Angus Deaton, Who Just Won Nobel Prize, Thinks A $75,000 Salary Makes You Happy

Angus Deaton, a Princeton economist who won the Nobel Prize, thinks $75,000 per year is the magic income for happiness. (Photo via Cato Institute)

Angus Deaton, the 69-year-old economist who won a Nobel Prize on Monday morning, isn't exactly a household name.

At one point, nearly 75% of respondents to a poll on today said they hadn't heard of his signature work.

But even if he's relatively unknown, you're probably familiar with one of Deaton's studies.

The much-reported finding that making more than $75,000 per year doesn't make you significantly happier on any given day? That was discovered by Deaton (along with fellow economist Daniel Kahneman).

"The question of whether 'money buys happiness' comes up frequently in discussions of subjective well-being in both scholarly debates and casual conversation," Deaton and Kahneman wrote in 2010.

"More money does not necessarily buy more happiness, but less money is associated with emotional pain."

(It's worth noting that Deaton and Kahneman did find that richer people tend to objectively evaluate their lives in a more positive way, as Jordan Weissmann points out at Slate.)

Deaton and Kahneman found that happiness leveled off at a salary of about $75,000 per year.

The $75,000-salary-equals-happiness benchmark is useful, although it's not specifically why the Nobel Committee honored Deaton.

Instead, the committee praised his research into the study of consumption — essentially, how we use goods and services, and what that means for our welfare.

And on this front, Deaton is essentially unparalleled.

Deaton's "Almost Ideal Demand System," which he developed with John Muellbauer in 1980, has helped shape research into consumption of commodities. He's helped change how economists measure living standards and poverty in developing countries — or as the committee put it, "Deaton helped transform development economics from a largely theoretical field based on crude macro data, to a field dominated by empirical research based on high-quality micro data."

Deaton is a "brilliant selection" for a Nobel Prize, Tyler Cowen writes at Marginal Revolution. (Cowen has more on why Deaton is a deserving choice.)

Much of Deaton's work has focused on inequality and poverty, and how the world's poorest countries face significant economic and health challenges.

But if there's a through line in Deaton's work, it's that he's optimistic — that despite the world's many problems, we are on the right track. And that economic growth is propelling us forward, whether raising the standard of living in India or connecting Americans through the digital revolution.

"The story Deaton tells — the most inspiring human story of all — should give all of us reason for optimism," David Leonhardt wrote in the New York Times, reviewing Deaton's 2013 book, "The Great Escape."

"By the most meaningful measures — how long we live, how healthy and happy we are, how much we know — life has never been better."

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