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Happy Face MoneyThere is an old saying that goes something like this: "Money cannot purchase happiness but it does help!" And do you know what? It is absolutely true; we mean statistically true. Many people have accused Libertarian and people with Austrian Economics orientation to be, in essence, greedy bastards. No, we don't mean the usual critique to rich people (see for example Those Bastards - The Rich People). What we mean is that the accusation is directed towards average people (not rich) who embrace freedom and free markets as being nothing but selfish, egocentric, hedonistic materialists who are there in the world "all for themselves". It would seem that we have no morals, ethics, religion or whatever the accusation of the week may be according to their schedule. We are obsessed with material possessions. We don't think about the poor, the dispossessed, the cold, the hungry, the children, the puppies and the butterflies. In essence, we are Ogres and we eat kids for breakfast (with a little Worcestershire -or fish- sauce on top for flavour).

SIMPLY NOT TRUE

All those accusations are, of course, plain stupidity. Yes, we are big fans of everybody becoming richer (and we mean everybody) but simply as a side effect of being freer. We wish so because there is no other way to become richer other than through freedom. Communism does not work and Socialism is nothing but Communism light obsessed with "equality" which only achieves in reducing our wealth (see for example Piketty Fences). The point we had always made and will continue to make is a simple one: the richer a person is, the better this person's life is. It is not just that this person has more choices, but that the choices are cheaper in terms of wealth. All those choices become more accessible through wealth. Additionally, as Libertarians we don't give a rat's ass (spoken very bluntly) as to what you do with your wealth or what moral or ethical or religious code you follow. Our most precious belief is also a simple one: I won't mess with your property and in exchange you won't mess with mine. This belief is a belief that everybody can understand and follow. It does not require a University degree or a 10 year PhD thesis. A 2 year old child understands it. As such, we are only putting in place the very basic rules of coexistence and pursuance of wealth which are based on biological imperatives (see Contracts Are The Key To Coexistence). We do all this because we are convinced that this will make you happy. No, this is not a joke and we are not making fun of you. We genuinely want you to be happy. As a matter of fact, we want everybody to be happy. But what has this to do with wealth? Glad you asked.

HAPPINESS AND LIFE SATISFACTION

It so happens that many impeccable researches have traversed this road before we did and their findings are very interesting indeed! To task.

Income and Life Satisfaction

In the picture below it can be seen very clearly that the higher the personal income (Per capita GDP) the higher the Life Satisfaction. This graph shows what a million words can't express. Yes indeed, wealthier people are happier! You may have noticed that the horizontal scale is odd because it keeps accelerating. This is because it is a logarithmic scale. The implications of this scale will become obvious as we progress on this article.

Income and Life Satisfaction

Reference: Deaton (2008) – Income, Health, and Well-Being around the World: Evidence from the Gallup World Poll. In Journal of Economic Perspectives, 22, 2, 53–72. The poll was conducted in 2006. Note the log scale for incomes.

Statistical Link between Income and Life Satisfaction

Another way of looking at the same data is through a distribution plot. What the sophisticated picture below shows us (in a very convoluted manner) is that the statistical link between Life Satisfaction and Income is indeed strong. The higher the number in the horizontal axis, the stronger the link. If this number becomes negative, this would indicate the opposite; this is that Life Satisfaction is not related to Income. As you can see, only one country out of 113 has such a negative number.

Income Gradient

Reference: Stevenson B, Wolfers J (2008) – Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox. Brookings Paper Econ Activ 2008 (Spring):1–87.

Note: please see the Glossary if you are unfamiliar with certain words.

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