The Origins of Happiness

2 Income

Wealth is like seawater. The more we drink, the thirstier

we become.

— Schopenhauer

Does more money buy more happiness? It does, but less than

many people might think. There are two extreme views,

both equally fallacious. On the one hand there are careless

studies claiming that money makes no difference. This is

certainly wrong, if we are talking about life- satisfaction as

the outcome. On the other hand, there are millions of indi-

viduals who think that more money would totally change

their well- being. For most people, this too is a delusion.

The effect of income on happiness is in fact one of the

best- measured effects in all happiness research. In this chap-

ter we present the evidence. This is the first of five chapters,

all of which follow a fairly standard format. Each chapter

takes the effects of one factor (here income) and begins

with evidence from the British Cohort Study, mostly cross-

sectional. It then goes on to time- series data on individuals

drawn from three panel studies for Britain, Germany, and

Australia, as well as cross- section data on the United States.

For every factor we also examine the key role of social com-

parisons and adaptation, before tracing how the factor itself

is determined by earlier childhood experiences.

There is one other important general point. From now

on we measure life- satisfaction not in terms of its standard

deviation (as in Chapter 1) but in its natural units, running