For more than a half century, researchers at UCLA have conducted a massive annual survey of incoming college students titled “The American Freshman: National Norms.” One part of the survey asks students to rank 20 life goals on a scale from “not important” to “essential.” Most are lofty aspirations such as becoming a community leader, contributing to scientific progress, creating artistic works, and launching a successful business. Surveyed in 1969, freshmen entering four-year colleges were most interested in “developing a meaningful philosophy of life” (85 percent considered it “essential” or “very important”); “raising a family” (73 percent); and “helping others who are in difficulty” (69 percent). Ten years later, freshmen opted for “being an authority in my field” (74 percent), followed by “helping others” and “raising a family.”
But something shifted amid the Reagan Revolution, which deregulated Wall Street, revamped the tax code, and set the nation hurtling toward levels of wealth and income inequality unseen since before the Great Depression. By 1989, a new priority had taken over the survey’s top position, and has appeared there on and off ever since: money. Indeed, the No. 1 goal of the Class of 2023, deemed “essential” or “very important” by more than four in five students, was “being very well off financially.”
Grown-ups can relate. Recent polling from The Wall Street Journal and the University of Chicago points to a steep decline over the past quarter century in the percentage of American adults who view patriotism, religion, parenting, and community involvement as “very important.” The only priority tested whose perceived importance grew during that period, the pollsters reported, was money.
Consumer culture encourages us to dream about the happiness that a new Land Cruiser or Club Med holiday might bring. Yet the ability of most families to keep up with basic needs—food, housing, health care, and child care—has diminished steadily over the decades. We’ve all been warned that money can’t buy happiness, but the siphoning-off of middle-class security has left us too willing to embrace evidence to the contrary.
Consider a paper on money and happiness published by the psychologists Daniel Kahneman, Matthew Killingsworth, and Barbara Mellers last month in the journal Proceedings of the National Academy of Sciences. Mainstream news outlets largely treated the conclusions as confirmation that money could buy happiness after all. But buyer beware: A more careful reading suggests otherwise.
More than a decade earlier, in 2010, Kahneman and another colleague, Angus Deaton, had published a study in which, on average, the more money people earned, the higher they scored on self-reported measures of well-being—but only up to a point. The happiness effect hit a plateau, or “satiation point,” at incomes of $60,000 to $90,000. Jackpot, my 2021 book on American wealth and its discontents, cited a similar 2018 study led by the psychologist Andrew Jebb that crunched global survey data for more than 1.7 million people. Among the U.S. and Canadian subjects, positive emotions improved with higher earnings up to about $65,000 a year. Negative emotions (stress, worry) declined as earnings increased, reaching an inverse satiation point at $95,000. Life-evaluation scores, which measure how well we believe we are doing in our life, maxed out at $105,000. The upshot, I surmised, is that “we hit peak satisfaction when all of our basic needs are met and we no longer live in fear of our credit card bills.”
But in 2021, Killingsworth published a new paper contradicting Jebb’s and Kahneman’s results. He didn’t observe the satiation points others had noted. Refreshingly, instead of retreating into their academic trenches, Kahneman and Killingsworth teamed up and, with Mellers as arbiter, probed more deeply. In their new study, the one PNAS published last month, well-being indeed hit a ceiling as income rose, but only among the 15 percent of subjects who were least happy to begin with. The happier ones kept getting happier, the authors found; in fact, among the happiest 30 percent, the effect accelerated: More money meant even more happiness.
This intriguing result was widely reported. But the paper includes caveats that were largely ignored. The authors note that the association of income and happiness “is weak, even if statistically robust.” Kahneman and Deaton, they point out, had determined that the quadrupling of a person’s income had an effect on well-being roughly equal to the mood boost of a weekend “and less than a third as large as the [negative] effect of a headache.” The authors also explain that “the difference between the medians of happiness at household incomes of $15,000 and $250,000 is about five points on a 100-point scale.”
That’s “almost nothing,” Jebb told me in an email. With such a small difference, in fact, one could argue that “there is no practical effect of income at all!”
Jebb also noted that the new paper includes a chart of the income-happiness correlation that relies on z-scores, statistical devices that “can make the effect look large when it is not.” And even if no satiation point was observed among the happier subjects, “its existence seems to be a logical necessity,” he said. Income can theoretically increase indefinitely, but happiness as we understand it cannot.
Jebb is no longer interested in the questions these income studies ask, in any case, because when we ponder money and happiness, “we imagine ourselves with more money relative to our current state.” But nobody has done a before-and-after analysis to determine whether—and how—changes in income and wealth affect any given person’s well-being. “It’s possible that we have enough data to do those analyses, but it would be a big undertaking,” Robert Waldinger, the director of the Harvard Study of Adult Development, which spans generations, told me in an email. In the meantime, comparing group averages “might tell us which group is happier,” Jebb said, “but not why.”
Killingsworth actually did consider, for his 2021 paper, why higher incomes seem to correlate with more happiness. He estimates that three-quarters of the effect might be due to the fact that higher earners have “more control over their lives.” Most of the rest had to do with relief from financial insecurity. For most people, once we finish school and enter a particular career track, “the range of plausible incomes is fairly narrow,” Killingsworth told me. “Raising one’s income by some modest percentage would make at best a tiny difference in happiness. But deciding whether to be a surgeon or a social worker could certainly matter to a meaningful extent.”
He acknowledges that “people already tend to overestimate the importance of money to happiness, so they should probably care less” about these associations. “I wouldn’t want people to read this work and conclude that the pursuit of happiness can be reduced to the pursuit of money,” Killingsworth said. “That would be totally wrong.”
This brought to mind a conversation in my book with the Boston-area psychologist Bob Kenny, a founding partner of North Bridge Advisory Group. Kenny spends much of his time assuaging the wealth-related anxieties of his extremely well-heeled clients and their offspring. Comprehensive data on the emotional well-being of America’s richest 0.1 percent are nonexistent. Anecdotally, though, Kenny thinks his clients may be at a slight disadvantage on the happiness front. “I’m not comparing them to people who don’t have enough money to put food on the table,” he told me. “But most people believe that, even if life isn’t very good right now, ‘I’m going to make a whole lot more money and then life’s going to be better. Wouldn’t it make things better if I had that house on the ocean; if I just had something?’”
His clients have more money than they know what to do with, so they can no longer cling to that fallacy. “I say to people all the time, ‘Look, retail therapy works, but so does cocaine,’” Kenny said. “The problem is, it wears off. When you go out to buy something and it’s new and it’s pretty, the latest iPhone or the Tesla—God, this is great!—it just isn’t sustainable. Not that you don’t have enough money, but that it’ll lose its kick, so you buy another one. I know a guy who bought three.”
“iPhones?” I asked.
“Teslas,” Kenny said. “And you wouldn’t meet him and think, God, that is one happy guy.”
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