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Chart of the Week

The Relationship Between Money and Happiness

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Charting the Relationship Between Money and Happiness

Charting the Relationship Between Money and Happiness

Today’s chart is best viewed full-screen. Explore the high resolution version by clicking here.

Can money buy you happiness?

It’s a longstanding question that has many different answers, depending on who you ask.

Today’s chart approaches this fundamental question from a data-driven perspective, and it provides one potential solution: money does buy some happiness, but only to a limited extent.

Money and Happiness

First, a thinking exercise.

Let’s say you have two hypothetical people: one of them is named Beff Jezos and he’s a billionaire, and the other is named Jill Smith and she has a more average net worth. Who do you think would be happiest if their wealth was instantly doubled?

Beff might be happy that he’s got more in the bank, but materially his life is unlikely to change much – after all, he’s a billionaire. On the flipside, Jill also has more in the bank and is likely able to use those additional resources to provide better opportunities for her family, get out of debt, or improve her work-life balance.

These resources translate to real changes for Jill, potentially increasing her level of satisfaction with life.

Just like these hypotheticals, the data tells a similar story when we look at countries.

The Data-Driven Approach

Today’s chart looks at the relationship between GDP per capita (PPP) and the self-reported levels of happiness of each country. Sources for data are the World Bank and the World Happiness Report 2017.

According to the numbers, the relationship between money and happiness is strong early on for countries. Then later, when material elements of Maslow’s hierarchy are met, the relationship gets harder to predict.

In general, this means that as a country’s wealth increases from $10k to $20k per person, it will likely slide up the happiness scale as well. For a double from $30k to $60k, the relationship still holds – but it tends to have far more variance. This variance is where things get interesting.

Outlier Regions

Some of the most obvious outliers can be found in Latin America and the Middle East:

Latin America vs. Middle East

In Latin America, people self-report that they are more satisfied than the trend between money and happiness would predict.

Costa Rica stands out in particular here, with a GDP per capita of $15,400 and a 7.14 rating on the Cantril Ladder (which is a measure of happiness). Whether it’s the country’s rugged coastlines or the local culture that does the trick, Costa Rica has higher happiness ratings than the U.S., Belgium, or Germany – all countries with far higher levels of wealth.

In the Middle East, the situation is mostly reversed. Countries like Saudi Arabia, Qatar, Iran, Iraq, Yemen, Turkey, and the U.A.E. are all on the other side of the trend line.

Outlier Countries

Within regions, there is even plenty of variance.

We just mentioned the Middle East as a place where the wealth-happiness continuum doesn’t seem to hold up as well as it does in other places in the world.

Interestingly, in Qatar, which is actually the wealthiest country in the world on a per capita basis ($127k), things are even more out of whack. Qatar only scores a 6.37 on the Cantril Ladder, making it a big exception even within the context of the already-outlying Middle East.

Nearby Saudi Arabia, U.A.E., and Oman are all poorer than Qatar per capita, yet they are happier places. Oman rates a 6.85 on the satisfaction scale, with less than one-third the wealth per capita of Qatar.

There are other outlier jurisdictions on the list as well: Thailand, Uzbekistan, and Pakistan are all significantly happier than the trend line (or their regional location) would project. Meanwhile, places like Hong Kong, Ireland, Singapore, and Luxembourg are less happy than wealth would predict.

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Chart of the Week

War and Peace: How Violence is Disrupting the Global Economy

This graphic estimates the direct and indirect costs associated with violence, and explores how they are negatively impacting the global economy.

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War and Peace: How Violence is Disrupting the Global Economy

Although you may not see it, millions of lives are disrupted by violence everyday.

War, homicide, terrorism, suicide, and sexual assault can be found across the world in various degrees. While certain types of violence can incur costs that result in personal traumas, violence can also create significant economic disruptions.

In today’s Chart of the Week, we visualize data estimates from the Global Peace Index 2019 on the global cost of violence, and its geographical spread.

How is Violence Linked to the Economy?

The Global Peace Index calculates the total cost of violence using purchasing power parity (PPP) by considering three factors:

  • Direct costs: Immediate consequences to the victims, perpetrators and the government
  • Indirect costs: Delayed economic losses following the violent event, including the after-effects of trauma experienced by the victim
  • Multiplier effect: Calculates the additional economic activity that would have accrued if the direct costs of violence had been avoided.

Between 2012-2017, the cost of violence increased by 11% to $14.6 trillion—mainly due to rising violence in Syria, Libya, Yemen, and other parts of the Middle East and North Africa.

In 2018, the total cost of violence decreased for the first time in six years to $14.1 trillion. That’s the equivalent of 11.2% of global GDP (PPP), or $1,853 for every person.

In this one year, the $475 billion saved from decreased violence costs was largely due to lower levels of armed conflict in Syria, Ukraine, and Colombia.

The Top 10 Worst Affected Countries

It comes as no surprise that countries affected by conflict incur the greatest costs due to a higher than average death toll, and sizable military expenditures.

Here are the countries with the highest cost of violence according to the report:

RankCountryCost of violence (% of GDP)    
#1🇸🇾 Syria67%
#2🇦🇫 Afghanistan47%
#3🇨🇫 Central African Republic42%
#4🇰🇵 North Korea34%
#5🇮🇶 Iraq32%
#6🇻🇪 Venezuela30%
#7🇨🇾 Cyprus30%
#8🇸🇴 Somalia26%
#9🇨🇴 Colombia25%
#10🇸🇻 El Salvador22%

Since 2017, Venezuela has climbed the ranking and now sits in the top 10, due to continuing political repression and a spiraling economy as a result of hyperinflation.

The Global Composition of Violence

Government spending on military comprises 40% of the global total, or $5.7 trillion in constant purchasing power parity (PPP).

Type of economic impactShare of total     
Military expenditure
40.2%
Internal security expenditure
31.7%
Homicide
8.6%
Private security expenditure5.8%
Suicide5.2%
Armed conflict4.8%
Violent crime2.6%
Other1%

Naturally, the types of violence costs vary by region, and the most noticeable difference is in military expenditure. It represents 59% of Middle East and North Africa’s violence costs—but only 8% for Central America and the Caribbean.

regional costs violence

Interestingly, the Middle East and North Africa boast the lowest levels of violent crime, homicide, and suicide, representing only 4% of the total, compared to South America’s 45%.

Keeping the Peace

Despite today’s chart painting a picture of the world as a dangerous place, it is worth noting that there are two sides to this story.

Of the 163 countries ranked in the index, 86 countries improved their peace score in the last year, with Iceland retaining its number one position for over a decade. In fact, the country has not had any gun murders since the Global Peace Index began in 2007.

Is the recent drop in costs of violence a sign that we are moving towards a more peaceful planet, or just a blip on the radar?

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Business

Ranked: The 20 Easiest Countries for Doing Business

Entrepreneurship is challenging at the best of times. Here are the countries where at least starting a new business is easy to do.

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Easiest Countries to do Business

Ranked: The 20 Easiest Countries for Doing Business

Contrary to popular belief, the hardest part about running a business may not be finding customers, it’s getting one started.

Depending on the public policies and application processes of your country, you might struggle or succeed in opening and operating a business.

If you live in New Zealand, for example, you can get a new enterprise up and running in half a day. If you live in Luxembourg or Argentina, however, it’s a different story─with the process sometimes taking over a year.

Today’s chart uses data from the World Bank’s annual Doing Business 2020 report, which delves into the ease of doing business in countries around the world.

Measuring the Ease of Doing Business

Now in its 17th year, the Doing Business (DB) report measures how easy it is for someone to start and run a company in an economy, using 12 key factors throughout a business lifecycle:

  1. Starting a business
  2. Employing workers
  3. Dealing with construction permits
  4. Getting electricity
  5. Registering property
  6. Getting credit
  7. Protecting minority investors
  8. Paying taxes
  9. Trading across borders
  10. Contracting with the government
  11. Enforcing contracts
  12. Resolving insolvency

Of the 190 countries reviewed last year, only 115 made it easier for entrepreneurs to do business.

Note to readers: this year’s DB score did not factor in Employing Workers or Contracting with the Government when ranking economies.

Top 20 Easiest Countries to Run a Business

RankCountryDB Score
#1🇳🇿 New Zealand86.8
#2🇸🇬 Singapore86.2
#3🇭🇰 Hong Kong85.3
#4🇩🇰 Denmark85.3
#5🇰🇷 South Korea84
#6🇺🇸 United States84
#7🇬🇪 Georgia83.7
#8🇬🇧 United Kingdom83.5
#9🇳🇴 Norway82.6
#10🇸🇪 Sweden82
#11🇱🇹 Lithuania81.6
#12🇲🇾 Malaysia81.5
#13🇲🇺 Mauritius81.5
#14🇦🇺 Australia81.2
#15🇹🇼 Taiwan80.9
#16🇦🇪 United Arab Emirates80.9
#17🇲🇰 North Macedonia80.7
#18🇪🇪 Estonia80.6
#19🇱🇻 Latvia80.3
#20🇫🇮 Finland80.2

In the top spot for the fourth year in a row, New Zealand only requires half a day to start a business. Singapore also stands out for having the shortest timeframe when it comes to paying business taxes and enforcing business contracts.

Only two African nations─Rwanda and Mauritius─are listed in the top 50 countries, with Mauritius being the only one to crack the top 20 list.

Latin American economies are noticeably missing from the rankings, as many countries in this region are fraught with bureaucracy and prolonged processes.

Most Improved Scores

Several developed and developing economies made significant strides in 2019 to implement reforms that opened doors for new business owners.

The Doing Business 2020 report shows that the cost of starting a business has fallen over time, particularly in developing economies.

Top 10 Most Improved Economies, 2018-2019

Top 10 most improved economies for doing business

Saudi Arabia made the greatest improvement overall, adding 7.7 points to its score.

Bahrain also made improvements over the most number of factors (9). While Jordan showed improvement in the fewest factors (3), it showed the second highest jump in DB Score.

Gains Among Low-Income Countries

The DB 2020 study also shows that developing economies are making progress: it’s now cheaper than ever before to run a business in developing economies.

However, a significant disparity still remains when we consider the difference in business costs between high-income and low-income economies.

An entrepreneur starting a company in a low-income economy will spend about 50% of per capita income (PCI) to launch a venture, whereas an entrepreneur in a high-income economy spends only 4% PCI to accomplish the same task.

Put another way, entrepreneurs located in the bottom 50 economies spend an average six times more to open a new company as those in a high-income economy.

Entrepreneurship and Economic Growth

Generally, more entrepreneurs will enter a market where they can easily conduct business─adding more value to local economies.

While the rankings clearly illustrate the link between ease of doing business and economic growth, there are still significant barriers in place that not only deter entrepreneurship but also inhibit a relatively simple strategy for growth.

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