I know what will make me happy. All I need to attain an enduring sense of joyful exuberance is one lousy 1959 Les Paul electric guitar in pristine condition. That this can be bought for the low, low price of $325,000 is a minor impediment - at least, it would be in an alternative universe where money falls from the skies in great sheets and the sun shines continually in Vancouver.

Unless I steal Jimmy Page's while he's looking the other way or win the lottery, I will likely never possess what is widely regarded as the holy grail of electric guitars. For me, this is a source of deep and unabating sadness. But, even if it were within reach, would acquiring the object of my desire have the desired effect?

Recently, the notion that money can make you as giddy as a girl at a Jimmy Choo sample sale has come under fire. At the same time, however, emerging research shows that money can make you happy - under very specific conditions. So, which wins out? Like most age-old questions, this one is more complicated than it seems.

The root of all evil?
Tammy Strobel owns a nice little pied-à-terre in Portland, Ore. More accurately, Tammy Strobel owns an orteil-à-terre - "toe on the ground" - since, by almost any measure, the footprint of the house she and her husband live in takes up less square footage than the average parking space or walk-in closet.

At only 12 square metres and built at a cost of just $33,000, the home is beyond tiny. Yet Strobel, the author of You Can Buy Happiness (and It's Cheap), has, quite literally, downsized her way into a happier, more fulfilling life - an idea she embraced while culling all her worldly possessions down to 100 items (yes, shoes included).

The result? No debt, less stress and a heightened sense of well-being. "The idea that you have to go bigger to be happy is false," she told The New York Times. "I really believe the acquisition of material goods doesn't bring about happiness."

Strobel may be onto something. Although long thought to be significant to a sense of well-being, money may not promote happiness as much as suspected. In a 2010 study, Nobel prize-winning psychologist Daniel Kahneman reported that in a two-year-long survey of 1,000 U.S. residents, happiness levels did rise with income - but only up to a point.

Once a family income reached a relatively modest threshold of $75,000 a year (in high-cost areas; in other regions, this threshold would probably be lower), there was no measurable difference in reported happiness, regardless of how much more money was coming in.

How does money impact our relationships with others? Keep reading on the next page...