They say that money can't buy happiness, but they don't know what they're talking about.
A new study attempts to lay to rest the notion that more money does not improve people's well-being. To the contrary, there appears to be no limit to the amount of happiness that comes from a higher income.
Using economic and polling data, economists Betsy Stevenson and Justin Wolfers of the University of Michigan found people in nations with higher per capita GDP levels tend to have higher levels of life satisfaction.
They found a similar correlation within countries, showing that people with higher incomes are more satisfied with their lives than their less affluent compatriots.
"The relationship between well-being and income ... does not diminish as incomes rise. If there is a satiation point, we are yet to reach it," they write.
That flies in the face of past studies indicating that money only improves well-being up to a certain point – that is, that once "basic needs" are met, more money does not improve people's life satisfaction.
Still, Wolfers and Stevenson's research gets at issues more profound than whether or not money "buys" a better life.
First, it is important to point out they did not plot income dollar-for-dollar against happiness measures in the above graphs. Rather, they used a logarithmic scale, with income doubling at each interval. In other words, with that horizontal axis stretched out, the graphs would show happiness increasing more quickly for poorer countries and poorer people than for those on the richer end of the spectrum.
Or, put even more simply, an extra dollar improves well-being for someone in poverty far more than it will help a Fortune 500 CEO. That supports the political argument for promoting income redistribution — more money appears to do more good for people who are poor.
Second is the question of causation. Wolfers acknowledges happiness may in a small way contribute to greater income. For example, a person who is pleasant and happy in the workplace may get paid or promoted more than a perpetual grouch. It's also possible that an outside factor, like democracy, helps to boost both income and happiness at the same time, which may help to explain why many stable, strong democracies tend to also have relatively high per capita GDPs.
Still, Wolfers believes that there is also strong causal link between income and happiness, though it may not be that a wallet full of $100 bills is exactly what makes people smile.
"I suspect what's actually going on is that income is a marker for something else. It may be that what really makes us happy is leading fulfilling lives," he says. Having more money equals more freedom — the freedom to quit a terrible job, the freedom to choose a better career, the freedom to move to a better place, and even the freedom to pick how much money one makes, he adds.
"I generally steer away from saying income causes happiness, because that then leads people to think that what I'm telling them is to quit their current jobs and become hedge fund managers," says Wolfers.
"It's not income per se, but it's having a broad set of choices, including the choice to have a healthy income."