MoneyWeek issue 385 cover

Place your bets

23 May 2008 / Issue 385

Ten stocks our experts think you should buy now... PLUS:

• Making a fortune in mystery metals

• Asian inflation: threatening the West?

• The ultimate Fight Club, worth $2.6bn


Money does make you happy
I’ve got some really depressing news. It seems that money really can make you happy.

For years now those of us who aren’t quite as rich as we’d like to be have been able to comfort ourselves by reading and re-reading research published by economist Richard Easterlin in 1974. This theorised – with considerable statistical back up – that absolute income has no bearing on happiness levels. People in poorer societies are happier when they can afford basic necessities than when they cannot (I imagine that bit was pretty obvious from the start), but beyond that further gains made little difference.

The research, known as the Easterlin Paradox, “quickly became a social science classic”, says The New York Times. “It tapped into a near spiritual human instinct to believe that money can’t buy happiness”, allowing anyone struggling financially to believe that as long as they had a roof over their head and enough to eat, they had just as much of a chance of real happiness as the super-yacht-owning classes.

Unfortunately, it now turns out that might not be the case after all. New research from economists Betsy Stevenson and Justin Wolfers suggests that absolute income does matter – a lot.

Bad news then that many of us are about to have a lot less of it.

Read the full editor’s letter here: Money does make you happy