Tuesday, November 16, 2010

money can buy you happiness-- up to $75K

I became aware of the "threshold principle" when reading Charles Murray's awesome public policy book, In Pursuit of Happiness and Good Government. Often, the relationship between an independent variable and a dependent variable is not linear or even simply non-linear. Instead, there is very little relationship between the variables over most of the range of the data. But if you get to a threshold-- too much or too little-- than the variable suddenly matters a lot.

So, one might apply this to what constitutes good/bad parenting, teaching, or diet. Over significant ranges, there may be little relationship between "better" X and better outcomes.

Along those same lines, we have this on money and happiness from the AP's Randolph Schmid
(hat tip: C-J)...

They say money can't buy happiness. They're wrong. At least up to a point.

People's emotional well-being -- happiness -- increases along with their income up to about $75,000, researchers report in today's edition of Proceedings of the National Academy of Sciences.

For people making less than that, said Angus Deaton, an economist at the Center for Health and Wellbeing at Princeton University, "Stuff is so in your face it's hard to be happy. It interferes with your enjoyment."

Deaton and Daniel Kahneman reviewed surveys of 450,000 Americans conducted in 2008 and 2009 for the Gallup-Healthways Well-Being Index that included questions on people's day-to-day happiness and their overall life satisfaction.

Happiness got better as income rose, but the effect leveled out at $75,000, Deaton said. On the other hand, their overall sense of success or well-being continued to rise as their earnings grew beyond that point....

Kahneman, a Nobel Prize-winning psychologist, and Deaton undertook the study to learn more about economic growth and policy. Some have questioned the value of growth to individuals, and Deaton said they were far from definitively resolving that question...


At November 27, 2010 at 8:22 AM , Blogger Bryce Raley said...

Very interesting. Makes me think of money being your master if you have too much or too little. I've had a dose of both but more of the latter.

Seems like Solomon said something about ... give me neither :)


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