Wealth and Happiness Don't Necessarily Go Hand in Hand

from the Wall Street Journal 13 August 2004 - by Sharon Begley

Does money buy happiness? In particular, does raising a nation's income or wealth, as measured by gross domestic product, raise the population's overall level of happiness? Intuitively, you'd think the answer is a definite yes. After all, classic economic theory holds that additional income allows people to meet additional needs, and the more needs - or even wants - you satisfy, the happier you are.

Psychologists suggest hat things are a lot more complicated. An ambitious analysis of more than 150 studies on wealth and happiness shows that "economic indicators have glaring shortcomings" as approximations of well-being, write psychology professors Ed Diener of the University of Illinois, Urbana-Champaign and Martin E.P. Seligman of the University of Pennsylvania, Philadelphia, in a coming issue of the Journal of Psychological Science in the Public Interest. The studies show that, in many countries "although economic output has risen steeply over the last decade, there has been no rise in life satisfaction...and there has been a substantial increase in depression and distrust."

Economists find repeatedly that, in general, the higher a nation's GDP, the greater its population's happiness. While that seems to support the money-can-buy-happiness idea, though, it ignores one thing: Wealthy nations tend to be democracies that respect human rights and have a fair legal system, good health care, and effective, honest government. But "economic success fall short as a measure of well-being, in part because of materialism can negatively influence well-being, and also because it is possible to be happy without living a life of luxury," conclude Profs. Diener and Seligman.

Just look at the world's wealthiest nations. Since World War II, GDP per capita in the US has tripled, but life satisfaction (measured by surveys that ask something like, "overall, how satisfied are you with your life?") has barely budged. Japan, too, had a stupendous rise in GDP per capita since 1958, yet measures of national happiness have been flat. The same holds true for much of Western Europe, finds social psychologist Ruut Veenhoven of Erasmus University, Rotterdam. One reason may be that a rising economy produces rising aspirations. Luxuries come to seem like necessities, canceling the psychological benefits of economic growth.

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