Money and well-being: three studies, one dispute

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.

Your answer

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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).

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.

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.

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)

Step 6 Learner practice (instant-marked)

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.

Your sentence

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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.