Does money buy happiness? Yes—up to a point. All sorts of other factors also play in, but nothing is as important as national income in determining response to “life satisfaction” surveys. A decade of surveys organized by a Dutch social scientist have found that “most people worldwide say they are fairly happy” and that people in more developed countries are happier than people in less developed countries (i.e. more development would increase happiness). However, once you get to the $20,000 per capita income level, advances in national income cease to produce much gain in life satisfaction or happiness. Thus, “happiness” or “life satisfaction” has not increased in the United States since the mid-Fifties, although there has been an 85 percent increase in the real value of family incomes (from $24K in 1953 to $51K in 2001). About 53 percent of Americans described themselves as “very happy” in 1957; about 47 percent did so in 2000. Curiously, the material ambitions of Americans seem to have sky-rocketed in recent years. In 1987 surveyed adults estimated that an income of $50K/year would be enough to “fulfill all your dreams”; by 1994 that figure had shot up to $102K, although prices had not doubled. (NB: All of a sudden Americans wanted things that were really expensive? Or college tuition sticker-shock had hit?)
What is “happiness”? One Yale political scientists (Robert Lane) argues that “happiness is derived largely from two sources—material comfort, and social and familial intimacy…” These needs tend to be out of whack. In “less developed countries…social ties are often strong and money is scarce…” People have social intimacy, but no material comfort. “Economic development increases material comfort, but it systematically weakens social and familial ties by encouraging mobility, commercializing relationships, and attenuating the bonds of both the extended and the nuclear family.” Initially, “the gains in material comfort more than outweigh the slight declines in social connectedness.” At some point the competing needs for comfort and intimacy balance, leaving people at their maximum point of “life satisfaction” or “happiness.” Western culture has a deeply entrenched need to produce and consume, to generate prosperity. It is what made the West the leader in economic development and it continues to hold sway long after the real need to produce has passed. Eventually, therefore, “the balance tips and the happiness-reducing effects of reduced social stability begin to outweigh the happiness-increasing effects of material gain.”
Still, there are places that are poor and unhappy, less poor and happy, and rich and happy, but there are no places that are rich and unhappy. The places that were poor and unhappy ten years ago were Ukraine, Russia, Belarus, Armenia, Azerbaijan, Bulgaria, and Latvia. Estonia and Lithuania are pretty close to falling into this category. In short, people were really miserable in the ruins of the old Soviet empire. Conversely, people who lived in the old American empire (the US, Canada, Western Europe, Japan, Australia) tended to be pretty happy. (Hence the outcome of the Cold War.) The highest levels of “life satisfaction” seemed to be found in politically insignificant countries with per capita incomes between $17,000 and $25,000, and located in more northern climates (Finland, Sweden, Denmark, Iceland, Switzerland, Netherlands, Luxembourg, Ireland, Canada). However, that doesn’t prove that moderate income and moderate social stability is the real key to happiness. Perhaps the cold climate just keeps people indoors all the time and they make love a lot. For lack of anything better to do.
 Don Peck and Ross Douthat, “The World in Numbers: Does Money Buy Happiness?” Atlantic, January-February 2003, pp. 42-43.