Economic Tidbits

Can Money Buy Happiness?

Does higher income lead to greater levels of happiness? It’s an age-old question. An analysis by The Economist magazine of data reported by the World Happiness Report sponsored by the United Nations suggests that there is a correlation between happiness scores and income, but it is a weak one. The World Happiness Report is a survey of global happiness which ranks 156 countries on how happy their citizens perceive themselves to be. The report, based on data from the Gallup World Poll, was begun in 2012.

Respondents are asked to value their lives on a scale of 0 to 10, with 0 being the worst possible life and 10 the best possible life. The responses are averaged, and countries ranked. The report also explores factors which might explain variations in happiness across countries like GDP per capita, social support, healthy life expectancy, freedom, generosity, and absence of corruption. According to the Report, these six variables explain about three-quarters of the variation in happiness among countries.

Finlanders rank as the most-happy in the world with a score of 7.77. Citizens of Denmark, Norway, and Iceland follow closely behind. The United States ranks 19th with a score of 6.89, while South Sudan in Africa ranks last of the 156 countries with a score of 2.85.

One of the interesting aspects of the rankings is to examine the connection between happiness and a country’s income level. The Economist says, “There are important examples of national income and happiness rising and falling together. The most significant—in terms of population—is China, where GDP per person has doubled over a decade, while average happiness has risen by 0.43 points.” But there are examples of happiness and income moving in opposite directions. Again, The Economist says, “Like China, India is a populous developing economy that is growing quickly, but happiness is down by about 1.2 points in the past decade.” The magazine also notes that Americans’ happiness levels have fallen in recent years despite a growing.

Can money buy happiness? As any good economist might respond, on the one hand, happiness tends to be higher in richer countries and rising incomes in countries have appeared to bring greater happiness, so yes. But, on the other hand, there are countries where growing economies have not brought greater happiness, so no. Ultimately, it depends. The Economist, Dismal Science: An old paradox about growth and happiness lives on, March 23rd, 2019.

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