Can Money Buy You Happiness? A not so simple answer

A brief analysis on the economics of happiness. I explain the conclusions of a research paper that I wrote on the topic of how relative income affects individual happiness.

Economics of happiness

Reasoning for Relativity Research

For those of you that don't know me, I have just finished my degree in Economics. As part of my degree I had to write an academic paper in an economic topic area of my choice. I chose to conduct some research into the economics of happiness. I really wanted to understand what it is that makes people happy. How do we achieve a happy life? What things can we do to improve the level of satisfaction in our lives?
Picture from xedos4

After much reading it became clear from the previous reaearch from the last 50 years that there was a  large disagreement as to how income makes people happy. The old saying "money can't buy you happiness"  can be argued to be false with the vast majority of people claiming a rise in happiness levels as they became richer. However, it became clear to me that there is a large discrepancy between researchers who argue why this is the case.

On side argue that money allows us to buy the things that make us happy. Hence money gives us the means to be happy. Thus money buys happiness.

On the other hand there is a school of thought that argues that it isn't money itself that makes us happy, nor the things we buy with it. Instead, it can be argued that it is our level of wealth compared to those around us, our friends, neighbours, and co-workers. They argue that when we receive an income boost, it is the increase in our status compared to friends (through the purchase of a new car etc) that generates happiness, not the object itself.

Cautious Conclusions

I conducted a large amount of research into the subject. I used survey data from a European survey of 30,000 peoples' happiness and income. By statistical analysis (that I will not bore you with the details here) I found some interesting results. Any conclusions must be observed sceptically and there is much needed research into this fairly young area of social science:
  • Richer people do indeed tend to be happier people
  • Poorer people tend to be less happy than their richer counterparts
  • People do make comparisons with those around them and these comparisons affect their level of happiness
  • People tend to compare based on a number of criteria: those of a similar age (within a decade of each other), same gender, similar geographic location
  • Richer people living in richer areas care more about social comparison (and it is more detrimental to their well-being if they fall below a considered norm) than poorer people living in poorer areas

The Happy Dilemma

Clearly we have a problem. We want to be rich because being poor makes us unhappy. However, as we become richer we begin to compare ourselves more to those around us. Keeping up with the Jones's has never been harder or more stressful. it so good being rich?

Well, personally it's not going to stop my goals but I think these findings highlight that as your wealth grows, care needs to be taken as to how you view yourself in comparison to other people. Comparison is dangerous. To be rich and happy it would appear that relative income should be ignored. Be happy with  yourself for your own sake and don't measure success against others. It's just the beginnings of a very long slippery slope.

Readers, what does happiness mean to you?
Furthermore, if anyone would like to read my academic journal, get in touch.

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