Personal Wealth Vs Happiness

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Here in the U.S., though, the happiness school has made less headway. “The political establishment is much more pro-economic growth, and it doesn’t like this subjective well-being stuff,” Easterlin says. “There is a feeling it is promoting welfare-state ideas such as families, health, and other human concerns.” Also, despite the survey evidence, many economists refuse to accept that money and happiness don’t go together. “People who have more income have more opportunities,” Alan Krueger, a Princeton economist and an authority on the measurement of well-being, said. “How can you find that they are less happy? To an orthodox economist, it doesn’t make sense.”

If you believe Stevenson and Wolfers, the traditional focus on G.D.P. makes eminent sense. Using new data from a 2006 worldwide survey by Gallup, they find the correlation between income and life satisfaction is 0.82, which seems impressive. (One represents perfect correlation; zero is none.)

In a discussion session following Stevenson and Wolfers’ presentation of their paper at Brookings, Nobel Prize winner Gary Becker praised the paper warmly, and former Treasury Secretary Larry Summers, who is now back at Harvard, said it had appended the conventional wisdom of the happiness school.

But is that really the case? Gallup asked people to imagine themselves on a ladder with steps numbered from zero to 10, with the bottom of the ladder representing “the worst possible life for you” and the top representing “the best possible life for you.” The respondents were then asked to say which step they were standing on. If you instruct people to think about the best possible and worst possible lives they could be living, you are surely inviting them to compare their living standards with those of people elsewhere. This methodological quirk alone could ­easily ­explain why residents of poor countries report low scores and residents of rich countries report high ones, and it wouldn’t have anything to do with money making people happier.

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