In this study, we measure the relationship between consumption -- arguably an excellent measure of permanent income (see Meyer and Sullivan, 2006) -- and subjective well-being (or happiness) using a large national data set from the U.S.  We not only measure the extent to which consumption expenditure is related to happiness but also whether various components of consumption expenditure (e.g., food, health care, or leisure spending) is related to happiness. 

      After determining the relationship between various components of consumption and happiness, we then determine whether it is consumption expenditure itself or the relational goods that might be associated with consumption that determines happiness.  We do this by considering a variety of psycho-social measures that are related to a person’s social connectedness. 

Our preliminary findings suggest that spending on leisure goods (vacations, entertainment, sports, leisure equipment) is associated with an increase in happiness.  By contrast, spending on other types of consumption (food, utilities, and health care) is not associated with happiness.  Our findings also suggest that leisure spending increases happiness primarily as a result of the social connections that are linked to leisure spending, rather than the consumption of the material goods themselves.