How happy are rich people

Are Rich People Happier?

Bruno S. Frey

The question of whether money makes you happy is as old as humanity. It is often assumed that the rich are not happy. This idea is based on a prejudice. This becomes clear when, conversely, we ask ourselves whether the poor are happier. In general, this is certainly not the case.

The question of what makes people happy can now be answered better than ever on the basis of scientific knowledge. In recent years there has been intensive research into this in psychology and, more recently, in economics. People are asked with the help of sophisticated methods: "How satisfied are you, on the whole, with your life?" The data collected are quite reliable. They correspond to the usual ideas that one has of happy people. For example, they laugh more often, are more optimistic, more creative, more helpful, have more social contacts and prefer to work. In our country, on a scale from 1 to 10, no less than 29% of those surveyed with the highest score of 10 describe themselves as “completely happy” and a further 44% as “very happy” (scores 9 and 8).

Switzerland is therefore a country with happy people. In an international comparison, only the Danes consider themselves happier (they have an average of 8.2 on the satisfaction scale compared to Switzerland with 8.1). The residents of our neighboring countries Italy (average 7.3), Germany (7.1), France (6.8) and especially Austria (6.5) rate themselves as less happy.

With the help of statistical methods, it is now possible to determine how people's satisfaction with life depends on factors such as income, but also on age, marital status or state of health and other variables. The influence of income on happiness can be measured independently of other factors.

Fortunately, research has refuted some popular beliefs. Above all, it has become clear that happiness is not just a purely private matter, but depends to a large extent on economic conditions. This also includes the influence of income on happiness. People from rich countries like Switzerland are often tempted to think people in poor countries are more satisfied. Isn't the Greek fisherman you met on vacation happy despite his meager income?

The scientific analysis shows a different result: people who live in countries with a low average income consider themselves to be significantly less happy than those who live in richer countries. The positive correlation between income and satisfaction applies especially to the poorest countries in the world. Once a higher median income is reached, the relationship weakens.

Such comparisons between countries are often viewed as inadmissible because the concept of happiness differs between different cultures. Americans, for example, are always compelled to emphasize how "happy" they are. In France, on the other hand, anyone who describes himself as “heureux” is considered stupid (de Gaulle once said that only idiots are happy). This objection should be taken seriously. For this reason, the income differences between people within a country where the cultural differences are less significant are also examined.

The result is also confirmed here: recipients of higher incomes describe themselves as more satisfied than those with a lower income. The positive correlation between income and satisfaction has been found for many different countries. It is also confirmed for unexpected increases in income such as lottery winnings: Those who draw the golden ticket will be happier as a result.

However, research also shows that the influence of money on happiness should not be overestimated. A higher income only makes you happier if you earn more than other people. This makes it crucial who you compare yourself to. It is probably a basic socio-biological constant of people that they always compare themselves with those who are materially better off. In addition, you get used to a higher income over time. As income rises, so do expectations. Many readers have probably already had such experiences themselves. The habituation effect was also found for countries as a whole. For example, the real average income in the USA has more than doubled since 1945, but subjective satisfaction has not increased accordingly, rather has fallen. In Japan, real per capita income even increased sixfold between 1958 and 1991, but the Japanese have not become more satisfied with their lives.

What are the implications for politics? - More money is certainly not the ideal solution to happiness. For already wealthy countries in particular, growth policies should not come at the expense of other goals such as full employment and the general health of the population. For poorer countries, on the other hand, policies to increase the average income in society are undoubtedly still urgent.

Bruno S. Frey is Professor of Economics at the University of Zurich. Bruno S. Frey is