Money buys happiness? New study says think again about those assumptions

Wealth is perceived in both absolute and relative terms, as locals keep up with the neighbors.

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Conventional wisdom has long held that for people who have the least, money matters much more than it does for people who are better off. With more money – and therefore more social mobility – the poor will find a sense of wellbeing and happiness that the more affluent take for granted.

But there is some dissension in the ranks. Economist Arild Angelson believes that this is a dangerously outdated concept.

“It is this idea that if you are poor, what matters is just to fill your belly with food and have shelter and some of the bare necessities covered,” he says. “And that social comparison is something only the rich care about.”

Angelsen, a senior associate of the Center for International Forestry Research (CIFOR), and an economics professor at the Norwegian University of Life Sciences is the co-author of a new study that is turning long held beliefs upside down.

“The discussion we have had for decades in rich countries is about how more consumption does not necessarily lead to more happiness, and that our quality of life goes beyond material things. Well, this is equally applicable to poor countries,” Angelsen says. “It is much more relevant than we think – and more than we thought when we began this study.”

For over a decade, CIFOR has been conducting the world’s largest and most comprehensive global analysis of tropical forests and poverty, the Poverty and Environment Network (PEN).

Around 8000 households in 24 developing countries across Asia, Africa and Latin America have been surveyed since 2004, with researchers collecting detailed socio-economic data at the household and village level in 59 study sites. The bulk of the data recorded income that households generate from diverse sources, including forests (this work is documented in a recent special issue of World Development).

Researchers asked people hundreds of questions about ‘life satisfaction’ or ‘subjective well-being’ – or ‘happiness’ for short  (although the latter might bring about the wrong association of something short term and superficial).

The bottom line is that the differences are not that big between poor and rich in what determines subjective well-being

Arild Angelsen

People talked about how satisfied they were with their life over the previous year – and to compare the economic situation of their household with others in the village – and to their own situation five years ago.

What researchers learned surprised them.

They found that absolute income does matter for people’s wellbeing, but that social comparison – how well off people feel compared to their neighbours – also matters a great deal.

Professor Angelsen says the results resonate with his experiences living and working with poor forest communities in Sumatra, Indonesia for his PhD research.

“People were practising shifting cultivation so they would open up fields in the forest and move out to stay there for several months while the rice was growing, partly to keep bush pigs away from the rice,” he says.

“I thought that this would be lonely as they’re maybe an hour walk or more from the village.”

“But people said to me, ‘No we like it, because in the village there is so much consumption pressure. There’s a market, you have to buy things, the kids want sweets. We enjoy being away from all that.’

“These were poor people – and yet there’s the exactly the same social mechanisms as are at work in rich countries, consumption pressure and keeping up with the Joneses.”

“The bottom line is that the differences are not that big between poor and rich in what determines subjective well-being. We have studied them as though they are a different category, a different breed – but it’s very much the same mechanisms at work,” Angelsen says.

The study also found that being married, strong family ties, and trusting one’s community also made people happier; while illness or major losses reduced wellbeing.


The definition of happiness is not universal, though – the role of culture is vital to understanding its meaning across regions.

Higher income and higher mobility is related to loss of trust, loss of social capital and weakened family ties, which are all important for wellbeing

Arild Angelsen

In the Latin American communities surveyed, people’s absolute income did not seem to have any noticeable impact on their wellbeing – it was only when well-off people compared themselves with their neighbours that money mattered.

That’s because Latin America is one of the most unequal areas in the world, says the study’s lead author, Victoria Reyes-García, Institució Catalana de Recerca i Estudis Avançats research professor at the Autonomous University of Barcelona.

And while Reyes-Garcia points out that the sample of villages may not necessarily be “representative” she says that the differences between regions has made her question just how universal the concept of happiness or wellbeing really is.

“Because for some societies being happy means the group is doing well, even if there is a personal sacrifice. So even if you have lower income or conditions it may not affect your happiness,” she says.

“Whereas in more individualistic societies it’s more about how much you get, even if other people are getting worse.”


While researching ‘happiness’ may sound frivolous, this study has serious implications for development policies for emerging economies, and rural and forest communities, the authors say.

A narrow focus on raising incomes can lead to people feeling (and being) worse-off, even as they make more money, says Angelsen.

“Higher income and higher mobility is related to loss of trust, loss of social capital and weakened family ties, which are all important for wellbeing – so if you sacrifice some of those things for higher income, happiness is not necessarily improved,” he says.

And for Reyes-García, the study shows issues of distribution should be taken into account.

“Policy makers and development practitioners tend to create projects designed to raise income – selling non-timber forest products, for example – but if you give money to the poor and don’t look at how it is distributed, and only some people benefit, then you are creating inequalities,” she says.

“You are not depriving the others of anything, but in terms of wellbeing they will be worse off, because now they are comparing themselves with the group that is a little bit better off.”

“You risk creating more unhappiness at least for part of the group.”

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