Money buys happiness

The percentage of the U.S. population saying it was "very happy" in 1972 was exactly the same as it was in 2002: 30.3 per cent. Social critics of "consumerism" claim that what makes rich people happy is not money per se, but rather the fact that they have more of it than others – so if everybody gets richer, happiness remains unchanged. The critics go on to say that income differences lead to unwholesome feelings of superiority, so taxes can improve our moral fibre simply by bringing us closer to the same income level.

There is an explanation for unchanging happiness levels over time which is rather less supportive of income redistribution, notes Syracuse University's Arthur C. Brooks. As incomes rise, so generally do levels of government revenues and spending, and there is evidence that these forces work against personal income on the overall level of happiness.

For example, a $1,000 increase in per capita income is associated with a one-point decrease in the percentage of Americans saying they are "not too happy."

At the same time, a $1,000 increase in government revenues per capita is associated with a two-point rise in the percentage of Americans saying they are not too happy.

In other words, not only can money buy happiness, but it may be that the government can tax it away as well.

But beyond earning, taxing and spending, there is an even clearer link between money and happiness: charity, says Brooks. The evidence is unambiguous that donating money (and time) is one of the best ways to buy happiness. People who donate to charity are 40 per cent more likely to say they are "very happy" than non-donors.

Givers of charity earn substantial mental and physical health rewards, even more than do the recipients of charity, says Brooks.

Source: Arthur C. Brooks, Money Buys Happiness, Wall Street Journal, December 8, 2005.

For text (subscription required): http://online.wsj.com/article/SB113400764335517001.html

For more on Social: http://www.ncpa.org/iss/eco/

FMF Policy Bulletin/ 13 December 2005