Americans are materially wealthy relative to most of the rest of the world. I would suspect (without having any sort of citation to support it) that, when compared to Americans, most of the people who have ever lived in any time and in any country have known nowhere near the standard of living represented by a $60K annual income in the U.S. today. If that assumption is true, and if the premise of this piece is also correct, this would mean that most of the people who have ever lived throughout all of humanity's existence have been unhappy with their lives. That would seem to me a dubious proposition.
I think that neither money nor happiness is the key but rather contentment. Life dishes up the good and bad to us all, and we often can't do anything about that, but learning to be content with what we have is an achievable and worthwhile goal for all - and also a better measure than money can ever be of whether we have lived our lives well.
I think the key to the $60K happiness threshold is that it represents being in the top 20% income bracket.
Standard of living may be lower elsewhere, however, an individual's relative wealth (especially with respect to peers) is probably what's really relevant:
Yes, point well taken - I think I was unfair to Mr. Kahneman in how I characterized his statement (my comment really addresses the absolute "Happiness is earning $60,000/year" statement as expressed in the title - which, in my view, is a dubious absolute metric for happiness). Thanks also to timwiseman and merrick33 for pointing this out.
In fact it might represent both an absolute and a relative component, all it really says is that in the USA today that combined figure seems to be $60k.
I suspect that our system is (unintentionally) rigged so that only the top 20% are set-up for happiness. I suspect that most social systems are set up in such a way, such that the majority have to strive for something.
"I think the key to the $60K happiness threshold is that it represents being in the top 20% income bracket."
And another caveat (financially), to those who live in regions where the housing bubble has not yet popped, is: did you buy a house before the bubble started?
In most of Canada (and Australia and a few other places) where the bubble is still thriving, the #1 most important financial issue for 95+% of people is, did you own a house before ~2001. If not, you can be in the top 10% of earners, and you can only "afford" to buy a house equivalent to those in the top 30-40% who got in pre-2001.
In major cities in Canada, $500k will get you an "ok" cookie cutter in the suburbs, if you're lucky. In the US, where the bubble has burst, $500k will, in most places, get you what seems like a mansion.
Ya, maybe I didn't express that properly, I AM bitter! I'm bitter that my government is using my tax dollars to play with interest rates allowing a real estate bubble to exist in the first place.
In a normal market, one should be able to reasonable purchase a home based on local wages. Since central bankers have decided to counteract the actions of the normal business cycle, I am now stuck in a 10-20 year battle while they hand out free money ($ below the cost of inflation) waiting until they find they are wrong yet again.
"In a normal market, one should be able to reasonable purchase a home based on local wages."
Says who? You're not even making the point of the actual existence of a bubble believable, and my cursory search shows that most people don't agree with your claims. And that's not even mentioning that there is no reason ever that it "should be easy". You can borrow at a fixed rate for 5% FFS! In the 80's people paid 10-15 % ! Was it so much better back then?
Most people buy homes with a mortgage, where the number they look at is "can I afford the monthly payment?" When interest rates are high, the same monthly payment gets you a much smaller mortgage, which means there's less money to buy a house, which means that house prices come down accordingly.
It ends up being pretty close to a zero-sum game: house prices go up when mortgage rates go down, and house prices go down when mortgage rates go up.
The problem with the recent financial innovation has been that it prices fiscally responsible people out of the market. So when you can get a zero-money down option ARM without proof of income, suddenly people who never could've gotten a mortgage have a lot of money to spend on houses. The price of a house rises accordingly, and soon only people who are willing to take out zero-money-down option ARMs can afford them. Fiscally prudent people who're looking for a 30-year-fixed, 20% down mortgage see that homes are overpriced, and so they sit on the sidelines and rent.
It's Gresham's Law: "Bad money drives out good". It's why we got such a housing bubble in the U.S: it wasn't that consumers were individually stupid, it's that they were responding rationally to economic incentives, and those incentives led to a market where only people who had no possible way of paying back their loans were buying houses. One of my coworkers bought a house in 2006: he said that the loan officer told them that basically all loans that they wrote were now interest-only. Small wonder, considering that everyone who was looking to put down 20% found that homes were too expensive for them to afford.
Luckily, this process works in reverse, too. Now that the bubble's bursting, the only people who can get loans are the ones able to put significant money down. Good things come to those who wait.
Not to mention homebuyers never had to worry about these things when the market set prices, but now when the central banks set the price of money, all hell breaks loose. (By this I mean 40% to 70% swings in real estate prices, maybe you think thats ok, maybe the people buying overvalued real estate should have "seen value")
Though in this case, I think you may be neglecting one thing. As the article mentions towards the end, humans are creatures of comparison. Someone earning around 60K in America can see that they are better off materially than most of the people in their city and if they pay any attention at all to the world they will know they are vastly better off than the majority of the world. At that point they are hardly wealthy, but better off than most.
Yep, I was going to post exactly this. You can be making 200k/year, but if you're a trader and your peers are pulling 400-600k, you're very likely to be unhappy with your predicament.
Humans are competitive. If you have the best mud hut of everyone you know and know of, it seems likely that you'll be just as happy as that top trader, with regards to wealth.
most of the people who have ever lived throughout all of humanity's existence have been unhappy with their lives. That would seem to me a dubious proposition.
Actually, I would agree with the assertion that most humans who've ever lived have been less than happy through most of their lives. The 60K number is mentioned in the context of being in the top 20 percent, status-wise, so this implies that most Americans are unhappy even though they're richer than Croesus, quite literally. This squares with my experience.
I think that neither money nor happiness is the key but rather contentment. Life dishes up the good and bad to us all, and we often can't do anything about that, but learning to be content with what we have is an achievable and worthwhile goal for all - and also a better measure than money can ever be of whether we have lived our lives well.