Does Money Make You Happy? Kind Of…

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In his novel Anna Karenina, Leo Tolstoy famously penned: “happy families are all alike; every unhappy family is unhappy in its own way.” While this novel was written over a century ago, Tolstoy’s statements about the relationship between happiness and income have remained in public interest ever since. Most recently, researchers including cognitive scientist Gal Zauberman at the Yale School of Management have discovered relationships between income and happiness within different income brackets, painting a clearer picture of the true impact of income on well-being.

In his recent study published in the Journal of Economic Behavior and Organization, Zauberman and his co-author, Bouke Klein Teeselink, created two ‘Anna Karenina’ plots: one that depicts a positive relationship between income and well-being that eventually levels out, and one depicting a negative relationship between income and deviations in reported well-being that eventually levels out.

The idea of an asymptotic positive relationship between income and well-being has previously been posited. As one’s income increases, on average, they would receive smaller and smaller boosts to their well-being. Zauberman’s research dove into how the distribution of people’s well-being was impacted by income changes. He uncovered that those with higher incomes have similar happiness levels, while those with lower incomes had widely different levels of happiness (recalling Tolstoy’s quotation). Moving up the income bracket, there are fewer people who report having low levels of well-being. Zauberman coined the term “misery” to explain this shrinking demographic in the upper classes of society. 

Zauberman believes that his research can prompt change in our current “redistributive” economic policies, which are policies about moving money from one income bracket to another. “Who are we moving?” Zauberman asks. “Making somebody happy, happier, is not as important as making somebody who lives in misery [happier].” Such data about differences in well-being could greatly aid the government in increasing citizen well-being by crafting economic policies that maximize happiness. 

However, there are still many steps to be taken in this field of research. People’s subjective realities clearly influence their perception of happiness, but how do people of different religions or races respond to income changes? Who tends to be more or less sensitive to changes in income? While Zauberman touts the potential for this research to further shape policy, he also believes it could challenge subjective well-being as a deciding factor in policy. Would it make sense to distribute more income to one group because they are more sensitive to income changes?

All in all, while Zauberman’s research demonstrates how far we’ve come in the debate of whether money improves happiness since Tolstoy, his research also uncovers the unexpected complexities behind the relationship between income and well-being. This work also emphasizes that perhaps Tolstoy’s assertion is an oversimplified view of the role money plays in our lives, reflecting the nature of science: answering questions will pose more questions.