How Much Money Makes You Happy?

After we talked about it in class, it got me thinking; how much money makes you happy?

In many studies, it has been found that at a certain point, money stops making you happy.  For instance, according to a recent international survey, slum dwellers in Calcutta rated themselves as about as happy as millionaires in America and Northern Icelandic Inuits rated the same as American millionaires.  Then, does money buy happiness?

Well, to a point it is rather clear that it does, because the homeless in Calcutta were far less happy than American millionaires.  So, what gives? Well, Harvard Professor, Daniel Gilbert says that it has been, "generally concluded that wealth increases human happiness when it lifts people out of abject poverty and into the middle class but that it does little to increase happiness thereafter."

I guess that makes sense, but with the fear of sounding terribly snobbish, there are certain quite expensive things that I love.  My family is fortunate enough to have a summer cottage and a relatively expensive ski boat.  I would say that while at our cottage in Wisconsin, I feel generally more content than in Chicago, not to mention that boating is also a very fun pastime, and gas for a V8 boat is not cheap.

Would I be less happy if we didn't have the boat and the house? I don't know.  I have a few hypothesis as to the relationship between wealth and happiness:

1) those who are wealthy only believe that they are becoming happier, when in truth, they are becoming less and less content with what they have.

2) People who truly need money to feel happy, work hard and get it.  One of my friend's dads came from rather meager means (lower middle class) and worked hard to get into law school then get a job at a private firm.  I'm not saying that everyone who wants to be wealthy gets there, but a lot do.

3) People can naturally feel content with just one rung above what they have, so long as they have the general necessities of life (food, shelter etc.), therefore, I feel relatively content with what I have, but would not want less because I have had a taste of "the good life" and would not could not imagine having tons more (Buchanan type wealth).

What do you think?  Does wealth cause happiness, or does happiness come from people's own desires (which for some may include wealth) or does wealth deter happiness? I would love to hear your hypothesis.