If money and happiness were to describe their relationship on Facebook, it would read: “It’s complicated ufabet. There is a correlation between income and happiness.
Peak stuff for happiness
Generally speaking, in richer countries, people are happier. The gross domestic product – the GDP per capita, a nation’s wealth – is one of the six factors that explain why people in some countries are happier than others.
However, it is important to emphasize that the connection is likely to be the fact that being without money is a cause of unhappiness. It makes sense to focus on improving material conditions in impoverished societies. Higher household income generally signifies an improvement in the living conditions of the poor – and, in turn, the happiness of the people.
So, when money means that we can put food on our table, have a roof over our head and support our children, money has the power to transform misery into happiness. But when money is spent on a $1,000 Serenity Dog Pod that lets your dog ‘float away on a cloud-like bed into a blissful state with calming colour, changing light, relaxing and soothing music’ (Google it; it’s a thing), you have definitely run out of stuff you can buy that will improve your happiness. In fact, not only did you reach peak stuff for happiness a while back, but you fell off the cliff and now your dog is taking a dump on the summit.
Like most things, the more we have of something, the less happiness we derive from it. The first slice of cake: awesome. The fifth slice: not so good. Economists call this the law of diminishing marginal utility. That is one of the reasons why some countries and people get richer – but not happier. Another reason is that we adapt to new levels of wealth. In happiness research, we call this the hedonic treadmill.