Author Clare Boothe Luce once said, “Money can’t buy happiness, but it can make you awfully comfortable while you’re being miserable.” This is one of the many variations of the old adage that is apparently more grounded in reality.
It might be true that happiness does not have a price tag, but a recent study has proven otherwise, stating that people who are wealthier tend to be happier, according to PsyPost. This is especially true among those who reported earning rather than inheriting their wealth.
The study conducted by Harvard Business School’s Marketing Unit doctoral candidate Grant E. Donnelly based its findings on the answers of over 4,000 millionaires surveyed from various parts of the world. Two sets of samples were used as a basis for analyzing the data.
First, those with higher levels of wealth—$8 million and $10 million or more—were assessed to be happier than millionaires with lower net worth. The differences were modest in magnitude but still significant. Second, millionaires who earned their wealth were reported to be happier than those who simply acquired it through inheritance.
Diminishing marginal utility
Donnelly tried to answer in his study whether greater wealth actually leads to a greater level of happiness. This question has been examined by economists and behavioral scientists in the past decades. The correlation between economic status and psychological feeling of well-being seems obvious, but there is a built-in “diminishing marginal utility.”
As people become wealthier, the corresponding level of happiness does not necessarily increase as significantly as the amount of wealth. The idea is that if a certain level of wealth is reached, any additional amount of wealth thereafter will not necessarily increase happiness.
The idea of marginal utility concerning income apparently has a specific range. Based on a paper published in the Nature Human Behavior Journal, the global levels of annual income satisfaction for life evaluation and for emotional well-being are $95,000 and $60,000 to $75,000, respectively. The study used the data from the Gallup World Poll with a sampling size of more than 1.7 million individuals around the world.
Exploring the question deeper
Donnelly’s research tried to explore the question much deeper by comparing those at the higher end of wealth with those at the lower end. He focused on the wealthy people rather than having a large sample group from the general population.
His research team partnered with a financial service company focusing on wealth management and included only those with a net worth of more than $1 million. Two sets of surveys were analyzed from 17 countries. The first mainly asked the millionaires the rating of how happy they are generally. Meanwhile, the second focused on their life satisfaction rating.
A moderate but significant link was found between wealth and happiness. It was also apparent that the marginal utility for wealth among the wealthier respondents was not as quickly declining as previously assumed. The respondents were asked how much more money they would need if they want to reach a 10 on the happiness scale, with 1 being the lowest and 10 the highest, one point at a time. The results implied that additional wealth contributes to greater happiness but at a slower rate of diminishing marginal return.
On the other hand, the happiness level is also comparably significant among the respondents depending on the source. The researchers reported that how the wealth was acquired was also very important in terms of happiness. The respondents who merely inherited or married into wealth indicated a lower level of happiness compared to those who earned it.
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