We lost an intellectual giant last week, Daniel Kahneman.
Psychologist and Nobel prize winner in economics, he along with long term collaborator Amos Tversky, created what has become known as ‘Behavioural Economics’.
So what you say.
In 2010 Kahneman published research that demonstrated that income was strongly correlated with happiness at lower levels, but above a seemingly modest level (US 75K at the time) it had no effect.
In 2021, a Wharton academic Mathew Killingsworth published a paper that came to the opposite conclusion.
In order to reconcile these conflicting outcomes, Kahneman teamed up with Killingsworth and a third, neutral researcher to establish the truth.
The result was a case of diminishing returns.
It found there were substantial gains in happiness up to 200k income, but after that, diminishing returns kicked in. The ‘happiness curve’ flattens out, eventually delivering no increase in happiness with an increase in income.
This seems to make sense to me.
At a point, an increase in income does not increase happiness (I aspire to discovering that point) it just becomes a scorecard, no different from the one used on a golf course.
Given this instinctively sensible outcome, should Dr Chalmers add a level to income tax?
At a point above an income level few will ever see, impose a further meaningful tax rate on the increments?
Despite the inevitable screams, they will not miss the money, and you never know, it just might make those few happier.
