It’s a question pondered across generations and debated in countless conversations: Does Money Buy Happiness? While the intuitive answer might seem straightforward, scientific research has painted a more complex picture, with earlier studies even presenting conflicting conclusions.
Groundbreaking research from Princeton University in 2010, spearheaded by Nobel laureate Daniel Kahneman and economist Angus Deaton, suggested a cap on happiness. Their findings indicated that day-to-day happiness increased with annual income, but only up to $75,000. Beyond that threshold, the emotional benefits of more money seemed to plateau. However, a contrasting study in 2021 from the University of Pennsylvania’s Matthew Killingsworth challenged this notion, proposing that happiness continued to rise steadily with income, far beyond the $75,000 mark, without any apparent leveling off.
To resolve this apparent contradiction, Kahneman and Killingsworth joined forces in a unique “adversarial collaboration,” enlisting the expertise of Penn Integrates Knowledge University Professor Barbara Mellers as a mediator. Their collaborative study, published in the Proceedings of the National Academy of Sciences, reveals a nuanced understanding: on average, higher incomes are indeed associated with increasing levels of happiness. Yet, digging deeper into the data uncovers a more intricate relationship. Within this overall trend, a segment of individuals in every income bracket experiences a sharp increase in happiness up to an annual income of $100,000, after which their happiness plateaus.
“Put simply, for most people, greater income is linked to greater happiness,” explains Killingsworth, a senior fellow at Wharton and the lead author of the study. “The exception lies with those who are financially comfortable but unhappy. For example, if you’re wealthy and miserable, more money isn’t going to change that. But for the majority, more money was associated with greater happiness, although to different degrees.”
Mellers elaborates on this, highlighting that the connection between emotional well-being and income isn’t uniform. “The relationship varies depending on an individual’s emotional well-being,” she states. Specifically, for the least happy individuals, happiness improves with income up to $100,000 but shows no further increase beyond that point. For those with moderate emotional well-being, happiness increases linearly with income. Interestingly, for the happiest group, the positive association between income and happiness actually accelerates once income exceeds $100,000.
Reconciling Conflicting Views on Money and Joy
The researchers embarked on this joint effort recognizing the discrepancies between their prior research findings. Kahneman’s 2010 research indicated a happiness plateau, while Killingsworth’s 2021 study found no such leveling. This “adversarial collaboration”—a concept pioneered by Kahneman—aims to settle scientific disputes by bringing together researchers with differing viewpoints, facilitated by a neutral third party.
Killingsworth, Kahneman, and Mellers centered their investigation on a new hypothesis: that both a happy majority and an unhappy minority exist within the population. They proposed that for the majority, happiness continues to rise with increased income, while for the minority, happiness improves with income only up to a certain threshold, beyond which it plateaus.
To test this hypothesis, they re-examined data from Killingsworth’s 2021 study, collected through his specially designed app, “Track Your Happiness.” This app periodically prompts participants at random times throughout the day, asking them questions about their feelings on a scale ranging from “very good” to “very bad.” By analyzing the correlation between a person’s average happiness and their income, Killingsworth drew conclusions about their relationship.
A crucial breakthrough in this collaborative effort occurred when the researchers realized that the 2010 data, which had identified the happiness plateau, was primarily measuring unhappiness rather than overall happiness.
Killingsworth clarifies this with an analogy: “Imagine a cognitive test for dementia that most healthy individuals pass easily. While such a test can detect cognitive impairment and its severity, it wouldn’t reveal much about general intelligence because most healthy people would achieve perfect scores.”
“Similarly, the 2010 data indicating a happiness plateau predominantly featured ‘perfect scores,’ revealing trends at the unhappy end of the happiness spectrum, rather than overall happiness trends. Once we recognized this, the seemingly contradictory findings were no longer necessarily incompatible,” Killingsworth notes. “And our findings beautifully confirmed this possibility. When we analyzed happiness trends for unhappy individuals in the 2021 data, we observed the same pattern as in 2010: happiness increases relatively sharply with income and then plateaus.”
“The two sets of findings, initially appearing completely contradictory, actually stem from remarkably consistent data,” he concludes.
The Practical Implications of Money and Happiness
Mellers emphasizes that reaching these conclusions would have been significantly more challenging without the collaboration between the two research teams. She suggests that adversarial collaborations are an invaluable method for resolving scientific disagreements.
“This type of collaboration demands significantly greater self-discipline and precision in thinking compared to standard procedures,” she states. “Collaborating with an adversary—or even a non-adversary—is not simple, but it makes both parties more likely to acknowledge the limitations of their own assertions.” This very process led to a more refined understanding of the intricate relationship between money and happiness.
Killingsworth points out that these findings have significant real-world implications. They can inform policy decisions regarding tax rates, compensation structures for employees, and, importantly, individual financial planning. For individuals navigating career paths or weighing higher salaries against other life priorities, this research offers valuable insights.
However, Killingsworth cautions that money is not the only determinant of emotional well-being. “Money is just one of many factors influencing happiness,” he concludes. “Money isn’t the secret to happiness, but it can certainly be a helpful component.”
