Tuesday, November 01, 2005

On happiness

I don’t care too much for money, money can’t buy me love — so sang McCartney all those years ago. But can money buy you happiness? If we had more stuff, will we be happier? Brothers AAA don’t quite agree on this point. Some of us think that happiness lies in renunciation, others are more skeptical. Not satisfied with deeper meanings and highfalutin verses by dead poets, I thought I’d look into the data.

Does an increase in income raise happiness? Well, as with most things in life, the empirical answer is — it depends. It depends on what you mean by ‘an increase in income’.

The first chart shows that as your dollar income rises, you reach a point where extra money doesn’t buy you as much happiness. But wait. If you use a log scale, that is, if you want to look at percentage increase in your income and see how that affects your happiness, well it appears that there is a clear positive relationship (the second chart).

Of course, Lennon sang that happiness is a warm gun. If anyone has empirical evidence of that link, please do let us know.

Thanks Andrew Leigh for the charts.