Kahneman and Deaton investigated whether money buys happiness, separately for two aspects of wellbeing - emotional wellbeing and life evaluation.
Emotional wellbeing refers to the emotional quality of an individual’s everyday experience—the frequency and intensity of experiences of joy, stress, sadness, anger, and affection that make one’s life pleasant or unpleasant.
Life evaluation refers to the thoughts that people have about their life when they think about it.
They analysed more than 450,000 responses to the Gallup-Healthways Well-Being Index, a daily survey of 1,000 US residents conducted by the Gallup Organization. They found that emotional well-being (measured by questions about emotional experiences yesterday) and life evaluation (measured by Cantril’s Self-Anchoring Scale) have different correlates. Income and education are more closely related to life evaluation, but health, care giving, loneliness, and smoking are relatively stronger predictors of daily emotions.
When plotted against log income, life evaluation rises steadily. Emotional well-being also rises with log income, but there is no further progress beyond an annual income of approximately $75,000.
Low income exacerbates the emotional pain associated with such misfortunes as divorce, ill health, and being alone. High income buys life satisfaction but not happiness while low income is associated with both low life evaluation and low emotional well-being.
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Citation: Kahneman D and Deaton A. 2010. High income improves evaluation of life but not emotional well-being. proceedings of the national Academy of Sciences. Published ahead of print September 7, 2010, doi:10.1073/pnas.1011492107