High income improves evaluation of life but not emotional well-being
https://www.princeton.edu/~deaton/downloads/deaton_kahneman_high_income_improves_evaluation_August2010.pdf
The search to define happiness has consumed a lot of human energy. Until recently, we've had little to show for it -- some songs, a few poems, and a Charles Schulz cartoon about happiness being a warm puppy -- but nothing of much practical use.
The best life evaluations come from people who went to college, got married, and have good jobs.
To get practical results, you need scientists. Fortunately, two of the best are now on the case: Angus Deaton, Ph.D., a renowned economist, and Daniel Kahneman, Ph.D., a Nobel prize-winning psychologist, both from Princeton University. Dispensing with romantic imagery, Dr. Deaton and Dr. Kahneman looked for happiness in numbers. More specifically, they analyzed responses to the Gallup-Healthways Well-Being Index (GHWBI), a daily survey that asks roughly 1,000 U.S. residents a battery of questions about their well-being.
After analyzing more than 450,000 GHWBI responses from 2008 and 2009, Dr. Deaton and Dr. Kahneman found that happiness is actually the result of the fulfillment of two abstract psychological states -- emotional well-being and life evaluation. The finding is important because it offered the researchers a new and more useful way of looking at happiness.
"What did we get from these data? Everything," says Dr. Deaton. "The GHWBI asks clear questions about life evaluation as well as emotional well-being. These data are just terrific in permitting research that was not really possible before."
Evaluation and emotion
The difference between life evaluation and emotional well-being is vital, though the two are related. "Nobody claims that the two dimensions are independent," says Dr. Kahneman. "They're clearly distinct dimensions that are correlated. But they have somewhat different determinants. What improves people's emotional well-being is different from what it takes to make them say that they're satisfied with their life."
In other words, life evaluation and emotional well-being refer to different feelings. Life evaluation requires a long view of a person's overall life. Though life evaluation is colored by the day's emotions, Dr. Kahneman and Dr. Deaton's GHWBI research shows that people evaluate their lives based on a retrospective of their achievements. If they've accomplished the goals they've set, are financially secure, and are emotionally fulfilled, they're more likely to have a high evaluation of their life.
And research shows that the more conventional the goals, the better the life evaluation. Dr. Kahneman notes that the best life evaluations come from people who went to college, got married, and have good jobs; other studies show that people who wanted to be performing artists when they were 18 but didn't end up to be were generally very dissatisfied with their lives at age 45. "Having goals that you can meet is essential to life satisfaction," says Dr. Kahneman. "Setting goals that you're not going to meet sets you up for failure."
Emotional well-being reflects a much shorter view and refers to the emotional quality of an individual's everyday experience. If the day's experience is negative, emotional well-being will take a hit. That said, people with good emotional well-being seem to get it through social contact.
"Emotional happiness is primarily social," says Dr. Kahneman. "The very best thing that can happen to people is to spend time with other people they like. That is when they are happiest, and so, without question, this is a major story. We find loneliness is a terrible thing. So is extreme poverty. But loneliness, regardless of how rich you are, is a very bad thing."
But the research also indicates that you won't become happy merely by socializing with your best friends and achieving your goals. You also need $75,000.
The magic number: $75,000
Of all the important and interesting findings Dr. Kahneman and Dr. Deaton's research has uncovered, the most reported finding is that people with an annual household income of $75,000 are about as happy as anyone gets. More specifically, those with annual household incomes below $75,000 give lower responses to both life evaluation and emotional well-being questions. But people with an annual household income of more than $75,000 don't have commensurately higher levels of emotional well-being, even though their life evaluation rating continues to increase.
This finding holds true even where living isn't cheap. "When we mention $75,000, the question I always get is, 'What about New York City?'" says Dr. Kahneman. True, $75,000 won't go very far in big cities like New York, London, or Singapore, and it makes sense that a high cost of living will make even large sums feel puny. "Our finding indicates that $75,000 is the limit even in large expensive cities," says Dr. Kahneman. "So, though there may be places in which happiness levels off at a lower income, $75,000 is the sufficiency point in the most expensive places."
Dr. Deaton and Dr. Kahneman are not certain why, but the data are clear: Even in high-cost cities, incomes over $75,000 don't correlate to greater happiness. They think this is because even in expensive places, $75,000 is enough to live on while allowing for emotionally rich -- and enriching -- social experiences. Some places such as New York may be expensive precisely because they are such great places to live, says Dr. Deaton, because their terrific amenities may offset the higher cost of living there.
"No matter where you live, your emotional well-being is as good as it's going to get at $75,000," says Dr. Deaton, "and money's not going to make it any better beyond that point. It's like you hit some sort of ceiling, and you can't get emotional well-being much higher just by having more money."