Up to what amount can money bring happiness?

As long as you earn less than five tons per year, higher income brings more happiness. Unless you are already unhappy. Then it stops after a ton.

Dan Ballegeer

“I’m not rich, but I would like to be,” sings the American country singer Chris Johnson. Money doesn’t buy happiness, they say. Maybe. But a boat.

Money alone does not make you happy, but it is certainly easier to be happy with money than without. Unless you are an ascetic like Diogenes. When Alexander the Great visited the Greek philosopher, he found him sitting in front of the barrel in which he lived. Alexander offered to grant her a wish. Diogenes did not ask for money, only that the powerful ruler could step down because he was standing in the sun.

About the Author

Daan Ballegeer is a business journalist. He writes, among other things, on financial markets and central banks. In of capital interest it delves into exciting and remarkable economic events.

Yet, for the most part, more money is better. Even if it loses its meaning from a certain level. I once heard that Jürgen Klinsmann could earn millions at the end of his career playing football in China, but the hyper-efficient German striker wouldn’t have wanted it. He already had enough money. “I can only eat one steak a day, can’t I? It’s too good to check dead.

The exact point at which extra money no longer brings extra happiness is a tricky question. There are undoubtedly people for whom more is always needed, as the Greek philosopher Epicurus (contemporary of Diogenes) said: “Nothing is enough for those who lack enough”.

What is the order of magnitude of “enough” for Jan(ten) Modaal? According to new American research, the limit is an income of at least 500 thousand dollars per year (475,000 euros), well above the 75,000 dollars paid in 2010 another study have been established.

Remarkably, both studies were conducted by the same author: Daniel Kahneman. Two years ago, the psychologist and winner of the 2002 Nobel Prize in Economics a study under the eyes of doctoral student Matthew Killingsworth. He concluded that there was no time when money stopped contributing to more happiness.

Kahneman and Killingsworth joined forces and reexamined their survey data, leading to some remarkable results.

It turns out that for happy people, more money continues to contribute to more happiness. Up to at least the $500,000 per year mark (none of the Americans surveyed had an income above that). It is therefore possible that above this amount there is a point where the extra money does not bring more happiness.

In unhappy people, it appears that above a certain level of income (about $100,000), no additional happiness is added. “For very poor people, it clearly makes a difference if they have more money,” Killingsworth told the British weekly. new scientist. “But if you’re still miserable despite having a decent income, the source of that misery may not be something money can fix.”

One element not covered in this analysis is the importance of relative wealth for happiness. “No man is an island unto himself”, in words by English poet John Donne. People relate to others and often measure themselves against that. Income is therefore also a relative factor.

Economists immediately think of the Easterlin’s paradox. American economist Richard Easterlin established almost fifty years ago that the rich in a society are generally happier than the poor. But if a society as a whole gets richer, it does not become happier. Easterlin concluded that it is not money, but the feeling of being richer than our neighbors that makes us happy.

Several experiments have been conducted to test this. One of the most famous dates back to 1998, and asked participants which hypothetical outcome they preferred:

A) An annual income of $50,000, while other members of the society earn $25,000.

B) An annual income of $100,000, while others earn $200,000 (prices of goods and services are the same in both scenarios).

If only the purchasing power of money were decisive, everyone would opt for a higher absolute income (B). Yet half of the participants chose Option A because higher relative income was more important to them.

In other words: they prefer to float in a rowing boat between the dinghies than in a speedboat between the yachts.

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