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June 05, 2007

Money and happiness

There's an old saying that money can't buy happiness. Yet most of us certainly like to get more money. So which is it? Can money buy happiness or not? N.C. State University's Mike Walden says yes, up to a point.

"Studies show that citizens in countries where average incomes are higher do respond to surveys saying that they are happier. Yet it is not a straight-line trend," says the economist. "Happiness does rise on average as income rises, but the rate of increase seems to slow down at higher levels of income.

"And actually there is an economic principle here that I think will explain this: Generally speaking the more we have of something economically the less valuable each additional unit of that is," he says. "Think about eating say hamburgers: Your fourth hamburger isn't going to mean as much to you as the first one you ate when you were very hungry. Well the same thing here: Certainly we can do more with money the more we have, but each additional unit the more we have probably gives us less happiness.

"So although I think you can generally say that there's a correlation between money and income and happiness," he concludes, "again it's not a straight line. And higher income people may very well at some point say they are going to defer some money in order, for example, to spend more time with their children or generally have more leisure time."

Posted by deeshore at June 5, 2007 08:14 AM