Income and happiness: Towards a unified theory

Material aspirations are initially fairly similar among income groups; cons equently more income brings greater happiness. Over the life cycle, however , aspirations grow along with income, and undercut the favourable effect of income growth on happiness, although the cross-sectional happiness-income difference persists. People think they were less happy in the past and will be happier in the future, because they project current aspirations to be t he same throughout the life cycle, while income grows, But since aspiration s actually grow along with income, experienced happiness is systematically different from projected happiness. Consequently, choices turn out to be ba sed on false expectations.