Anyone who thinks money can't buy happiness doesn't know where to shop.

[archerships]

Does Money Buy Happiness? A Longitudinal Study Using Data on Windfalls
March 2001

Jonathan Gardner
Department of Economics
Warwick University CV4 7AL
jonathan.gardner@warwick.ac.uk

Andrew Oswald
Department of Economics Warwick
University CV4 7AL
andrew.oswald@warwick.ac.uk

http://www.warwick.ac.uk/fac/soc/Economics/oswald/marchwindfallsGO.pdf

Abstract

The most fundamental idea in economics is that money makes people happy. This paper constructs a test. It studies longitudinal information on the psychological health and reported happiness of approximately 9,000 randomly chosen people. In the spirit of a natural experiment, the paper shows that those in the panel who receive windfalls -- by winning lottery money or receiving an inheritance -- have higher mental wellbeing in the following year. A windfall of 50,000 pounds (approximately 75,000 US dollars) is associated with a rise in wellbeing of between 0.1 and 0.3 standard deviations. Approximately one million pounds (1.5 million dollars), therefore, would be needed to move someone from close to the bottom of a happiness frequency distribution to close to the top. Whether these happiness gains wear off over time remains an open question.

Lot's of fascinating stuff on Oswald's site: http://www.warwick.ac.uk/fac/soc/Economics/oswald/

Comments

[candid.livejournal.com]

I've been thinking about this stuff a lot recently.

Imagine how incredibly better off we are than people were, say, 200 years ago. (In terms of wealth and convenience of day-to-day life, not in terms of government... :P).

But do you think we're happier, in general (whatever that means)? I'm inclined to doubt it.

Re:

[crasch.livejournal.com]

No, I don't think we feel happier now. I suspect that we have happiness setpoints that we return to despite objective circumstances. See David Lykken's talk: http://www.edge.org/3rd_culture/lykken/lykken_p3.html

I also think that we relatively rapidly habituate to circumstances, both positive and negative. When was the last time you felt thrilled by hot and cold running water, for example? A Mongolian peasant would likely feel thrilled initially, but eventually they would take it for granted as well.

Conversely, imagine waking up tomorrow in your future 80 year old body. I'd probably panic and become extremely depressed. Yet because it happens so gradually, most people don't feel much anxiety.

I suspect Oswald is measuring short term gains in happiness that will fade with time. See David Meyer's paper http://newdream.org/newsletter/myers.html for an alternative view.

[wallstreetgirl.livejournal.com]

Neat concept, though I can *tell* it's UK and not US - I've discovered that US tax laws and paperwork suck more joy out of my life than the enjoyment/utility of getting inheritance $ provides...