So the old saying is true - money does not buy happiness, although it does if we earn more than our neighbours.
That's the major finding of a "happiness economics" study by New Zealand student Marc Reinhardt, presented at a conference in Italy recently.
Reinhardt, a graduate of the University of Auckland Business School, has been studying whether increased income makes us happy. It appears that while a pay rise does, the euphoria is short-lived if work colleagues, associates, or indeed the whole country's income goes up.
Reinhardt, 23, says human nature means we're always comparing with other people in our community. People don't just want to become wealthier, they want to be richer than the next person. Giving everyone a pay rise doesn't necessarily improve their sense of wellbeing because everyone is getting richer.
The same goes for contentment on a national level. If a country's standard of living and average income rises, the feel-good spin-off will once again be affected if we look across the border - or across the ditch in New Zealand's case - and see a neighbouring country doing even better, Reinhardt says.
While we care about our GDP, we care more about being better off than people in other countries. In short, our happiness with our economic lot depends on how our neighbours are doing.
"It's like grades in class, people don't really care that much what they get in an exam, they're always asking what other people got."
In the 70s, American economist and professor Richard Easterlin became known for his "happiness economics" - finding that, while the rich appeared happier, increased income did not correlate with increased happiness in the long term. Studies showed that as countries became richer over two or three decades, the level of happiness stayed much the same.
The Easterlin Paradox and other similar theories were examined by Reinhardt, comparing data from 27 mainly European countries, including Great Britain. The study also included the United States, Canada and Mexico. New Zealand was not included due to a lack of suitable data but Reinhardt sees no reason why New Zealanders should respond any differently from many of the countries studied.
"New Zealanders may be happier if our economy grows but if Australia grows faster than us, it may offset that," Reinhardt says. "We'd be happier if we were wealthier than Australia."
Reinhardt's research resulted in a 10,000-word honours dissertation on relative income and subjective wellbeing, comparing developed and developing (or transitional) countries, and urban and rural populations.
It confirmed the Easterlin Paradox held true in developed countries but revealed some distinctions in transitional countries, such as Lithuania and Slovakia. In developing countries the urban population, used to being poor, were happy when their incomes increased, no matter what their neighbours were earning. They saw a chance to work hard, get ahead and increase their income in the future.
The same did not apply to rural populations in transitional countries. Reinhardt found they were not so content with their increased income.
"Rural regions are more likely to be stagnant than mobile and there are likely to be fewer opportunities to get ahead," he says.
If everyone in the transitional country increased their income by 10 per cent, people in rural regions were unlikely to feel any happier because their gain would be overshadowed by the envious aspect of comparisons.
Reinhardt says the research has implications for public policy in New Zealand and other countries. If simply focusing on income and GDP does not necessarily make people happier, governments should be looking at other ways to improve their wellbeing.
He would also like to see New Zealand increase its publicly-available data on the subject.
"I think governments should be tracking subjective wellbeing, both at the national and regional level to help inform our policymakers," he says. "It's relevant. People are social animals. Incomes are important but so are relationships. They want to be in contact with other people. Things like family relationships, friends and community are important as well as health, personal values and freedom and work satisfaction."
Reinhardt is now considering studying for his Masters degree and wants to work as a public policy advisor, helping policymakers "make good decisions, decisions that make society better off".
Reinhardt's dissertation was presented at the Regional Studies Association annual conference in Piacenza, Italy in May. An extended version, co-authored with Dr Arthur Grimes, Adjunct Professor of Economics, University of Auckland Business School and Senior Fellow, Motu Economic and Public Policy Research in Wellington, will be presented at the New Zealand Association of Economists conference in Wellington in July.