More on money (not) buying happiness
September 6th, 2010
03:00 PM ET

More on money (not) buying happiness

You may have seen our coverage of a recent study showing that most people with a household income of $75,000 per year are happy, but that happiness doesn't appear to increase with incomes higher than that.

A newer study in Proceedings of the National Academy of Sciences backs that up when it comes to everyday happiness - but not when people were asked to think about their overall satisfaction with life.

Daniel Kahneman and Angus Deaton of Princeton University analyzed poll data from the Gallup Organization from more than 450,000 U.S. residents in 2008 and 2009. Their study was conducted completely independently of the Keirsey Research analysis CNN reported  last week.

The Princeton group differentiated between life evaluation, which measures satisfaction with one's life overall, and emotional well-being, which reflects everyday experience. Analyses of happiness don't often make this distinction, and it is an important new development in this line of research, Kahneman said.

He and Deaton found that people's emotional well-being did not increase with higher household incomes after $75,000 - meaning day-to-day happiness does not rise after that point.

But here's where their study parts from the Keirsey analysis: The new study finds that happiness in terms of overall satisfaction with life does continue to rise with higher incomes after $75,000.

The Princeton researchers were surprised by the sharp difference in life evaluation and emotional well-being results after the $75,000 point. One theory behind these findings is that increases in income beyond $75,000 do not improve a person's ability to spend time with people they like, avoid pain and disease, enjoy leisure, and engage in other activities important to emotional well-being. But when people stop and think about their life as a whole, being wealthier makes everything seem better.

"We suspect that this means, in part, that when people have a lot more money, they can buy a lot more pleasures, but there are some indications that when you have a lot of money, you will savor each pleasure less," Kahneman said.

On the other end of the spectrum, less money is associated with emotional pain, the researchers found. Poverty exacerbates the pain of misfortunes such as asthma, divorce, and being alone, as well as stress.

"Reducing suffering is an important social objective, and it's not quite the same thing as making people happy," Kahneman said.

To put this all in perspective, about one third of households had incomes above $75,000 according to the 2008 American Community Survey by the U.S. Census Bureau. The average U.S. household income was $71,500 in that survey.

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