Lord, Make Me Blissful, But Not Yet

This year's TED conference just wrapped up, and among the ideas generating the most chatter was Daniel Kahneman's claim about happiness.  According to Kahneman, a psychologist and Nobel laureate at Princeton, happiness levels for individuals increase with income, but only up to 60,000 $/yr.  "Above that it's a flat line" he said in an interview with CNN.  Does this mean we all should just shut off our ambition and go canoeing once we hit $60k?

I'd argue no.  And furthermore, I think Kahneman's statistic is misleading for two reasons.  Firstly, reported happiness isn't the whole picture.  There are many other dimensions of value, such as life satisfaction or immediate pleasure.  Secondly, the threshold beyond which utility decreases, known in economics as the 'bliss point,'  is not fixed.  In a rich country like the U.S. happiness is a relative, rather than absolute, value.  $60K a year does not represent some magical amount of material wealth, but instead an arbitrary point highly influenced by external social factors.  Economist Marco Bertoli has a brilliant article looking at this phenomenon in the context of energy efficiency.  Snapshot: 

"Finally, if the bliss point exists, but figures show that individuals never achieve it, the correct question would be: how does it happen that the bliss point for individuals keeps moving further, becoming more and more unattainable? Why did we condemn ourselves to this constant Sisyphean challenge?"

Short answer: people are jealous, overly concerned with social status, and prone to addiction.  Research shows that experiences generate more happiness than do material goods.  One possible explanation for this is that comparing experiences is much trickier than comparing material wealth.  This makes unique experiences less susceptible to social jealousy or power cravings.  Maybe that canoe trip isn't looking so bad after all.