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.


Ablefable

Love the comments! If anything this exercise proves you can find data to support any position, especially ambiguous feelings like "happiness".

This site is pushing the link/correlation between Wealth=Happiness pretty hard. Guilty feelings... If, in fact, economists have feelings?

Once again, what about mental illness, family violence, alcoloism, suicide... How do these correlate to general wealth?
Closer then "happiness" I suspect.
We, in Alberta, lead Canada in wealth, but also in many of the aforementioned un-happy catagories above.

"You cannot seek to find that which makes you happy for happiness comes from within and by your own choice." TRUE WORDS from Dale USA.

Appetite

That survey question and the answer choices seem bunk. But I WOULD expect economists to try to prove a link between income and happiness. That's what they do.

Noah

@ dnl2ba and David - Great points.

In a similar vein, wealth is typically correlated with hard work, a sense of earned success, and above-average skill in one's chosen field. It may be these types of factors which actually account for the increased happiness of those with money. To test this, we could look at people who become wealthy through windfalls (e.g. those who inherit money (and don't become successful in their own right), lottery winners, etc.).

I guess, overall, this correlation/causation question is pretty obvious, but I think Mr. Wolfers should address it, perhaps in later research.

Arthur Engel

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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Joey S

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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dnl2ba

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

bob

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

David

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.

Mike

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?

A E Pfeiffer

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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John

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

ids

Yesterday it said:
2) One interpretation of the 2006 Gallup data is that it is still all about relative income comparisons: In today's global village, folks in Jamaica may be comparing their lot in life to the greater prosperity they observe when watching U.S. television shows. Countering this, it looks, to my eye, as though the income-happiness link appears about as strong in countries that are truly plugged in to the global village, as those that are less engaged.

Today it seems yesterday is ignored. What is "truly plugged in" and "less enganged" ??

tomorrow tomorrow

Marcio Rocha

I was itching to comment about the difference between self-reports on satisfaction/ happiness and actual happiness, glad so many already did.

I think it is good to further examine the "comparative wealth" idea, which i guess is the goal of the article and not exactly to prove links between happiness and wealth.

Nevertheless i still hunger for a better discussion of "what is happiness" and "is it possible to measure it" and also "if so, to what extent?"...

I've know a researcher who actually specializes in "happiness" (Pedro Demo), though i did not check really his writings, and he does point examples of very rich people very sad and very poor people very happy. I guess this means that statistically there might be correlation (even strong correlation) between the two, but not causation, either way.

Though it does not make the correlation less relevant, i think it points to how risky it is to find moral points in this research.

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Peter

Are rich people more selfish? Crude? Cruel? Ignorant? Republican? Happy?

Whenever I think of someone saying they're happy, I start to wonder. Is there really any such thing? Is it possible to even declare oneself 'happy' without being completely selfish or deluded?

Meaning - if someone ever asked me, "Hey Peter, are you happy?"

My answer - "Well, you mean besides the murder and the mayhem and the torture and violence and oppression and all that? I guess. Happy enough? Not too sad? I mean, I have things in my life that make me happy, and things like U.S. war crimes that make me very angry and dissatisfied, and 'unhappy' I guess you could say. So, yeah, no, maybe, whatever. Stupid question. I just keep keepin-on, having fun when I can, and putting up with the bad stuff when I have to."

If it was for an economic study I could probably provide some type of answer, straight up --

"Yes - it's a 7.3 on the 10-point happiness scale - thank you for asking!"

Point is - to be rich or even well-off and self-proclaimed 'happy', I think it may require an individual to be ignorant (ignorance is bliss), and /or possess any number of attributes that would allow them to be happy given the current state of the world (like a Republican/Objectivist world view). And that's not just rape and murder with your tax money on the other side of the globe, that's the myriad social ills that you see every day when you leave your apartment - the beggars on the streets, the car noise and air pollution, etc.

But, the data makes sense. Why not? Everybody knows, anecdotally at least, that money buys you access to stuff - cars (BMWs), health care (few dead white babies), legal protection (no rich folks on death row), legal rights (you get to vote), social stature (vanity), etc.

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David V

I agree very much with #8 and others. 1/ Happiness is a relative concept. And 2/ rich people tend to not admit it when they are not happy. The approach to study the correlation between consequences of unhappiness (such as the number of suicides as suggested by Arthur) and incomes seems much more relevant (although suicide seems to me too extreme to be considered as being a consequence of unhappiness, maybe the rate of usage of anti-depressant drugs could also be seen as such less extreme proxy). Another possibility could be to do the same survey by showing instead the perception of happiness from the point of view of close friends or relative. Unhappy rich people could lie but most probably not the close people around them. Although I admit putting it in place such survey on a large scale basis may not practically be an easy task.

Rachael

Why are so many people saying rich people more likely to lie on this survey than poor people? I don't see any evidence that being rich makes you feel guilty for being unhappy so you try to cover it up, even to the extent that you want to cover it up to researchers you will never know personally.

I see lots of people trying to explain away these results. 'Other surveys say differently', you say, perhaps never having seen Wolfers' excellent articles discussing Easterlin and others. 'It doesnt accord with my personal experience', you say, perhaps not realising that your personal experience does not constitute data.

All I see are a lot of people who want to cling to the idea that rich people are sad, despite being presented with convincing evidence to the contrary.

Amy

Call no man happy until he is dead. - Herodotus

I don't believe the analysis, for all of the reasons posters above have cited. Bad methodology, vague terminology, too-eager conclusions, and of course no mention of contradictory studies (of which there are many).

The misery of having money worries can seep into and poison every aspect of your life, certainly (especially if you are of the worrying disposition to begin with). Being unable to seek medical treatment, repair your car, keep the electricity on or a roof over your head (or buy healthy food) can seriously affect one's happiness. Having enough money that you don't have to worry certainly can take a load off.

But beyond that, I don't see reason to believe that people with lots of money are that much happier than people with adequate money. Certainly my personal experience doesn't accord with that at all.

nick sandro miranda

I totally agree with Arthur Engel (#8). W.H.O. data show us that suicides are the first cause of death in Europe between males within the age 15-35.I suggest to read a beautiful book: The Joyless economy written by Tibor Scitovsky.
Nick Sandro Miranda
Trieste
Italy

Paco

Have you tried comparing happiness against change in income? some countries may be richer, but their citizens might feel unhappier due to a recession. poor countries might feel happier due to high growth rates. change in wealth and wealth is not the same thing...

Steve Garry

My take, reading these comments, it is that many feel happiness is such an ephemeral commodity that it resists reliable measurement. Perhaps, but consider this. The General Social Surveys have been asking this same question for at least twenty years to a representative national sample of respondents at random times during the year. There is no doubt that some days I am happier than other days. But is a person with a disposable income of $150K, on average happier than a person with an income of $45K?

You can argue that people don't know whether they are happy or not. You could make that argument about any self-reported feeling. But higher income people are more likely to report being happy that lower income people. Are wealthier people more delusional than their poorer brethren? Perhaps, and though wealth is not the key to happiness, I can tell you knowing that you'll have plenty to eat, warm clothing to wear and a roof over your head has some effect on your stress level and the likelihood of thinking you are happy. While happiness is a complex thing it is not totally beyond the grasp of some measurement.

The Consumer Confidence Index, a monthly measure of people's expectations of their economic future, demonstrates patterns similar to the GSS. That is, though expectations fluctuate considerably with macro-contexts (e.g., 9/11, War in Iraq, Hurricane Katrina). Wealthier people are consistently more confident about the future than those less well off (46.9 for incomes below $15K versus 78.1 for incomes $50K+). Expectations of future economic circumstance are not the same as happiness but I think there is a relative and absolute connection to that feeling here. By the way, younger people report being more confident than older people (77.5 for those under 35 versus 55.6 for those 55+) offsetting to some extent the effects of income. To be sure we can't take the full measure of happiness, but don't throw out the baby with the bath water.

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