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Newest Research on Income and Well-Being
Fittingly or ironically, the dismal science has a lot to say about happiness.
The classic economic story about money and well-being goes something like this. Money buys happiness, sure, but only up to a point. Once basic needs are taken care of, extra money has diminishing (or non-existent) returns. Perhaps richer people use their money to move to richer areas, where they no longer feel rich. Perhaps relative income — how much you have compared to your friends — is matters much more than absolute income — how much money you have, period.
Economists call it the "Easterlin Paradox." You call it the "Keeping Up With the Jones’ Principle."
And a new research paper calls it total bunk. Or, in the economists’ parlance, "based on empirical claims which are simply false." People with more money have higher reported well-being, they say, all the way up to the top 10 percent of earners. Here are the 6 most interesting observations from "The New Stylized Facts about Income and Subjective Well-Being," a discussion paper by Daniel W. Sacks, Betsey Stevenson, and Justin Wolfers.