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Module 2 · Lesson 2 · Core

Money and well-being: three studies, one dispute

What three well-known studies found about income, why they seemed to conflict, and how to think in doublings.

  • 55 minutes
  • Serves O2, O3 and O5
  • Assumes M2.L1

Phase 1: Prepare

Step 1 Warm-up recall

From M2.L1 and Module 1: what is the difference between life evaluation and emotional well-being? Give one survey item for each.

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Step 2 Learning goal

By the end of this lesson you can:

  • state what three well-known studies found about income and well-being (Foundation);
  • explain two reasons the studies can seem to disagree (Core);
  • use the “equal steps per doubling” pattern to estimate a change (Core).

Phase 2: Teach

Step 3 A familiar example

A pay rise of 5,000 means a great deal to someone earning 20,000 and very little to someone earning 200,000. The same sum is a large step up for one person and a small step for the other. Researchers capture this with proportional, not absolute, change.

Step 4 Clear explanation

Three studies frame the debate.

StudyData and measureWhat it reported
Kahneman and Deaton (2010), PNASMore than 450,000 responses to the Gallup-Healthways Well-Being Index, a daily US survey. Emotional well-being and life evaluation.Life evaluation kept rising with income. Emotional well-being showed no further progress beyond an annual income of about $75,000.
Killingsworth (2021), PNAS, “Experienced well-being rises with income, even above $75,000 per year”Reports of feelings collected at random moments from people going about their day (experience sampling).Experienced well-being kept rising with income. No plateau at $75,000.
Killingsworth, Kahneman and Mellers (2023), PNAS, “Income and emotional well-being: A conflict resolved”A joint analysis by the two earlier teams with a neutral third author (an adversarial collaboration).As later summarised: emotional well-being rises with income for most people, with a plateau at about $100,000 for the unhappiest minority.

Why can studies disagree? They may measure different things (a rating of life versus feelings sampled in the moment), collect data differently (a one-off survey versus random moments through the day), and define a “plateau” differently. A 2024 preprint by Bennedsen argued that the plateau finding depends on where the threshold is placed, and reported a flat relationship only above roughly $200,000 when the threshold was chosen from the data; the author called for more research. Treat it as a pointer, not as a settled result.

A pattern often reported in this literature is that life evaluation rises with the logarithm of income: equal steps for each doubling of income. On an ordinary income axis such a line looks as if it flattens, although it is still rising.

Ordinary axis: income 10,000 to 160,000Looks like a plateauDoubling axis: 10, 20, 40, 80, 160 (thousand)Same data: equal steps per doubling
The same invented relationship drawn on two axes. A curve that looks like a plateau on the left is a straight line on the right.

Step 5 Worked example (4 marks, invented numbers)

Suppose life evaluation rises by 0.3 points for each doubling of income.

  1. From 25,000 to 100,000 is two doublings (25 → 50 → 100). (1 mark)
  2. Rise = 2 × 0.3 = 0.60 points. (1 mark)
  3. From 100,000 to 175,000 is a rise of 1.75 times, which is 0.81 of a doubling, so the rise = 0.81 × 0.3 ≈ 0.24 points. (1 mark)
  4. Both steps add 75,000, yet the first is worth about two and a half times the second. Equal sums are not equal steps. (1 mark)

Phase 3: Practise

Step 6 Learner practice (instant-marked)

2. In Kahneman and Deaton (2010), which measure showed no further progress beyond about $75,000?

3. Why can two income studies seem to disagree?

4. A headline says “Money stops buying happiness at $75,000.” What is the best criticism?

Phase 4: Close

Step 7 Recap

  • Kahneman and Deaton (2010): life evaluation kept rising; emotional well-being showed no progress beyond about $75,000.
  • Killingsworth (2021): experienced well-being kept rising.
  • The 2023 collaboration: rising for most people, a plateau at about $100,000 for the unhappiest minority.
  • Equal steps per doubling: judge income changes in proportion, not by the sum.

Step 8 Exit ticket (ungraded)

Write one sentence on what a policymaker could responsibly say about income and well-being, using only what these three studies support.

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Step 9 Go further (Extension)

Read the abstract of Killingsworth, Kahneman and Mellers (2023). List which measure they used, which income threshold they pre-specified, and one limit they state.

Common mistakes

MistakeWhy it fails
Reading “no further progress” as “no effect”The 2010 finding concerned emotional well-being only; life evaluation kept rising.
Comparing equal sums at different incomesThe pattern is proportional: doublings, not dollars.
Treating a threshold as a lawThresholds depend on the measure, sample and how they are set.

Limits. The figures come from the studies’ abstracts and later summaries; learners are asked to read the originals in the Extension. The fixed step per doubling is a teaching simplification. Income, in these studies, is household income in US dollars, and findings may differ in other countries and periods.