Does Income Bring Happiness?

Conversable Economist: Does Income Bring Happiness?

Back in 1974, Richard Easterlin published a paper called "Does Economic
Growth Improve the Human Lot? Some Empirical Evidence" (available here and here,
for example). Easterlin raised the possibility that what really matters
to most people is not their absolute level of income, but their income
level relative to others in society. If relative income is what matters,
then an overall rise in incomes doesn't make me any better off relative
to others, and so my happiness does not increase. Income becomes a sort
of arms race: even as we all race to get more, it doesn't actually make
us any happier. …

He concludes with:

… For my own part, I confess that I find happiness surveys both intriguing
and dubious. It seems to me that higher levels of income are typically
correlated with more health, education, travel, consumption, and a
higher quality of recreation, so it's not a surprise to me it seems to
me that happiness rises iwth income. On the other side, it does seem to
me that survey questions about life satisfaction are answered in the
context of a particular place and time. If a person says that their life
satisfaction was a 7 in 1960 on a scale of 0-10, and another person
says that their life satisfaction is a 7 in 2013, are those two people
really equally satisfied? To put it another way, if the person from 2013
was transported by a time machine back to live in 1960, with all their
memories and knowledge of the technologies, medicines, foods, education,
and travel available in 2013, would that time traveller really be
equally happy in either time period? I suspect that when most people are
asked to rank happiness on a scale of 0-10, they don't say to
themselves: "Well, people living 100 years from now might have
extraordinarily high levels of income and technology, so compared with
them, I'm really no more than a 2." At best, survey questions on a scale
of 0-10 seem like an extremely rough-and-ready way of measuring life
satisfaction across very different countries or across substantial
periods of time.