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(Andrei Tselichtchev/Getty Images/iStockphoto)
(Andrei Tselichtchev/Getty Images/iStockphoto)

Money might buy you happiness, if you spend it right Add to ...

Last spring, world leaders gathered at the United Nations to discuss a pressing international matter: the happiness of the world.

The UN Conference on Happiness marked the first time the international community sat down to discuss something as seemingly squishy and subjective as how to make the world a cheerier place – following efforts by France and Britain, among others, to create new metrics to rate a nation’s success not according to gross domestic product but by citizens’ subjective well-being.

“Happiness studies” has been a trendy field for more than a decade, both in academe and on the bestseller lists. But since the fiscal collapse of 2008, it seems the focus has shifted from the social psychology of satisfaction to the harder facts of dollars and sensibility.

In 2013, as we continue to debate politically whether dour austerity or upbeat stimulus is the better economic remedy, number-crunchers are trying to answer the question posed by a thousand novels and at least one Baz Luhrmann 3-D spectacle: Can money buy happiness?

New academic journals have been devoted to happiness economics and a raft of books and studies are published each year. The most recent study, published by prominent economists Betsey Stevenson and Justin Wolfers a few weeks ago, made headlines: It claimed to overturn decades of research by finding that money does indeed produce happiness, and at every income level.

Meanwhile, a new book by Canadian academic Elizabeth Dunn and Harvard Business School marketing professor Michael Norton suggests that researchers may have been asking the wrong question: Perhaps it is not how much money people have that makes us happy, but how we choose to spend it.

Like the current one, the original boom in happiness-economics research came at a time when a long period of prosperity was sliding into a slump, in the 1970s. Before that, “happiness used to be a province of psychology,” says Trent University professor Mak Arvin, who launched the International Journal of Happiness and Development in 2012.

The foundational work came from American economist Richard Easterlin, who observed that the great postwar growth in wealth in the United States and Japan had not made the countries correspondingly happier.

He and other researchers theorized that this was due to what they called the “hedonic treadmill” – that is, we get used to nice things, and then they stop making us happy. A big promotion may boost your spirits next week, but by next November, it will simply be the daily grind.

Perhaps our relative wealth – how much money we have compared with the Joneses – is more important than our absolute wealth.

Since then, this “Easterlin Paradox” has been refined to suggest that once you reach a certain threshold – around $75,000, according to recent studies – increased wealth does not increase happiness. A new BMW won’t make your heart sing if you already have a half-dozen Ferraris in the garage.

The popularity of that model might have been due not only to the data, but to the way it chimed with the anti-materialistic ethos of the time, as an indictment of mindless consumerism. Indeed, it still has an innate appeal, especially to anyone who is not as rich as we’d like to be.

Over the years, however, numerous economists have challenged the theory. Most recently, Profs. Stevenson and Wolfers have come forward to state boldly that the Easterlin Paradox simply does not exist.

Building on research begun in 2008, they looked at multiple data sets, analyzing Gallup polls, the World Values survey, the Pew Global Attitudes survey and other sources that asked people to rate their life satisfaction.

Charted against income, the results were clear: Rich people in every country were happier than the poor. Rich countries were happier than poor countries.

In the United States, for example, just 35 per cent of respondents earning less than $10,000 a year said they were “very satisfied” with their life, compared with 60 per cent of those earning $100,000 to $150,000. (For the record, all eight of the respondents earning more than half a million dollars said they were happy.)

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