
Studies of happiness often find a positive correlation between income and subjective well-being. Put simply, rich people tend to be happier than poor people.
Of course, correlation by itself doesn’t prove causation. In the past, I’ve suggested that the positive correlation largely reflects reverse causation. Happy personalities are likely to be more motivated and capable of earning money.
Lyman Stone recently directed me to a study showing that genes linked to higher income are associated with much better mental health.
The study looked at two sets of genes, one associated with higher levels of education and another associated with more income for any given level of education. (Presumably the latter are linked to other traits, such as work ethic, self-control, ambition, charisma, prudence and other qualities that are useful in earning more money.)
To be clear, I am not suggesting that money has no impact on happiness. Rather, I believe the impact is fairly small, and that most of the observed correlation between wealth and happiness comes from the fact that certain types of people are both more likely to become rich and more likely to have happy personalities.
I’ve spent multiple years in each of the 5 major income quintiles, and I have never noticed any impact on my happiness from moving to a different income category. My happiness level seems to reflect my innate personality, not my income.
PS. For decades, philosophers have debated the question of happiness. What is it? At age 69, I feel like I’ve finally discovered the answer.
READER COMMENTS
TMC
Feb 1 2025 at 2:48pm
Totally agree. Half my friends are blue collar and half professional. Some are quite wealthy, but we are all friends because of similar personalities, not SES. All do well in their fields and seem happy in general. Loved the belly laugh in ‘the answer’.
David Henderson
Feb 1 2025 at 2:58pm
At age 69, I feel like I’ve finally discovered the answer.
Love it.
Scott Sumner
Feb 2 2025 at 1:32am
What is the answer? The child is happy? Or seeing the happy child makes me happy? Or both? 🙂
Todd Ramsey
Feb 2 2025 at 9:12am
Making a baby (pre-verbal, younger than this girl) laugh is one of the most joyful things in my life.
David Henderson
Feb 2 2025 at 2:49pm
I can’t speak for you, because I don’t know you well enough.
But speaking for me, both.
Jose Pablo
Feb 1 2025 at 6:49pm
If you are right (and I believe you likely are), there should be a difference in the subjective well-being of the “self-made rich” compared to, for instance, the “inherited rich” or the “lottery-winning rich”.
I am not aware of any study on this topic, but perhaps someone here is.
Scott Sumner
Feb 2 2025 at 1:33am
Good question.
john hare
Feb 2 2025 at 4:38am
I don’t know of any formal studies. In construction. I have dealt with a fair number of people with money. The self made seem happier and more “down to Earth” than the ones that inherited. Right now I am witnessing an inheritance hassle between three siblings, one of which is deceased. The ones that have moved on to other careers seem much happier than the one that hasn’t. It is so odd seeing one that has inherited more than I will likely ever own playing victim.
Peter
Feb 1 2025 at 9:23pm
I’m not buying it except in the middle. I absolutely think Elon is happier now than he would be in abject poverty on SNAP. I know I’ve did the highs and lows multiple times and when you can’t even feed your kids and you have to send them to school with a sandwich bag of small coins to pay for lunch, my happiness was way lower than when I was flying first class and taking my 5 year old out to thousand dollar sushi on a whim weekly.
Now sure at some point you become acculturated to that level of income and hence it no longer improves happiness but you will definitely take a happiness hit if you were to drop three income levels overnight or likewise raise it. It’s not the money per se but the lifestyle and when you can’t recover it nor escape it, well the doldrums for you. Now sure we all adjust at some point as cognitive dissonance but it’s ludicrous to claim if someone handed me a billion dollars tomorrow I wouldn’t be happier when I’m living off cans of Costco sardines seven days a week the past two years and for the foreseeable next five. Hell a couple thousand would go a long way to my happiness at least in the interim.
Scott Sumner
Feb 2 2025 at 1:29am
Yes, I should have been clearer that my comments did not apply to abject poverty. I was thinking in terms of the 5 income quintiles in the US, where even the bottom 20% is doing OK.
Craig
Feb 2 2025 at 10:21am
Money is time; time is money and time is the ultimate luxury.
Jose Pablo
Feb 3 2025 at 5:30pm
That’s a very good point, Craig. But lead us to the same question(s):
Does free time make you happy?
And if people with tons of free time are happier, is causation involved or we are just observing pure correlation?
Craig
Feb 5 2025 at 12:11pm
Well, that free time is just liberation from ‘not free’ time, I suppose. We tend to think of that as ‘leisure’ but it doesn’t necessarily have to be indeed if we climb one mountain we might prefer to climb another and another rather than sitting at the summit idly admiring the view…..still I’d generally say ‘yes’ adding that there’s a difference between having to do something/living paycheck to paycheck and doing ‘what you want whenever you want to do it’ <—THAT yes that definitely makes you happy.
steve
Feb 2 2025 at 5:42pm
I think the observation about mental health is good. If your mental health is poor you probably arent happy and you probably dont do well financially. As noted, it probably outweighs intelligence. Happiness from what I have seen seems to come from people having good relationships with family and friends. If the absence of money affects those relationships it could lead to unhappiness. As noted above I would leave out those who are so poor they are starving or cant take care of even minor illnesses. There are still people who are happy even in very bad situations but its harder.
Steve
Knut P. Heen
Feb 3 2025 at 8:05am
This is easy to test. Just give a random person $1000 and look at the person’s face.
Scott Sumner
Feb 3 2025 at 12:22pm
Hedonic set points.