The Cost of Happiness

November 17th, 2010 by Andrea Bennett

A new study says that money can buy happiness – but only to an extent.

Brought to you by Liberty Mutual's
The Responsibility Project

In the 1959 hit “Money”, Motown pioneer Barrett Strong sang about the crassly fun correlation between dollars and happiness. As he crooned, “Your lovin’ gives me such a thrill; but your love don’t pay my bills,” and later, “Money don’t get everything it’s true; but what it don’t get, I can’t use.”

As it turns out, Strong may have been onto something, because a new study by a pair of Princeton researchers suggests that money can in fact buy happiness.

After analyzing more than 450,000 responses to the Gallup-Healthways Well-Being Index for 2008 and 2009 – a daily survey of 1,000 US residents conducted by the Gallup Organization – Nobel Prize-winning psychologist Daniel Kahneman and economist Angus Deaton assessed how income affected each of two types of well-being: emotional well-being and overall life satisfaction. They discovered that happiness improved as income rose – to a point.

As they reported in the Proceedings of the National Academy of Sciences, people's emotional well-being — happiness — increased along with their income up to about $75,000 before leveling out. On the other hand, people’s overall sense of success or well-being continued to rise as their earnings grew beyond that point. For instance, someone who doubles his $100,000 salary realizes a greater sense of success, Deaton said, but that doesn’t necessarily mean they are happier on a day-to-day basis.

They posit that making anything more than $75,000 no longer improves a person’s ability to spend time with friends, avoid pain and disease and enjoy leisure time – all components of emotional well-being. “It also is likely that when income rises beyond this value, the increased ability to purchase positive experiences is balanced, on average, by some negative effects,” they wrote, referring to a past study that revealed a link between a high income and a lower ability to savor small pleasures.

On the flip side, low income seemed to amplify how people felt about misfortune, including divorce, illness and the pain of loneliness. For those with a monthly income of at least $3,000, 38 percent who reported headaches also said they had sadness and worry, compared with 19 percent without headaches. But headaches seemed to have a more deleterious effect on people who made less than $1,000 a month; they reported sadness and worry at 70 percent when they had headaches.

What do you think? Is it true, as Barrett Strong sang, that although the best things in life might be free, “you can leave them to the birds and bees”? Or do you think you would be happy regardless of your income?