"Long before it's in the papers"
January 27, 2015


A price on happiness? Study cites $36,000

Nov. 28, 2013
Courtesy of the University of Warwick
and World Science staff

At least in Eu­rope, an av­er­age in­come of about $36,000 per pe­rson is as­so­ci­at­ed with the high­est lev­els of hap­pi­ness, econ­omists re­port.

More mon­ey, their find­ings would sug­gest, leads to more prob­lems.

The anal­y­sis, led by economists Eu­ge­nio Proto at the Uni­vers­ity of War­wick, U.K., and Al­do Rus­ti­chini of Uni­vers­ity of Min­ne­so­ta, found that un­sur­pris­ing­ly, more mon­ey meant more hap­pi­ness in poorer ar­eas. But life sat­is­fac­tion lev­els peak­ed at an av­er­age in­come lev­el around $36,000, above which it was found to dip slightly in the very rich coun­tries.

“Whether wealth can buy a coun­try’s hap­pi­ness is a ma­jor ques­tion for gov­ern­ments. Many policy-makers, in­clud­ing in the UK, are in­ter­est­ed in of­fi­cial meas­ures of na­t­ional well-being,” Proto said. “Our new anal­y­sis has one very sur­pris­ing find­ing which has not been re­ported be­fore—that life sat­is­fac­tion ap­pears to dip be­yond a cer­tain lev­el of wealth.

“In our study we see ev­i­dence that this is down to changes in the as­pira­t­ion lev­els of peo­ple liv­ing in the rich­est coun­tries,” he said. 

“There is a sense of 'keep­ing up with the Jones­es' as peo­ple see wealth and op­por­tun­ity all around them and as­pire to hav­ing more. But this as­pira­t­ion gap—the dif­fer­ence be­tween ac­tu­al in­come and the in­come we would like—eats away at life sat­is­fac­tion lev­els,” he added. “What we as­pire to be­comes a mov­ing tar­get and one which moves away faster in the rich­est coun­tries, caus­ing the dip in hap­pi­ness we see in our anal­y­sis.”

Probably al­so un­sur­pris­ingly, though, the de­crease in life sat­is­fac­tion meas­ured for very rich re­gions was not nearly as much as the drop af­flict­ing poor ones.

The dol­lar es­ti­mates were ad­justed to ac­count for “pur­chas­ing pow­er pa­r­ity,” the rate at which one coun­try’s cur­ren­cy would have to be con­vert­ed in­to an­oth­er coun­try’s to buy the same amount of goods and ser­vic­es in each coun­try.

The re­search­ers stud­ied 171 re­gions in Eu­rope, break­ing down na­t­ions in­to smaller sec­tions. The hap­pi­ness “sweet spot” that they iden­ti­fied is si­m­i­lar to the over­all GDP-pe­r-capita of the U.K., which is $37,000 ad­justed, they not­ed. The U.S. GDP-pe­r-capita is nearly $50,000, al­though many Amer­i­cans en­joy few­er pub­lic ser­vic­es, and the study cov­ered only Eu­rope.

The re­search­ers used da­ta on life sat­is­fac­tion gath­ered from the World Val­ues Sur­vey. Their find­ings were pub­lished Nov. 27 on­line in the re­search jour­nal PLoS One.

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At least in Europe, an average income of about $36,000 per person is associated with the highest levels of happiness, economists report. More money, their findings would suggest, leads to more problems. The link between national wealth and levels of happiness among the population is still open to debate. The analysis, led by economists Eugenio Proto at the University of Warwick, U.K., and Aldo Rustichini of University of Minnesota, found that unsurprisingly, more money meant more happiness in poorer areas. But life satisfaction levels peaked at an average income level around $36,000, above which it was found to dip slightly in the very rich countries. “Whether wealth can buy a country’s happiness is a major question for governments. Many policy-makers, including in the UK, are interested in official measures of national well-being,” Proto said. “Our new analysis has one very surprising finding which has not been reported before—that life satisfaction appears to dip beyond a certain level of wealth. “In our study we see evidence that this is down to changes in the aspiration levels of people living in the richest countries,” he said. As countries get richer, more money leads to “higher aspiration. There is a sense of keeping up with the Joneses as people see wealth and opportunity all around them and aspire to having more. “But this aspiration gap—the difference between actual income and the income we would like—eats away at life satisfaction levels,” he added. “What we aspire to becomes a moving target and one which moves away faster in the richest countries, causing the dip in happiness we see in our analysis.” Probably also unsurprsisingly, though, the decrease in life satisfaction measured for very rich regions was not nearly as much as the drop afflicting poor ones. The dollar estimates were adjusted to account for “purchasing power parity,” the rate at which one country’s currency would have to be converted into another country’s to buy the same amount of goods and services in each country. The researchers studied 171 regions in Europe, breaking down nations into smaller sections. The happiness “sweet spot” that they identified is similar to the overall GDP-per-capita of the U.K., which is $37,000 adjusted, they noted. The U.S. GDP-per-capita is nearly $50,000, although many Americans enjoy fewer public services, and the study covered only Europe. The researchers used data on life satisfaction gathered from the World Values Survey. Their findings were published Nov. 27 online in the research journal PLoS One.