The Economics of Happiness (Part I) — The $75,000 Threshold

“Money can’t buy happiness,” as the uber-wealthy actor Johnny Depp once said, “But it can buy you a great big yacht to sale right up to it.”

Most of us will never be able to afford a yacht (and even those that do don’t want to pay the “ sails tax ”). Fortunately, new research reveals that happiness can be bought for a more modest sum: about $75,000 in income a year .

In the study, researchers tried to evaluate the effect of money in two ways: One was on how people think about their lives and the other was on the feelings they have as they experience life. Responses from more than 450,000 Americans, gathered in 2008 and 2009, were evaluated.

The study found that people’s evaluations of their lives improved steadily with annual income. But the quality of their everyday experiences — their feelings — did not improve above an income of $75,000 a year. As income decreased from $75,000, people reported decreasing happiness and increasing sadness, as well as stress. The study found that being divorced, being sick and other painful experiences have worse effects on a poor person than on a wealthier one.

“More money does not necessarily buy more happiness, but less money is associated with emotional pain,” the authors wrote. “Perhaps $75,000 is a threshold beyond which further increases in income no longer improve individuals’ ability to do what matters most to their emotional well-being, such as spending time with people they like, avoiding pain and disease, and enjoying leisure.”

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