Happiness, Income, and Beyond

This commentary to Carol Graham's paper deals with the nature of the relationship between income and happiness. Carol Graham focuses her contribution on what I call the positive-coefficient hypothesis in economic theory; which states that, on average, well-being rises with income. The hypothesis was first questioned by Richard Easterlin's pioneering work and it has captured a lot of attention from happiness researchers during the last decade. My contribution deals with a related hypothesis, which I call the close-relationship hypothesis in economic theory. The hypothesis states that a person's income is a good predictor of his or her well-being. I show that this hypothesis is rejected by happiness research, and I discuss the implications of this rejection.