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Home / Academics / Economics / Can money buy happiness?

Can money buy happiness?

rich people

The dismal science of economics works in mysterious ways. Economic theory forces the governments to chase and maintain a positive and hopefully increasing rate of GDP (Gross Domestic Product) growth. Yet, its answer to the eternal question of “Does money bring happiness?” is a timid: “Well, not always”.

In 1974, Richard Easterlin found out that people with higher incomes do report to be happier within a same country, however average level of national income does not really relate to happiness in international comparisons. Increasing wealth does indeed raise the level of happiness but only up to a certain point. This phenomenon is called the “Easterlin Paradox”. The graph below demonstrates the paradox clearly. Higher average income increases the level of happiness in low-income countries, yet the relationship is not clear once the average exceeds $15000.

income vs. happiness

So why do developed nations still bother to get richer if it doesn’t really matter after a certain point? This is one of the main arguments of the economist Tim Jackson in his book Prosperity without Growth.  Jackson points out that in order to achieve a sustainable economic cycle, some economic thoughts set in stone, such as the measuring of individual well being of income with average GDP, has to be reconsidered and that further development and prosperity of our civilization is possible without economic growth in traditional sense.

What if we start using an indicator of happiness instead of average income? Is there such an index? In 1972, Bhutan’s fourth Dragon King Jigme Singye Wangchuck, coined the term “Gross National Happiness” and the Centre for Bhutan Studies developed a survey to measure happiness in Bhutan. Trying to capture psychological and spiritual advancement as well as financial progress, the GNH derived Bhutanese social and economic policies. The debate on whether or not to implement similar indicators in the rest of the world still goes on.

 

Image source: Flickr

Çınar Baymul

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