Wharton profs suggest correlation between wealth, happiness
December 13, 2010, 3:57 am · Updated December 13, 2010, 12:00 am·
Does money really buy happiness? A recent study by the Wharton School suggests that in some cases, it does — though not necessarily the way one would think.
In a paper entitled “Subjective Well-Being, Income, Economic Development and Growth,” Wharton professors Betsey Stevenson and Justin Wolfers, along with first-year Applied Economics Ph.D. candidate Daniel Sacks, argue that “measured subjective well-being grows hand in hand with material living standards.”
Sacks was asked by Stevenson and Wolfers to help revise their 2008 paper, “Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox.”
The “Easterlin Paradox” is an economic concept which claims that while richer people in a country are happier than poorer people, this is not true across different countries. For example, a person considered rich in the United States is no happier than a person considered rich in Ghana, despite differences in their absolute income.
The paradox also holds that happiness does not increase with a country’s economic growth.
The concept was developed by Wharton alum Richard Easterlin in a 1974 paper entitled “Does Economic Growth Improve the Human Lot? Some Empirical Evidence.”
In their revised paper, Stevenson, Wolfers and Sacks put together an unprecedented amount of data on the topic, gleaning information from 140 different countries, “represent[ing] nearly all of the world’s population.”
Consistent with Easterlin’s evidence, the professors reaffirmed that within a country, “richer individuals report higher levels of life satisfaction.”
But their results directly contradicted other areas of Easterlin’s findings, showing that “richer countries on average have higher levels of life satisfaction.”
Jason Dana, a Psychology professor who teaches behavioral economics, thinks it is important to note that the study is correlational, not causal.
Dana points to being “self-actualized” as being a possible causal explanation as it relates to people’s daily lives, rejecting the idea that money brings happiness.
“The people that are more effective and more happy at doing the things they should be doing within their fields tend to make more money,” he said. “That alone could cause this correlation.”
Wharton students, however, might be under another impression. “There is a stereotype at Wharton that happiness isn’t really important in business,” said Wharton sophomore Scott Dzialo. “I think it’s great that these professors are creating a dialogue about the correlation between money and happiness.”
“I personally believe that there is a certain level of wealth in the United States, and once you reach that, anything more doesn’t add any more happiness,” added Wharton sophomore Nick Schneider. “When you hit a super rich level, more money just creates more problems and more stress.”