Join Mike on this thought-provoking journey as you explore the timeless question: Can money buy happiness? Mike shares intriguing findings from two significant studies that have stirred the pot in the world of economics and psychology. The first, a collaboration between Daniel Kahneman and his colleague Deaton (referred to as the KD study), suggests that while happiness does increase with income, it plateaus after a certain point, around $75,000 per year. In contrast, Matthew Killingsworth’s study (the MK study) argues that happiness continues to climb with income even beyond that threshold. As Mike dissects these studies, he uncovers the complexities of happiness and its relationship with our finances.
Listen in as Mike discusses the fascinating outcomes of an adversarial collaboration between the researchers of these studies, which leads to a nuanced understanding of happiness across different income levels and individual circumstances. You’ll learn about the two distinct patterns identified: the ‘linear log pattern’, where happiness increases steadily with income, and the ‘flattening pattern’, where happiness levels off after reaching a certain income level. These patterns seem to affect different groups of people in various ways, and it all boils down to the metrics used to measure happiness. What do you think? Does money have the power to buy happiness, or is the truth more intricate than we assume? Tune in and join the conversation to discover where you stand on this multifaceted topic.
Check out the video version of this episode below:
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Episode transcript below:
0:00:00 – Mike Malatesta:
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Hey, everybody, welcome back to this free Thinking Friday episode solo episode of the how to Happen podcast. I’m Mike and I appreciate you being here today. Today we are diving into a fascinating topic, and that is can money buy happiness? For the purposes of this, we’re going to explore a groundbreaking article that delves deep into this age-old question, and our story begins with two conflicting studies on happiness and income. On the one hand, we have a study done by two economists, daniel Kahneman and I can’t remember the other guy’s first name, his last name is Deaton referred to as KD, which analyzed over close to half a million responses from the Gallup Healthways Wellbeing Index, and they looked at emotions like happiness, enjoyment and sadness and how those emotions relate to income. So what was KD’s main finding? Well, they found that happiness increases with income, but only up to a point. And in their study, after reaching $75,000 of annual income, the increase in happiness starts to level off. So this threshold became a widely quoted figure, suggesting that beyond a certain income, more money doesn’t mean more happiness.
And then there’s this other study. It’s a study by Matthew Killingsworth and it’s referred to as the MK study and Matthew conducted a study using experience sampling where participants reported their happiness in real time, so like just kind of like a food diary you know when you eat. So I don’t know if it was every 15 minutes or what, but MK’s conclusion was that happiness continues to rise with income, even above $75,000. And this obviously challenged the findings in the KD study. So we’ve got two valid studies with contradictory results. So you think to yourself well, you know, how can that be?
So, interestingly, these authors embarked on an adversarial type collaboration, a unique approach where the opposing researchers work together to find common ground, and their combined analysis revealed something very intriguing. There’s an unhappy minority whose happiness increases with income up to a point and then plateaus. That’s the unhappy minority. But for the happier minority, happiness continues to rise with income, even in higher ranges. And the analysis showed two patterns One they call a linear log pattern, where happiness steadily increases with income, and the other a flattening pattern, where happiness levels off after a certain income threshold. Both patterns exist simultaneously but affect different groups of people differently. So the study also sheds light on the importance of how we measure happiness. Like everything, it always comes down to how you measure it right. You and I both know that. So KD’s approach was more effective in measuring unhappiness, it turns out, while MK’s method captured a broader range of emotional well-being.
So the question is can money buy happiness? Well, according to these studies, it’s a complex question. It probably is a complex question, and money does influence happiness. But the relationship isn’t straightforward. It varies across different income levels and individual circumstances. So here’s what I have for you, right? I love talking to you about the things like this because you and I can usually help one another with our thinking.
So my question for you is can money buy happiness? Do you agree with the DK study or the MK study, or neither? Do you have your own belief system or have you studied this yourself? Here’s why, where I come down on this, money can definitely buy happiness. There’s no question about that. And at what level, I think, it’s different for every person and I have no way of predicting what that’s going to be for you or me or anyone else. But when I think about it in my own experience, I think well, having enough money to buy what I want and will use which are two sometimes different things, and I’ve definitely fallen into this trap of things that I think I want but then I never use. So for me, buying, being able to have enough money to buy what I have enough money to buy what I want and will use, having enough money to buy family experiences that I will remember, and having enough money for donating to things that my wife, jamie, and I want to support that makes me happy. So I’m really interested in finding out what makes you happy when it comes to money. So thank you for spending your time with me today. I do value it and I hope that doing so brought you some new value into your life and into your day. And until next time, maximize the greatness inside of you and I will talk to you in the next episode.
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