The Economics of Happiness, Part 4: Are Rich People Happier than Poor People?

Continuing on the theme of the relationship between income and happiness (previous posts: 1, 2 , and 3), let me show you what Betsey Stevenson and I learned when comparing the happiness of rich and poor people.

Let’s begin with the most recent data from the 2006 General Social Survey, which asked: “Taken all together, how would you say things are these days?”

Happiness Graph

It sure seems like the rich are more likely to be “very happy” than the rest of us. Is this a big effect? In 2005, Robert Frank argued:

When we plot average happiness versus income for clusters of people in a given country at a given time, we see that rich people are in fact much happier than poor people.

It’s actually an astonishingly large difference. There’s no one single change you can imagine that would make your life improve on the happiness scale as much as to move from the bottom 5 percent on the income scale to the top 5 percent.

Let’s go ahead and draw the plot that Frank envisions, using all of the data from the 2006 survey:

Survey Graph

Here’s the key point:

By comparing rich and poor people, we estimate a happiness-income gradient that has a slope that is similar to what we saw when we compared rich and poor countries.

OK, that’s the United States, what about other countries? We estimated the well-being-income gradient for over 100 countries in the Gallup World Poll. Rather than show you dozens of separate coefficients, we’ll let a picture tell the story (and let me admit, I love this graph).

Income and Life Satisfaction

The arrows in this figure show the slope of the well-being-income gradient for each country, while the dots show the average level of happiness and G.D.P. for each country. The dashed line shows the best fit through these dots.

The fact that the arrows all have a similar slope to the dashed line suggests that comparisons of rich and poor people yield very similar conclusions to comparisons of rich and poor countries. In the full paper, we document that this finding holds for many different datasets.

Why do we emphasize this finding?

Because it stands directly at odds with a key claim of Easterlin (see p.106 to 107):

… the happiness difference between rich and poor countries that one might expect on the basis of the within-country differences by economic status are not borne out by the international data.

Tomorrow I’ll describe what we learn from comparisons of countries through time.

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  1. dnl2ba says:

    I wonder what happens when you control for age, since age is correlated with income anywhere experience is rewarded.

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  2. Mike says:

    This is all truly very, very interesting, but I have one important question:

    Are SAYING that you are happy, and BEING happy the same thing?

    The answer may be “yes” but I can think of at least one obvious phenomenon: several rich people, who are in fact miserable, would never in their right minds admit it in such a survey because they are so rich and their guilt overrides their honesty. Would there be enough of them to create this meaningful statistical difference? Isn’t what these data show really that rich people SAY they are happier?

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  3. John says:

    Is one citizen one vote a fallacy, a myth or correct due to large numbers?

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  4. A E Pfeiffer says:

    This is pedantic I know, but according to this post the question in the 2006 General Social Survey asks, “Taken all together, how would you say THINGS are these days?” It doesn’t ask, “How would you say YOU are?”

    Maybe if you’re rich enough to be surrounded by a whole heap of expensive stuff, things will look pretty good. Or maybe rich people’s things really are happier, if we accept that inanimate objects can have emotions.

    Pedantry aside, one of the problems with surveys like this can be semantics. For example, what does it mean if someone says, “I’m happy”? Is that different from saying “I’m satisfied”, as in the Japanese survey? Not to mention the problem of interpersonal comparison of states of mind.

    I also find it somewhat ironic that the researchers are arguing in favour of link between increased income and happiness when a number of countries may be heading into recession. Not the best time to tell people that they’d be happier if they had more money.

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    • Chris says:

      I agree that rich people’s things that could think for themselves would tend to be happier than poor people’s things that could think for themselves. After all, they’re better made, and as a Transhumanist I can tell you confidently that I’ll be happier once I’m better made.

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  5. bob says:

    What are the STATA commands for these graphs? They are great.

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  6. David says:

    Are we sure the correlation goes that way? Maybe it’s not that rich people are happier, but that happy people are richer. If you’re depressed and spend half your time moping, you won’t be as productive as someone who uses that time productively.

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  7. Joey S says:

    Rich, poor and happy these subjects are too broad to define boundaries. Tried googling define happiness:

    I define happiness as … being at peace with oneself and the world. It happens when your mind (intent), body (action) and spirit (conscience) vibrate in unison. A rare occurrence when you leave it to chance but can happen all the time if you consciously seek it.
    Ali Said Husain, India

    I define happiness as the feeling of what the continual effort in bettering me gives.
    Damon Abbott, Japan

    I define happiness as … that sense of warmth that begins at the core of the soul, spreads to the heart, and radiates outward from the eyes and lips of those who know it. The gift of happiness is elusive, but tangible. You cannot seek to find that which makes you happy for happiness comes from within and by your own choice.
    Dale Reddish, Maryland, USA

    Happiness to me is seeing the smiles on my children’s faces and knowing that I am the one who put them there.
    Chalet Harris, Pennsylvania, USA

    But what is happiness except the simple harmony between a man and the life he leads.
    Albert Camus

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  8. Arthur Engel says:

    First of all, let me say I think this matter is fascinating. I’m a psychoanalist, from Brazil, and the topic of happiness is very present in my recent studies.
    Well, like someone already mentioned, there’s a difference betweeen being happy and saying that you’re happy. It’s very hard to measure if someone is happy or not, and asking him is not a good method to find out. The answer will not be accurate, on purpose or not. Things like guilt, for instance, would influence the answer.
    Another example: if you just watched a documentary about poverty in Africa, or about rape victims, cancer hospitals, etc. you’re gonna say you are very happy.
    To end my comment (and to show how hard it is to measure happiness), we could assume the following: if someone is happy, he doesn’t commit suicide. Ok?
    Well, if we analyse the suicide indexes in a society (like Durkheim did about 100 years ago), we see that suicide is something almost exclusively commited by rich people. Still, who among us doesn’t want to be rich? :)
    The discussion is great and could go on forever. Best regards, Arthur

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