The link between higher national income and higher national life satisfaction is critical to economic policymaking. This column presents new evidence that the connection is hump-shaped. There is a clear, positive relation in the poorer nations and regions, but it flattens out at around $30,000–$35,000, and then turns negative.
A commission on the measurement of economic performance and social progress was created on the French government’s initiative. Since 2008, this distinguished group of social scientists has put subjective well-being into the limelight as a possible supplement to traditional measures of development such as GDP (Stiglitz et al. 2009). The British government has also shown considerable interest in developing a subjective well-being measure in recent years as an instrument for policy.
Does money buy happiness? Discussion Paper 8048 examines the relationship between subjective well-being and income along three dimensions: between individuals in the same country, between other countries, and during a country's growth. In each case higher income correlates with higher reported levels of subjective well-being. Higher income, the authors conclude, does in fact make people happier with their lives.