Economy
Can money make you happy? It’s complicated
Summary
- Past research has attributed happiness to relationships and health
Can money buy happiness? This question has long puzzled social scientists. Past research has attributed happiness to relationships and health. A popular yearly report claims to rank countries on “happiness". But can a qualitative trait like happiness really be quantified? A recent study tried to settle the matter. The study, published in the Proceedings of the National Academy of Sciences, brought together the authors of two previous contradictory studies to decide how income influences happiness. The first, by Daniel Kahneman and Angus Deaton (2010), found a rise in happiness with income—but only up to an income of around $75,000/year, after which happiness tended to plateau. The second, by Matthew Killingsworth (2021), dismissed the idea of a plateau, claiming a consistent rise in happiness with income.
So there was no doubt that money added to emotional well-being, but to what extent? The authors’ adversarial collaboration (Deaton wasn’t part of it) released its findings last month. It divided people into five groups from the least happy to the happiest. It turned out that Killingsworth’s findings (that happiness keeps rising with income) applied only to the middle group, and the 2010 findings (that happiness plateaus) only to the unhappiest lot.
Among the lot that tended to be happier, happiness improved slowly as income rose, but once it reached the six-figure mark, they got even happier, much faster. But among the less happy people, happiness improved quicker with income up to a certain level, after which additional money didn’t give much extra happiness in life.
India Context
In India, there has been limited research on this correlation and a threshold in terms of an absolute income value is yet to be defined. A 2010 study by Indian academic T. Lakshmanasamy indicated a strong positive correlation between income and happiness, but said that status takes an upper hand beyond a certain level of income.
Moreover, what matters for Indians more is a “relative position" of happiness. Simply put, our derivation of happiness from income largely comes in the context of people around us. “While rise in absolute income does raise happiness, increase in neighbour’s (relative) income does depress life satisfaction," concluded Lakshmanasamy.
A YouGov-Mint-CPR Millennial Survey in January 2022 revealed urban millennials’ preference for happiness—nearly 69% of the respondents ranked happiness in the top two in a list of five common desires (the others being freedom, money, fame, and respect).
Naturally, attempts to quantify an intangible variable like happiness through proxy barometers come with their share of doubts. The most famous annual exercise, the “World Happiness Report", published by the United Nations Sustainable Development Solutions Network, attempts to measure citizens’ perception of how happy they are using six factors: social support, income, health, freedom, generosity, and absence of corruption. The 2023 edition was released last month. With a score of 4.036 out of 10 in the three-year period of 2020-2022, India ranks a poor 125 out of 136 countries in the report. Finland, with a score of 7.804, ranks first. A Mint analysis of the granular data showed that countries with higher incomes reported higher happiness scores. As income levels fell, so did happiness scores.
Politics of Happiness
Governments play an important role in creating conditions to nurture happiness, mostly through economic systems to ensure better health, education, and civic amenities. Some have looked into alternative, more holistic, ways of assessing economic growth, taking into account non-material well-being as well.
Bhutan is well-known for its Gross National Happiness (GNH), which it says is “more important" than GDP. The GNH is based on nine domains and 33 sub-indicators ranging from health and education to time use, cultural diversity, and living standards. The index recognizes four categories of people—unhappy, narrowly happy, extensively happy, and deeply happy. A positive score in a majority of indicators indicates “unhappy", and a sufficiency in seven or more out of the nine domains means the person is deeply happy.
Across the world, researchers have had varied views on happiness.
In 2007, US-based economist Will Wilkinson expressed doubts over the use of surveys to measure happiness, arguing that happiness varied by culture and time. He pointed out that happiness surveys tended to be based on wealth and freedom, primarily Western constructs.
The ongoing Harvard Study of Adult Development, which has tracked 268 Harvard sophomores since 1938, has stressed on the importance of community and personal relationships to lead a meaningful life. “Close relationships, more than money or fame, are what keep people happy throughout their lives," the study observed. In 1974, Richard Easterlin, professor of economics at the University of Carolina, proposed the “Easterlin Paradox", that at a point in time both happiness and income increases both among and within nations, but over a longer period, this relationship ceases to exist and happiness doesn’t grow with income of a country.
We have presented the chatter around happiness; we let you decide which side of the debate you are on.
