We're Past the Point Where Money Can Buy Happiness

Money really can’t buy you happiness, according to a new study—at least, not after a certain amount.

In a paper published in PLOS ONE, economists Eugenio Proto from the University of Warwick and Aldo Rustichini from the University of Minnesota looked at the relationship between Gross Domestic Product and self-reported life satisfaction across European countries. They found that while life satisfaction increased with the average income across poorer countries, it reached a peak and then began to fall as income increased across richer countries. After the $36,000 per capita mark it’s all downhill, and any extra dollars won’t help to warm your miserable, rich heart.

“The probability of reporting the highest level of life satisfaction is more than 12 percent lower in the poor countries with a per capita GDP below 5,600 USD than in the counties with a per capita GDP of about 15,000 USD," the authors reported. That’s unsurprising: It’s hard to be happy when your income can’t meet your basic needs.

However, they continued: “In countries with an income above 17,000 USD the probability of reporting the highest level of life satisfaction changes within a range of two percent maximum.” In other words, the more money you have, the less each bit more means for your general happiness. Not only that, but after a particular “bliss point,” the graph takes a downward turn. “Interestingly enough, life satisfaction seems to peak at around 30,000 USD and then slightly but significantly decline among the richest countries,” they said.

The latest figures for the UK put the per capita income at around $37,000. That’s according to GDP, adjusted for "Purchasing Power Parity," which takes into account the cost of living and inflation rates across countries. The US has an even higher income at around the $50,000 mark (though it wasn’t included in this study). It looks like this is as good as it gets, guys.

Of course, it’s notoriously difficult to measure the highly subjective and ethereal value of happiness. In this study, “personal satisfaction” levels reported by the World Values Survey were used. In the survey, people were asked to rank their happiness from 1-10 in response to the question: “All things considered, how satisfied are you with your life as a whole these days?” The new paper controlled for country-fixed variables, such as cultural differences that might lead some people to report a higher or lower satisfaction level.

The study's findings generally support a well-known concept in economics called the Easterlin Paradox. Back in the 1970s, economist Richard Easterlin found that within a given country, people were more likely to report a higher level of happiness when they had a higher income. But across countries, the average happiness level didn’t vary much with the country’s average income, at least in richer countries.

So why aren’t higher incomes making us happier? The authors put it down to the very scientific hypothesis of “keeping up with the Joneses.” Essentially, they suggest that we view what we have in relation to what we aspire to have—and that the more we have, the more we want. That sets off a vicious circle of increasing GDP accompanied by only more disappointment. “In the view we propose, higher GDP leads to higher aspirations (driven by the existence of more opportunities or by comparison with the Joneses), which drives effort and individual commitment, which in turn do, on average, produce higher income,” they explained. That would usually be a good thing. “However, higher income now sets up a race between aspiration and realization; when realization is lower than aspiration, the psychological cost paid is disappointment, which increases with this gap.”

In the end, there is no keeping up with the Joneses, and trying will only make things worse.