New study shows that more money does make you happier

BY Rainer Zitelmann | tweet rzitelmann   /  22 February 2021

“Money can’t buy happiness” and “It’s better to be poor and healthy than to be rich and sick” are just two sayings people use to cast doubt on or diminish the role money plays in human contentment. The Roman lyric poet and satirist Horace was probably not the first to observe that “Worry follows growing wealth” when he wrote his Odes in 23 BCE. Overwhelmingly, it seems that philosophers and intellectuals have always been skeptical about increasing human happiness through money.

And there are a number of scientific studies that seem to justify this scepticism. Two winners of the Nobel Prize in Economics, Daniel Kahneman and Angus Deaton, concluded that there is a correlation between higher incomes and greater happiness, but only up to a certain limit – namely, an annual income of $75,000. According to Kahneman and Deaton, additional income above this level no longer has a significant impact on happiness because people have already got used to being financially comfortable and only make minimal adjustments to their lifestyle with each additional salary increase.

Yet a new study published in the American scientific journal PNAS has arrived at a completely different conclusion. American researchers led by Matthew A. Killingsworth found that both “experienced well-being” and “evaluative well-being” increase with income. The new study is based on an analysis of 1.73 million experience-sampling reports from 33,391 employed US adults, who were contacted randomly via their smartphones. Experienced well-being was measured with the question “How do you feel right now?” while evaluative well-being was measured with the question, “Overall, how satisfied are you with your life?” Perhaps the most interesting finding of this new study is that the $75,000 limit identified by Kahneman and Deaton does not exist. The association between income and experienced and evaluative well-being was virtually identical for incomes below $80,000 and for incomes larger than $80,000.

This new study enjoyed some methodological advantages over older ones. For instance, in older studies respondents could only answer “yes” or “no” to questions about their happiness, whereas the current study employed a response scale ranging from “very bad” to “very good.” Contacting people by smartphone also allowed the researchers to measure respondents’ experience at the moment just before they were contacted. In older studies, in contrast, respondents were asked to recall their emotional state at a particular moment in the past. Many of these memories, however, will have become distorted and strongly coloured by a respondent’s present emotional state.

To date, there has never been a study that has asked very wealthy individuals about their feelings of happiness. By “very wealthy,” I mean people who are financially free, who have so much money that they no longer have to work but could live comfortably off the returns on their assets. To do so requires net assets in the double-digit million range, making this a very small group indeed. I met many such multi-millionaires when I conducted in-depth interviews and a detailed psychological test with 45 very wealthy people for my dissertation, The Wealth Elite. They were all worth at least tens of millions – and most were worth even more. I didn’t ask how happy they were, but I did ask them about the things they associated with money. Interestingly, when asked whether they associated having money with being able to afford “the finer things in life,” opinions differed widely. For some rich people this was very important, for others it was completely irrelevant. Yet almost all of my interviewees rated “freedom and independence” as the aspect they most strongly associated with money.

Financial freedom means: I decide whether I work, what work I do, with whom I work, where I work, how I work and when I work. If money is “coined liberty” then the question “does money make you happy?” can be rephrased as “does freedom make you happy?” Most people would probably answer this question with a definite “Yes.” Just think about it for yourself: if you didn’t have to work tomorrow because you had enough money and could decide for yourself whether to work or not and what work you most fancied doing – wouldn’t that make you happier?

Try this: make a list of all the worries you’ve had over the last three months and then cross off the ones you wouldn’t have had with, say, 30 million euros in the bank. You could immediately cross out any worries about your job security, potential rent increases or costly car repairs. Of course, you’d still be left with worries about your health. But we also know from scientific studies that rich people are, on average, healthier and have a significantly higher life expectancy than poorer people.

There are other worries, such as heartache. These worries wouldn’t disappear if you had more money – but at least, as a rich person, you have significantly better chances and choices when it comes to choosing a partner than a poorer person has.

One of Germany’s greatest literary figures, Johann Wolfgang von Goethe, couldn’t have disagreed more with all the philosophers who try to convince us that money is irrelevant or even detrimental to happiness: “Health without money is half a sickness.” The data is starting to prove him right.


Rainer Zitelmann is the author of “The Wealth Elite” and “The Rich in Public Opinion”.


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