Of Course Money Buys Happiness

There’s been some buzz recently over the finding that increased national income leads to increased national happiness.  This seems to hold true across countries, such that richer countries are generally more happy – which of course doesn’t hold much water in causal.  However, the more powerful finding to my mind is that it holds true within countries.  Countries seem to have different happiness baselines, but the baseline moves up in a predictable pattern (on a log scale, so doubling per capita GDP will only move you up 1 notch on the scale).  Everyone always loves to say that “money can’t buy happiness”, but it makes perfect sense to me on a national level.   Wealth gives individuals and nations many opportunities to maximize happiness even if you can’t walk into a happiness store and buy “1 sense of life satisfaction, please”.



First of all, money buys health.  It’s trivially obvious that individuals are in better health in Western Europe than in Bangladesh.  The United States is less healthy than many other rich countries and some poorer countries, but the overall trend is very clear – wealthier countries are healthier than poorer countries.  Within countries, it is even more true – wealthier Americans live longer and healthier lives than poorer Americans in basically any way you care to measure.  The most visible signifier of this is obesity, which is least common amongst the rich.  Illness can make you pretty darn unhappy.

Secondly, money buys security.  The higher your income, the further above subsistence you are and the less likely that minor setbacks will lead to total destitution or starvation.  When Americans get a raise at work or a new job, only the most desperate will think, “Hey, I’m a bit further away from starving in the gutter like an animal!”.  The fact that this is not our thought process reflects the security and peace of mind that higher national income has brought us.  When imagining the alternatives, it seems obvious that this must make us happier.

Finally and I think most importantly, money buys freedom.  As the level of national income rises, it becomes easier to be “poor” and still be comfortable.  If your dream is being a journalist and the only options available are back-breaking subsistence agriculture, then you are likely to be unhappy.  In a richer country it is simply easier to make a viable living on a “threshold income”, that is to say making just enough to get by.  If income is higher, people will have more disposable income to spend on whatever they want, meaning there is more money flowing to a wider range of things beyond the basics of agriculture, manufacturing, and construction and thus many more viable career options.  That must count for something, and I would guess it counts for a lot.

The cliche seems so well-established that this finding seems to surprise people, but I can’t imagine why.

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