One doesn’t need money to be happy. That old mantra sounds right in theory, but that feel-good sentiment doesn’t stand up to the data of recent surveys that show a strong correlation between wealth and well-being.
Betsey Stevenson, an associate professor at the Wharton School of Business at the University of Pennsylvania, gave a presentation on Thursday, April 5 showing data that rich countries are collectively happier than poor countries and, within those countries, the well-off are significantly happier than the poor.
Using data from a Gallup public opinion poll that surveyed 141 countries starting in 2005 Stevenson showed how countries with strong GDPs (Gross Domestic Product) have a significantly better well-being than countries with low GDPs.
“The correlation in countries between GDPs and well-being is .82 which is one of the strongest correlations between two things I’ve ever seen in my career as an economist,” Stevenson said.
It may seem like common sense that countries with higher GDPs are happier than poor countries. However, there was a longstanding misconception that a country’s overall happiness isn’t affected by its international ranking.
Instead, it was believed that an individual’s happiness was only affected by their relative income compared to their countrymen, Stevenson explained.
Richard Easterlin, a professor of economics at University of South Carolina, made this assertion in 1974.
According to Stevenson, Easterlin looked primarily at Japan because of their quick rise in wealth after World War II. Despite their rapidly increasing GDP, Japan did not become happier.
As a result of these findings, Easterlin gave the example that if one brough running water to a village in Africa, no one is better off because everyone is still even. However, if one only brought water to the village chief he would be very happy because of his relative advantage in income, Stevenson said.
Stevenson explained that in the ’90s people began to question this logic, and some economists came up with the theory that there was a satiation point, or minimum amount of wealth needed in a country, before Easterlin’s logic kicked in, and he dismissed this secondary theory. “The satiation idea has never been formerly tested and was never seen in a data sheet,” Stevenson said.
The professor went on to show numerous charts, graphs, and data tables that further proved her assertion that wealth has a positive correlation with happiness and well-being.
According to Stevenson, GDP is an umbrella term that represents many aspects of life.
“GDP captures a lot of what it means for people to be happier, it doesn’t all necessarily come from consumption,” she said.
Stevenson explained that when people are richer they report having more choice over how they live their lives, being treated with greater respect, are in physical pain for less time than their less wealthy counterparts and eat better tasting food.
“I always thought that you get used to your mother’s bad cooking no matter how bad it is, but apparently you don’t,” Stevenson said.
This possibly explains the U.S.’s continuous GDP rise but stagnation of happiness. People in the U.S. already have many of the aforementioned luxuries that a high GDP provides.
“We wouldn’t know what would happen to well-being in the U.S. if GDP actually decreased,” she said.
Despite the environmental issues that have worsened due to increased human growth, growth in GDP has continuously raised the happiness of the world population.
“Simply saying, if what you care about is wellbeing, we know that GDP is doing a good job of getting us there … GDP is a pretty good marker for well-being,” she said.
However, Stevenson’s findings didn’t come without a warning.
It is unknown if continued increase in GDP will result in happiness continuing to rise, she added.
“I think increasing GDP will lead to greater well-being. This will especially be the case if the increase in wealth is experienced by the people currently living in poverty,” said Victor Vazquez, sophomore political science major, who attended
Stevenson’s talk. “I believe the concern about finite resources will be mitigated by technological improvement which will use resources more efficiently and people adjusting their reproductive rates to coincide with the decrease in resources.”