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Would You Be Happier If You Were Richer? A Focusing Illusion

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Abstract

Most people believe that they would be happier if they were richer, but survey evidence on subjective well-being is largely inconsistent with that belief. Subjective well-being is most commonly measured by questions that ask people, “All things considered, how satisfied are you with your life as a whole these days?” or “Taken all together, would you say that you are very happy, pretty happy, or not too happy?” Such questions elicit a global evaluation of one’s life. An alternative method asks people to report their feelings in real time, which yields a measure of experienced happiness. Surveys in many countries conducted over decades indicate that, on average, reported global judgments of life satisfaction or happiness have not changed much over the last four decades, in spite of large increases in real income per capita. While reported life satisfaction and household income are positively correlated in a cross-section of people at a given time, increases in income have been found to have mainly a transitory effect on individuals’ reported life satisfaction. (1-3) Moreover, the correlation between income and subjective well-being is weaker when a measure of experienced happiness is used instead of a global measure. This article reviews recent evidence that helps interpret these observations.

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