The Wealthy Country Trap

New research finds life satisfaction peaks around $36,000 GDP per capita. Then it goes down.

Among the many arguments that economists have about the link between wealth and happiness, there's particular contention around the idea that, beyond a certain point, money stops mattering.

Wealthy people are happier than poor people. And the more money the poor have, the happier they become. But there's a theory that after a certain "satiation point," even more money probably won't do much for you. Once your basic needs are all satisfied, the theory goes, you're pretty much set, and happiness levels off as a function of wealth (whether we look at wealthy people compared to poor people, or wealthy countries compared to developing ones).

Economists Betsey Stevenson and Justin Wolfers made waves earlier this year with a new study suggesting that no such point exists. There's no level, they concluded, beyond which the rich don't get happier. The happiness just keeps coming. (That study was particularly appealing for how it enabled headline writers to report that, yes money does buy you happiness!)

Now, because this is still not a settled question, here comes an equally intriguing but contradictory new study, published in the journal PLOS ONE by the University of Warwick's Eugenio Proto and Aldo Rustichini of the University of Minnesota. They agree with much of the existing research ... up to a point. In poor countries, life satisfaction rises as wealth does, they say.

But then something happens around $36,000 in GDP per capita (they're adjusting this number according to the purchasing power in each country). They argue that there is a point at which more money stops mattering the same way, but what happens beyond it is surprising. Eventually, the more wealth that already-wealthy countries acquire, the less life satisfaction people who live there experience. Satisfaction peaks at a "bliss point" of around $36,000 and then actually begins to dip, according to data drawn from the World Values Survey:

"A Reassessment of the Relationship Between GDP and Life Satisfaction" by E. Proto and A. Rustichini in PLOS ONE.

In that chart, the people who live in the poorest countries are in the left quantiles. For them, more money (or economic development) will get you a lot of happiness below about $18,000 in per capita GDP. Then the benefits start to flatten out. Beyond about $36,000, Proto and Rustichini note, that satisfaction begins to "slightly but significantly" decline. Which would mean in poor countries, life satisfaction rises with wealth. In rich countries, it doesn't.

But why a decline? They suspect that the more money you have, the higher your aspirations, creating new opportunities for disappointment (and new comparisons with the Joneses). Proto and Rustichini point out that this raises an intriguing question:

Our analysis implies that GDP long term growth is certainly desirable among poorer countries, but is it a desirable feature among developed countries as well?

You might well opt to live in a richer country, even if you knew that life satisfaction there was slightly lower. So this is a tricky question to answer. And in fact, it's an old one: would you rather have money or happiness?

Top image: Jason Stitt/Shutterstock.com

About the Author

  • Emily Badger is a former staff writer at CityLab. Her work has previously appeared in Pacific StandardGOODThe Christian Science Monitor, and The New York Times. She lives in the Washington, D.C. area.