Question

The implicit assumption, when economists assess the performance of an economy by looking at its level of income per person or at its growth rate, is that higher income per person leads to more happiness. Does money lead to happiness? Back up your answer with concrete evidence (such as research findings).

Answer 1

Yes, higher income per person leads to the higher level of happiness within the economy. The relationship becomes stronger, when the different level of income and happiness is observed by the research (Easterlin, R.A., 1974). Though, there are weak relationship between the income and the happiness when the data of the different economies are studied. So, there is a significant role of relative income in deciding the happiness. A relatively higher income over and above the median income leads to higher level of happiness. Other research work also found that higher income in the rich economies makes the person capable to get the quality benefits, services and facilities that enhance the quality of life (Hershfield, 2013). As a result, happiness level increases.

References:

1. Easterlin, R.A. (1974). Does economic growth improve the Human lot? Some Empirical Evidence. Retrieved from: http://graphics8.nytimes.com/

2. Does More Money Make You Happier? Hershfield H.E. Retrieved from: https://www.psychologytoday.com/

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