Money Does Buy Happiness: The More You Have, The Happier You Are [Study]

It has long been an item of conventional wisdom: Money can’t buy happiness. Turns out, that sentiment might just be an old wives’ tale.

A new study shows that one can never be too rich. Research by University of Michigan economists Betsey Stevenson and Justin Wolfers found that among all classes, from rich to the very poor, as income climbs, so does one’s happiness.

Common knowledge has long held that basic needs are all that an individual needs to achieve happiness and that a rising income doesn’t translate into more happiness. In fact, there was long thought to be a plateau effect: Where you become so ridiculously wealthy that your emotional state plummets into despair.

But none of that it true according to Stevenson and Wolfers’ findings, to be published in the May 2013 American Economic Review, Papers and Proceedings.

Finding that the “money can’t buy happiness” belief has never really been formally tested and proved, Ms. Stevenson and Mr. Wolfers examined data for more than 150 countries from sources like World Bank and Gallup World Poll. They found that there’s no “satiation” point: The more money you have, the more happiness you have. Period.

They say: “while each additional dollar of income yields a greater increment to measured happiness for the poor than for the rich, there is no satiation point.”

Translation: More money makes both poor and rich people happier, it just takes more money to make the rich happy. This was proven true in rich and poor countries: “the well-being-income relationship among poor nations appears to extend roughly equally among rich nations.”

The authors note that their research notes correlation, not causation. More money doesn’t necessarily make people happier, but people say they feel happier when they see their incomes increase.

Do you think money can buy happiness?

[Image via: Rashevskyi Viacheslav, Shutterstock.com]