The Happiness Chronicles, Part II: Does Money Buy Happiness?

This is the second installment of an occasional series on Psych Your Mind examining the pursuit of happiness. Last time we considered the dark side of happiness. In this post, we consider an important question: Does money buy happiness?


Answering the question "Does money buy you happiness?" is not an easy task, and researchers have been trying to answer it for at least 25 years (philosophers, I imagine, have been considering this question for even longer). Over the years, psychology research has amassed a great deal of evidence suggesting that money in-and-of-itself does not make you happy. There are of course, some caveats to this answer and we'll consider them in today's post.

Before I launch into the reasons why money does not buy happiness, let me explain that the relationship between money and happiness depends on your absolute level of income. For people with very little money, it turns out that money can actually make you happy because it can provide you with things that you need for survival (e.g., a roof over your head, food to eat). However, once, you gain a foothold on these basic survival related needs, the relationship between money and happiness decreases. Research by Ryan Howell at San Francisco State University provides some of the clearest evidence for this effect. Dr. Howell examined happiness in 52 countries of all different levels of wealth and found the the relationship between money and happiness was medium-sized in poorer countries (R = .28), and very small in wealthier countries (R = .10).

As it turns out, happiness isn't "all about the benjamins" (source)

So why is it, that in most wealthier countries there is only a small link between money and happiness? Several reasons have been empirically supported. For instance, self-determination theory suggests that happiness is about self-improvement, finding meaning in the things you do, and personal growth. Thus, people tend to be happiest when they satisfy intrinsic goals that have to do with finding personal meaning. Extrinsic goals like making money and becoming famous won't necessarily improve one's happiness.

In a study that examined this effect, Niemiec and colleagues examined well-being among college students who just graduated from a four year university that were now heading out into the work force. They found that the students who set intrinsic goals--goals for self-improvement and personal growth-- tended to achieve those goals 1-year post graduation, and also tended to be happier than did students who set extrinsic goals--goals to make money and be famous.

It's also possible that increases in a select group of people's income can be detrimental to happiness in society as a whole. Recently researchers, led by Ed Diener of the University of Illinois published evidence from a large scale national survey asking if inequality--that is, large wealth differences between the richest and poorest people in society-- might decrease happiness. Not surprisingly, the researchers found that in years where USA economic inequality was at its highest (like this year for instance), people tend to be the most unhappy. Why might this pattern exist? The researchers found that wealth inequality is correlated with lower trust toward others. Thus, wealth inequality may reduce happiness by straining the normal trusting relationships between people. 

Beyond fulfilling your basic needs, money doesn't seem to be a pathway to happiness. In fact, at a certain point, people may find more happiness in sharing their wealth with others, forming lasting relationships, and pursuing goals for personal growth.  I hope this week's post has been informative with respect to your own future well-being. I'd love to hear more about your thoughts on what makes people happy in the comments! What shall I cover for Part III of the Happiness Chronicles?


Oishi, S., Kesebir, S., & Diener, E. (2011). Income Inequality and Happiness Psychological Science, 22 (9), 1095-1100 DOI: 10.1177/0956797611417262

Niemiec, C., Ryan, R., & Deci, E. (2009). The path taken: Consequences of attaining intrinsic and extrinsic aspirations in post-college life Journal of Research in Personality, 43 (3), 291-306 DOI: 10.1016/j.jrp.2008.09.001

Howell, R., & Howell, C. (2008). The relation of economic status to subjective well-being in developing countries: A meta-analysis. Psychological Bulletin, 134 (4), 536-560 DOI: 10.1037/0033-2909.134.4.536