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Monday, December 12, 2022

Wealth redistribution promotes happiness

R. J. Dwyer and E. W. Dunn
PNAS, 119 (46) e2211123119
November 7, 2022

Significance

We took advantage of a unique experiment, in which anonymous donors gave US$10,000 to each of 200 recipients in seven countries. By comparing cash recipients with a control group that did not receive money, this preregistered experiment provides causal evidence that cash transfers substantially increase happiness across a diverse global sample. These gains were greatest for recipients who had the least: Those in lower-income countries gained three times more happiness than those in higher-income countries. Our data provide the clearest evidence to date that private citizens can improve net global happiness through voluntary redistribution to those with less.

Abstract

How much happiness could be gained if the world’s wealth were distributed more equally? Despite decades of research investigating the relationship between money and happiness, no experimental work has quantified this effect for people across the global economic spectrum. We estimated the total gain in happiness generated when a pair of high-net-worth donors redistributed US$2 million of their wealth in $10,000 cash transfers to 200 people. Our preregistered analyses offer causal evidence that cash transfers substantially increase happiness among economically diverse individuals around the world. Recipients in lower-income countries exhibited happiness gains three times larger than those in higher-income countries. Still, the cash provided detectable benefits for people with household incomes up to $123,000.

From the Discussion section

This study provides causal evidence that cash transfers substantially increase happiness across a diverse sample spanning the global socioeconomic spectrum. By redistributing their wealth, two donors generated substantial happiness gains for others. These gains were greatest for recipients who had the least: Those in lower-income countries gained three times more happiness than those in higher-income countries, and those making $10k a year gained twice as much happiness as those making $100k. Still, the cash provided detectable benefits for people with household incomes up to $123k. Given that 99% of individuals earn less than this amount, these findings suggest that cash transfers could benefit the vast majority of the world’s population.

Of course, some caution is necessary in interpreting these findings, given that the study did not include nationally representative samples and focused on a limited time period. Although all participants were English-speaking Twitter users who were relatively liberal-leaning and well-educated, this sample was more economically diverse than any previous cash-transfer studies, enabling us to estimate the happiness benefits across a wide range of incomes. That said, our finding that cash transfers improved SWB—but less so for people with higher incomes—is consistent with the law of diminishing marginal utility in economics and with large-scale studies documenting the concave relationship between income and self-reported happiness.