Better to Be Richer

by Will Wilkinson on March 7, 2008

I just ran across Angus Deaton’s latest summary of his happiness findings at the Gallup website:

As the graph indicates, life satisfaction is higher in countries with higher GDP per head. The slope is steepest among the poorest countries, where income gains are associated with the largest increases in life satisfaction, but it remains positive and substantial even among the rich countries; it is not true that there is some critical level of GDP per capita above which income has no further effect on life satisfaction. Instead, each doubling of income adds about the same amount to life satisfaction, across poor and rich countries alike. [bold added]

Please share this fact with friends at your next cocktail party.

Here’s the graph:

Deaton conjectures that the consistent relationship between income and life satisfaction has to do with some kind of shared global standard for self-reporting — the Danes know how good they have it relative to the folks in Togo, and the folks in Togo know how bad they have it relative to Danes. I don’t know about that.

  • SanFranciscoJim
    Actually, numerous studies, by different methodologies, have uncovered the Venezuela "anomaly." Large income disparities tend to lower overall happiness, though that is obviously not giving Brazil too much trouble.
  • I noticed the Venezuela thing too. I also noticed that Hong Kong looks unhappy for its wealth.

    Rather than thinking that some countries are doing much better and worse with their wealth, I suspect that the data collection methods leave something to be desired when one wants to compare across countries.
  • Every time you post something like this, you should reiterate your point (made in prior posts) that the appearance of diminishing returns could be explained by the mapping of an infinite scale (income) against a finite scale (satisfaction with an upper bound).
  • KJ
    Looks like Venezuela is beating us in satisfaction despite a much lower GDP per person. Just think what Hugo could do with our GDP. Hugo Chavez for President! Anyone with me? Will?

    I'm kidding but it struck me as the most jarring piece of info on that graph. I'd also point out that Deaton makes the findings sound more directly proportional than they appear to me when looking at that graph. The Venezuela/U.S. comparison being the most drastic. When I look at it, it seems clear that some nations are much better at utilizing their GDP than others and the U.S. comes out pretty poor in that regard, perhaps due to a law of diminishing returns or because our GDP distribution policies are crappy.
  • It's Togolese, by the way, just in case you were wondering how to put that phrase. In the same way that people who live in Congo are Congolese.

    Your point about relativity is a good one although I think regardless of that, money makes you more comortable and arguably therefore happier regardless of what's going on in other countries.

    I'd also like to see a bar chart with the different religions also, i.e.countries that are predominantly Christian in one bar, Muslim in another bar, etc. and then compare that with happiness and then find a way to mix GDP in there somehow.

    But in the end the eternal question will always be, which is the cause and which is the effect? Did happiness cause production, did production cause religion, did religion cause happiness?
  • JA
    Did it again. KAHNEMAN. It's Kahneman, even though the link says Kahnemann.

    Mi dispiace.
  • JA
    Kahnemann, natch. heh.
  • JA
    Not only can you show them the graph, but you can then bring up Nobel laureate Daniel Kahneman's work on Prospect Theory to elevate your point to an inescapable fact of human nature.

    You are probably already familiar with Kahneman's work, Will, but here's a link to his Nobel lecture for your readers.

    http://nobelprize.org/nobel_prizes/economics/la...
  • mk
    The argument that people assess life satisfaction based on relative global status sounds plausible to me. Americans certainly know that they "have it better" than most, and people in Haiti know that life is harder there than in most places.

    Why not include a question about "what is your strictly material satisfaction" in the same survey? Then you could see whether they track up directly or not. If not, interesting. If so, then correlation is not causation but it is suggestive.
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