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I am pretty convinced by the evidence that after a certain income additional increases barely increase happiness

May I ask what the evidence is here? My vague impression from briefly looking into it a while ago was that happiness is very roughly proportional to log of income, so the marginal dollar is likely less worthwhile, but there isn’t a clear discontinuity/​dropoff anywhere.

Epistemic status: Uneducated guesses, however I’m more confident than usual for uneducated guesses that this points at a real effect, much less confident about effect sizes.

Great question! I don’t know the literature enough to provide a useful answer. However I think your friend may be framing this question incorrectly.

To the extent that we observe a correlation between income and happiness, and correspondingly decreased happiness from downwards social mobility, I think it is too hasty to jump to the conclusion that this is entirely or even primarily due to habituation to a wealthier lifestyle/​material goods. Here are two other hypotheses:

1. a) (Especially within the same country/​culture/​social group) income is used as a proxy for perceived social status, and b) social status is somewhat causal of perceived happiness (as measured by things like self-reported life satisfaction).

2. Income, social status, and happiness are all to some extent caused by some other underlying factor or set of factors, rather than a direct causal chain from Income → happiness or social status → happiness.

1) seems clearly plausible to me. Income is pretty frequently used as a proxy for social status,* both in our intuitive understanding of the world and in formal literature (hence phrases like “socioeconomic status”, “social mobility,” etc). So I think it’s plausible that a lot of the effects of observed income on happiness (and perceived dissatisfaction from downwards mobility) comes from a perceived gain(loss) of status, rather than from the gain(loss) of desired material goods or lifestyle.

1) will predict that people who willingly choose a lower-paying but equally (or more) socially desirable career than their parents will not be (much) less happy, and indeed may be happier. For example, people who willingly become academics, artists etc.

2) is less obvious, but also intuitively seems significantly more likely than not. For example, certain physical and mental disabilities (eg debilitating pain) likely reduces both your ability to earn significant income, and directly makes you less happy. Some environmental factors may do the same. More cheerily, traits that make people more well-liked may also makes people happier, even after you factor out the social aspects.

So you can think of social status both directly causal of happiness, but also having bidirectional effects with underlying environments/​traits that are themselves causal of happiness.

To the extent that they’re true, 1) and 2) may have implications for EA (not all of them positive). I can write out more speculations in a separate comment if people will find it helpful.