It might sound like a glaringly obvious statement to some of us, but according to new research conducted by economists from the University of Michigan, more wealth will indeed lead to greater life satisfaction, while human beings have “no satiation point” in terms of their level of income.
Betsey Stevenson and Justin Wolfers, a wife-and-husband economist team, found that happiness and life satisfaction were generally higher in rich countries than in poor countries. Additionally, regardless of the country, individuals of greater income would report more happiness than others below their own monetary level.
"The income-well-being link that one finds when examining only the poor, is similar to that found when examining only the rich,” they wrote.
“While each additional dollar of income yields a greater increment to measured happiness for the poor than for the rich, there is no satiation point,” they added.
The paper is in stark contrast to the Easterlin Paradox, written in the 1970s by economist Richard Easterlin, who argued that higher average income did not translate into greater average happiness after a certain threshold level.
That belief worked its way into popular thought, said Wolfers, a Brookings Nonresident Senior Fellow, to the Wall Street Journal; but it hadn’t really been formally tested and proved, he noted.
Wolfers noted that his new paper did not assert causation, just correlation. However, Wolfers still asserted that his findings proved Easterlin Paradox and other similar theories as inaccurate.
"If there is a satiation point, we are yet to reach it," the paper wrote. "We find no evidence of a significant break in either the happiness-income relationship, nor in the life satisfaction-income relationship, even at annual incomes up to half a million dollars."
Rather, "while the gains from income slow down as countries get richer, they never disappear. Doubling the income of a country has the same impact on the well-being of its citizens regardless of the initial starting point."
Stevenson and Wolfers fond that a 10 percent gain in income will produce roughly the same amount of happiness at all income levels. Recent studies to the contrary include one done by Nobel laureate psychologist/economist Daniel Kahneman and Princeton economist Angus Deaton, which found that “emotional well-being” (or happiness) maxes out around $75,000 of income in the U.S., and another study from the Skandia International’s Wealth Sentiment Monitor, which found that the average global “happiness income” was around $161,000.
Read Stevenson and Wolfers’ Full Study And Findings With Data Sets