All Commentary
Thursday, August 1, 2002

The Four Sources of Happiness: Is Money One of Them?

Income and Satisfaction Are Related

“I’m tired of Love: I’m still more tired of Rhyme.
But Money gives me pleasure all the time.”
-Hilaire Belloc

I came across a very interesting book the other day called Happiness and Economics: How the Economy and Institutions Affect Human Well-Being by Bruno S. Frey and Alois Stutzer. It’s a technical book, with lots of graphs and mathematical regressions, but the conclusions are pretty clear: “The general result seems to be that happiness and income are indeed positively related.”1 In other words, money can provide many benefits–more opportunities, higher status in society, and the ability to travel and enjoy better food, housing, health care, and entertainment. Several studies indicate that wealthier people live longer. In short, money fulfills highly desirable wants.

I remember the day that I discovered that I would be financially independent. It was a summer day in the late 1970s when I came home and presented my wife with over a dozen checks from a mail-order business I had started. Within a year, we had bought our first home, with 20 percent down, and by 1984, we had become successful enough that we could move our entire family (with four children) to the Bahamas to “retire.” The experience of becoming financially secure gave Jo Ann and me an incredible feeling of satisfaction. Of course, we didn’t really retire. We used our free time to read and write, go sailing, spend time with our children, and become involved in the local theater, a private school, and church work.2

Why Most Poor People Are Unhappy

The graph on the next page shows the relationship between income and happiness across nations. In general, people in poor countries are less satisfied than people in rich countries. One reason is that poor nations are often more subject to violence and uncertainty. As Frey and Stutzer state, “Countries with higher per capita incomes tend to have more stable democracies than poor countries have. . . . The higher the income, then the more secure human rights are, the better average health is, and the more equal the distribution of income is. Thus, human rights, health, and distributional equality may seemingly make happiness rise with income.”3

But the graph also indicates that money causes diminishing returns in happiness. Subjective well-being rises with income, but once beyond a certain threshold, income has little or no effect on happiness. Many wealthy people have experienced this law of diminishing returns and are not any more happy than middle-class people. In fact, some wealthy people are downright unhappy. Frey and Stutzer conclude, “Higher happiness with material things wears off.”4

Four Elements of Happiness

Years ago I read a sermon by a church leader on the “Four Sources of Happiness.” He spoke of work, recreation, love, and worship. I think he’s right.

First, you have to find rewarding and honest employment to be happy. Hard work and entrepreneurship offer the opportunity to create surplus wealth. Money in the bank gives you a real sense of security as well as freedom to do what you want to do. Moreover, studies show that unemployed people, believing they are not contributing to society or themselves, are generally unhappy.

Second, recreation is essential to your well-being. It helps to take a break from work from time to time. Relaxation and avocations are essential elements of a happy life. People who spend too much time at the office and can’t relax with their family or friends at home need to learn the joy of recreation with a hobby, sports, travel, or other avocation. Some of my most memorable times have been playing softball or basketball with friends, traveling with _family members on the weekend, or visiting a bookstore.

Third, love and friendship are also key elements of happiness. Everyone needs someone to confide in, to spend time with, to learn from, to reminisce with, to love and to be loved by. For most people, love and friendship take time and effort. You have to work at developing friendships, but the rewards are never-ending.

Finally, worship. Developing one’s spiritual side is essential to happiness. Some of my friends say they don’t need religion, but they are missing out on one of the joys of life–listening to a great sermon, singing hymns, meditating on the word of God, and praying for God’s help in solving business or family problems.

Let me conclude this essay with a delightful stanza by the Norwegian playwright Henrik Ibsen, who put the role of money in the proper perspective:

Money may be the husk of many things, but not the kernel.
It brings you food, but not appetite;
Medicine, but not health;
Acquaintances, but not friends;
Servants, but not faithfulness;
Days of pleasure, but not peace or happiness.


  1. Bruno S. Frey and Alois Stutzer, Happiness and Economics (Princeton, N.J.: Princeton University Press, 2002), p. 81.
  2. See my article “Easy Living-My Two Years in the Bahamas” at
  3. Frey and Stutzer, p. 75.
  4. Ibid., p. 78. In fact, Frey and Stutzer publish a graph showing that “Per capita income in the United States has risen sharply in recent decades, but the proportion of persons considering themselves to be ‘very happy’ has fallen over the same period” (p. 77).

  • Mark Skousen is a Presidential Fellow at Chapman University, editor of Forecasts & Strategies, and author of over 25 books. He is the former president of FEE and now produces FreedomFest, billed as the world's largest gathering of free minds. Based on his work “The Structure of Production” (NYU Press, 1990), the federal government now publishes a broader, more accurate measure of the economy, Gross Output (GO), every quarter along with GDP.