Maybe money does buy happiness

The collection of answers to the annual Edge question for 2008: What have you changed your mind about? Why?

165 contributors, and some fascinating responses, as always. Daniel Kahneman, 2002 Nobel Prize winner in economics:

To compound the irony, recent findings from the Gallup World Poll raise doubts about the puzzle itself. The most dramatic result is that when the entire range of human living standards is considered, the effects of income on a measure of life satisfaction (the "ladder of life") are not small at all. We had thought income effects are small because we were looking within countries. The GDP differences between countries are enormous, and highly predictive of differences in life satisfaction. In a sample of over 130,000 people from 126 countries, the correlation between the life satisfaction of individuals and the GDP of the country in which they live was over .40 – an exceptionally high value in social science. Humans everywhere, from Norway to Sierra Leone, apparently evaluate their life by a common standard of material prosperity, which changes as GDP increases. The implied conclusion, that citizens of different countries do not adapt to their level of prosperity, flies against everything we thought we knew ten years ago. We have been wrong and now we know it. I suppose this means that there is a science of well-being, even if we are not doing it very well.

The idea Kahneman had wanted to challenge was the idea of hedonic adaptation, that no matter how much our life circumstances change, whether we become wealthier, or get married or divorced, got healthy or sick, we all roughly returned to the same level of satisfaction. His idea was that as one's life circumstances improve, one's aspirations increase, and so one's satisfaction remains constant, but one's happiness is higher.

The paragraph above, though, challenges the idea of hedonic adaptation altogether. I have not read the findings from the Gallup World Poll referenced, but I'd long been a believer in the idea that money can't buy happiness, but extreme poverty can lead to unhappiness. But maybe we were all wrong?