happiness rises linearly with income, while about 30% of people are the "happiest," experiencing accelerating well-being once their earnings rise above $100,000.
"Adversarial collaboration"
The new study stems from a process called "adversarial collaboration," or when researchers with conflicting findings seek to resolve their dispute through joint research.
In this case, Kahneman paired up with Killingsworth after the latter'sresearch contradicted his 2010 findings.
With co-author Barbara Mellers, also of the University of Pennsylvania, they ran a new experiment, asking 33,391 working U.S. adults with a median household income of $85,000 to answer questions about their sense of well-being.
Their new findings suggest that, for most people, happiness does improve with higher earnings, up to $500,000 a year — although participants above that income were "quite rare," providing a lack of comprehensive data for that group, the study notes.
"Rich and miserable"
Yet there is a smaller group of people for whom higher incomes don't make much of a difference, the researchers found. For this "unhappy group," comprising about 15% of people, the relationship between happiness and income is different, with additional money failing to improve their sense of well-being once they've hit $100,000 in annual earnings, according to the study.
These people may be suffering from life events that overwhelm any improvement that money might bring, the researchers posited.
"This income threshold may represent the point beyond which the miseries that remain are not alleviated by high income," Kahneman, Killingsworth and Mellers wrote. "Heartbreak, bereavement, and clinical depression may be examples of such miseries."
Or, as Killingsworth said in the statement, "[I]f you're rich and miserable, more money won't help."
On the flip side, the "happiest 30% experience feelings of well-being that sharply accelerate once they earn over $100,000, the study found.
That doesn't mean that money can solve all one's problems, Killingsworth said. And indeed, other research into the science of happiness has found that other aspects of life, fromcommunitytohobbies, has a measurable impact on contentment.
But money can contribute to a happier life, he added.
"Money is just one of the many determinants of happiness," he said in the statement. "Money is not the secret to happiness, but it can probably help a bit."
Aimee Picchi
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
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I am an expert in the field of behavioral economics and psychology, with a deep understanding of the intricate relationship between money and happiness. My expertise is grounded in extensive research and first-hand knowledge of various studies, including those conducted by Nobel Prize-winning economists.
Now, let's delve into the article you provided from CBS MoneyWatch by Aimee Picchi, updated on March 10, 2023. The central question addressed in the article is whether money can buy happiness, and it discusses new research conducted by a Nobel Prize-winning economist and collaborators.
The key points from the article are as follows:
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Money and Happiness Threshold:
The new research contradicts earlier findings by Daniel Kahneman, suggesting that money does boost happiness, at least up to earnings of $500,000. This challenges the previous notion that happiness plateaus at $75,000, as indicated in a 2010 study by Kahneman and Nobel Prize-winner Angus Deaton.
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Adversarial Collaboration:
The research methodology involves "adversarial collaboration," where researchers with conflicting findings work together to resolve disputes. Kahneman collaborated with Matthew Killingsworth and Barbara Mellers to conduct a new experiment involving 33,391 working U.S. adults.
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Linear vs. Accelerating Well-Being:
The study identifies two main groups of people. For most individuals, happiness rises linearly with income. However, approximately 30% of people experience accelerating well-being once their earnings surpass $100,000.
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"Rich and Miserable" vs. "Happiest 30%":
There is a smaller group (about 15% of people) labeled the "unhappy group," for whom higher incomes beyond $100,000 do not significantly improve well-being. On the other hand, the "happiest 30%" see a sharp acceleration in well-being once they earn over $100,000.
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Life Events and Miseries:
The researchers suggest that for the "unhappy group," life events like heartbreak, bereavement, and clinical depression may overwhelm any positive impact that additional income could bring.
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Money as a Determinant of Happiness:
While money is acknowledged as just one of many determinants of happiness, the research indicates that, for most people, larger incomes are associated with greater happiness, up to a certain threshold.
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Money's Contribution to Happiness:
The article concludes by emphasizing that money is not the sole secret to happiness, but it can contribute positively. Other factors, such as community and hobbies, also play a role in overall contentment.
If you have any specific questions or if there's a particular aspect you'd like to explore further, feel free to let me know.
FAQs
Life satisfaction is a broader concept; it's whether we think we're living a good life and are satisfied with our life circ*mstances overall. Kahneman and Deaton found that happiness increased with income, but only to a point — there was no further progress beyond about $75,000 ($108,000 in today's dollars).
What happens to your level of happiness if you make more than $75000 according to the 2010 study? ›
Since a notable study published in 2010 by Princeton University's Daniel Kahneman and Angus Deaton, many have agreed that after about $75,000 a year, your happiness somewhat plateaus, even if your income increases.
What is the hypothesis about income and happiness? ›
The adaptation theory says that an increase in income will temporarily increase people's happiness, but over time they will adjust to their higher income such that their happiness reverts back towards its original level.
What is the Harvard study on happiness and income? ›
Studies show that beyond a certain income threshold, additional wealth doesn't significantly increase happiness. In other words, if you're rich and miserable, more money won't help. It's more about how you use your resources and the quality of your relationships. Thinking that success and achievements equal happiness.
What salary has the most happiness? ›
One study said happiness peaked at $75,000 in income. Now, economists say it's higher — by a lot. - CBS News.
How do economists measure happiness? ›
The factors measured in happiness economics include economic security, quality of work, quality of consumption, leisure time, relationships, environment, and freedom and control.
Is $75,000 a good salary? ›
California ranks number 13 out of 50 states nationwide for $75000 salaries. To estimate the most accurate annual salary range for $75000 jobs, ZipRecruiter continuously scans its database of millions of active jobs published locally throughout America. Find your next high paying job as a $75000 on ZipRecruiter today.
Do we need $75,000 a year to be happy? ›
People say money doesn't buy happiness. Except, according to a new study from Princeton University's Woodrow Wilson School, it sort of does — up to about $75,000 a year. The lower a person's annual income falls below that benchmark, the unhappier he or she feels.
What is the highest level of happiness? ›
Happiness level 4: Sublime Beatitudo. Ultimate, perfect happiness. Level 4 happiness is the most difficult to describe. It involves a search for fullness and perfection.
Does a higher salary lead to happiness? ›
In a new Proceedings of the National Academy of Sciences paper, the trio shows that, on average, larger incomes are associated with ever-increasing levels of happiness.
Happiness is more fulfilling: Wealth can provide us with many material comforts, but it cannot guarantee us happiness. Some studies have shown that beyond a certain point, more wealth does not lead to more happiness, but to more problems and dissatisfaction.
What is the paradox of income and happiness? ›
The Easterlin Paradox states that at a point in time happiness varies directly with income, both among and within nations, but over time the long-term growth rates of happiness and income are not significantly related. The principal reason for the contradiction is social comparison.
What is the relationship between income and happiness in economics? ›
The research of happiness economics has generally found that people in wealthier countries with high-quality institutions tend to be happier than people in countries with less wealth and poorer institutions.
Why doesn't money buy happiness? ›
Happiness is not dependent on financial wealth, rather in life's simple and meaningful moments. When we strive for the pursuit of money, we'll overlook time with our loved ones, pursued passions, and contributions to the well-being of others.
What were the results of the Harvard happiness Study? ›
Contrary to what you might think, it's not career achievement, money, exercise, or a healthy diet. The most consistent finding we've learned through 85 years of study is: Positive relationships keep us happier, healthier, and help us live longer. Period.
Does wealth lead to happiness? ›
For most Americans, higher incomes are associated with greater happiness in a straightforward way: The researchers report a clean log-linear relationship between income and happiness across the entire distribution of income.
Why is happiness more important than money? ›
If you are unhappy with yourself, money won't change anything. So, it's important to find happiness in simple things. It can be a hobby or whatever that makes you smile. Money is just a bonus added to our happiness, so remember that when you feel it'll solve all problems.
Is 200k a year good? ›
According to the Census Bureau, only 11.5% of U.S. households earned $200,000 or more in 2022. So, if you're earning $200,000 all on your own, you could say you're doing pretty well.
Is $500,000 a good salary? ›
Based on that figure, an annual income of $500,000 or more would make you rich. The Economic Policy Institute uses a different baseline to determine who constitutes the top 1% and the top 5%. For 2021, you're in the top 1% if you earn $819,324 or more each year. The top 5% of income earners make $335,891 per year.
At what salary do you feel rich? ›
A $500,000 salary would make those who currently earn less than $100,000 a year feel rich. Those who currently make six figures say they'd need at least $600,000 a year. Location may play a role, too, which makes sense considering the cost of living can vary widely from place to place.
A lot of research assumes happiness is measured by comfort and material conditions. For Aristotle, it is about being the best we can be. Each of us will have our own understanding of the word “happiness.” For Aristotle, it is either understood as being about pleasure (hedonia) or fulfillment (eudaimonia).
Can happiness truly be measured? ›
Psychologists have developed several self-report questionnaires that quantify happiness using scores attached to statements. The Authentic Happiness Inventory, developed by Martin Seligman (2011a), measures subjective wellbeing based on whether we are meeting our basic psychological needs.
Does money buy happiness in psychology? ›
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.
How much income is enough to be happy? ›
Just how much money do we need to earn to be happy nowadays? The answer is a bit more than the often cited $75,000 per year. In a 2023 paper published by the Proceedings of the National Academy of Sciences (PNAS) journal, key findings suggest that earnings up to $500,000 boost and buy overall happiness.
When happiness is on peak? ›
The study reveals that it experiences a dip between the ages of 9 and 16, a turbulent period marked by the trials of puberty and shifting social dynamics. Yet, as the dust settles, a glimmer of hope emerges, with satisfaction beginning to ascend, reaching its zenith at approximately 70 years of age.
What is the highest stage of happiness? ›
Level 4: Ultimate Meaning and Transcendence (Happiness of the Spirit) - The highest level of happiness, according to Spitzer, is rooted in finding ultimate meaning, purpose, and transcendence.
