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Two Nobel Prize winners figured out the perfect salary for happiness
Two Nobel Prize winners figured out the perfect salary for happinessTwo Nobel Prize winners figured out the perfect salary for happinessTwo Nobel Prize winners figured out the perfect salary for happinessLast week, Princeton economist Angus Deaton won the Nobel Prize for his research into poverty and development.
His work investigates how humanity's overall quality of lifehas surged in the past 100 years, thanks to global advancements of tech and healthcare, as well as Asia's incredible economic growth.
But he's also dug into the ways that Westerners relate to money. In a popular 2010 paper, he partnered with another legend in behavioral science: psychologist Daniel Kahneman, who won the Nobel Prize in 2002.
According to their study, there's a "happiness plateau" above an annual salary of $75,000.
To arrive at that figure, Deaton and Kahneman analyzed 450,000 responses from the Gallup-Healthways Well-Being Index, a daily survey of 1,000 US residents conducted by the Gallup Organization.
His work investigates how humanity's overall quality of lifehas surged in the past 100 years, thanks to global advancements of tech and healthcare, as well as Asia's incredible economic growth.
But he's also dug into the ways that Westerners relate to money. In a popular 2010 paper, he partnered with another legend in behavioral science: psychologist Daniel Kahneman, who won the Nobel Prize in 2002.
According to their study, there's a "happiness plateau" above an annual salary of $75,000.
To arrive at that figure, Deaton and Kahneman analyzed 450,000 responses from the Gallup-Healthways Well-Being Index, a daily survey of 1,000 US residents conducted by the Gallup Organization.
The study authors discovered that there are two kinds of happiness:
• Everyday contentment, or "the frequency and intensity of experiences of joy, stress, sadness, anger, and affection that make one's life pleasant or unpleasant"
• Life assessment, or "the thoughts that people have about their life when they think about it"
Money affects each kind of happiness in a different way.
Deaton and Kahneman found that "everyday contentment" increases up to $75,000, but then starts to level off after that.
"Perhaps $75,000 is a threshold beyond which further increases in income no longer improve individuals’ ability to do what matters most to their emotional well-being, such as spending time with people they like, avoiding pain and disease, and enjoying leisure," the authors write.
But the "life assessment" column continues to to grow with salary — someone pulling in $250,000 will report higher life satisfaction than someone earning $100,000.
"Giving people more income beyond 75K is not going to do much for their daily mood … but it is going to make them feel they have a better life," Professor Deaton said in an interview.
Of course, income is relative to cost of living. That $75,000 salary feels like a lot less in New York or San Francisco than it might in Mississippi or Utah.
Deaton and Kahneman's paper leaves us with useful questions for figuring out what happiness means in our own lives. Namely, after our material needs are taken care of, who are the people and what are the activities that bring about a sense of well-being? And when we're assessing how our lives are going, do we use our own personal criteria, or that of popular culture? And does that even matter?
• Everyday contentment, or "the frequency and intensity of experiences of joy, stress, sadness, anger, and affection that make one's life pleasant or unpleasant"
• Life assessment, or "the thoughts that people have about their life when they think about it"
Money affects each kind of happiness in a different way.
Deaton and Kahneman found that "everyday contentment" increases up to $75,000, but then starts to level off after that.
"Perhaps $75,000 is a threshold beyond which further increases in income no longer improve individuals’ ability to do what matters most to their emotional well-being, such as spending time with people they like, avoiding pain and disease, and enjoying leisure," the authors write.
But the "life assessment" column continues to to grow with salary — someone pulling in $250,000 will report higher life satisfaction than someone earning $100,000.
"Giving people more income beyond 75K is not going to do much for their daily mood … but it is going to make them feel they have a better life," Professor Deaton said in an interview.
Of course, income is relative to cost of living. That $75,000 salary feels like a lot less in New York or San Francisco than it might in Mississippi or Utah.
Deaton and Kahneman's paper leaves us with useful questions for figuring out what happiness means in our own lives. Namely, after our material needs are taken care of, who are the people and what are the activities that bring about a sense of well-being? And when we're assessing how our lives are going, do we use our own personal criteria, or that of popular culture? And does that even matter?
References
Russell, Tony, Allen Brizee, and Elizabeth Angeli. "MLA Formatting and Style Guide." The Purdue OWL. Purdue U Writing Lab, 4 Apr. 2010. Web. 20 July 2010.
Russell, Tony, Allen Brizee, and Elizabeth Angeli. "MLA Formatting and Style Guide." The Purdue OWL. Purdue U Writing Lab, 4 Apr. 2010. Web. 20 July 2010.