The Sense of Well Being

Studies in advanced economies show, as one would expect, that for every £1 000 increase in income there is, indeed, an increased sense of well-being—but only for the poorest one fifth of the population. Beyond that, there is almost no increase in people's satisfaction with their lives as income levels increase. In Australia, there is a slightly closer relation between level of income and well being, but in the U.S. and England there is only an unimportant and irregular relationship. The rich are no happier than the middle classes and the upper middle class is no happier than the lower middle class. Beyond poverty or near poverty levels of income, if money buys happiness, it buys very little and often it buys none at all.

This is strange because market economists report that the purpose of the market is to maximize the satisfaction of human wants. But they measure that satisfaction, called "utility", in a circular manner: satisfaction with something is revealed by the very fact that it was bought.

Yet studies show that the things that contribute most to a sense of well-being cannot be bought, such as a good family life, friendship, work satisfaction, and satisfaction with the uses of one's leisure. There is little relation between these things and people's incomes. For many people security of income actually contributes more to measured well being than does level of income.

Most people believe that if they had 25 per cent more income they would be much more satisfied with their lives, but those whose incomes are now at that higher level are not more satisfied with their lives. Changes in income do briefly influence our sense of well-being, but even the happiness that comes with an increase in income does not last long.