Saturday, October 02, 2010


Michael Norton reports on his happiness research here. Here is his summary:

Does money buy happiness? We certainly behave as though it does, spending most of our waking hours pursuing it. If only we got that raise, owned that second home, third car or 3G iPad, things would be better, we tell ourselves. We would finally be happy.

Truth be told, people drastically overestimate the impact of changes in income on their well-being. In a survey I conducted with my colleagues Elizabeth Dunn and Lara Aknin at the University of British Columbia, we asked 315 Americans to rank their happiness on a 100-point scale and predict how happy they would be if they made ten different incomes, ranging from $5,000 up to $1,000,000. Those who reported earning $25,000 a year predicted that their happiness would double if they made $55,000. But when we measured the actual happiness of these two groups, the change was only 7%. Beyond that, our data showed that once people reach the median income in the U.S. (about $60,000), the happiness return on additional income is very small.

Hapless lotto winners, take heart. We did discover at least one way to buy happiness with your money: Give it away.

... To test our idea, we approached strangers on the street and gave them different sums of money ($5 or $20) and told them to spend it by 5 p.m. that day. Half were told to spend the money on themselves, while the other half were told to spend it on others. When reached that evening, those who spent the money on themselves bought things like coffee and food, while those who gave money to others reported spending it on things like gifts for their siblings or donations to the homeless.

The result? Those who had spent their money on others reported feeling much happier at the end of the day than those who had spent their money as they usually did, on themselves. There was no difference in happiness between those who spent $5 or $20, suggesting that it is not how much money you spend, but how you spend it, that boosts the spirits. When we asked people to choose what would make them happiest, most people predicted that spending money on themselves would make them happier than giving it away, suggesting that people overestimate the buzz they get from a new purchase and underestimate the warm-and-fuzzy benefit to social spending.

We've heard this before. So what is going on? Most of us are self-regarding as well as other-regarding. We have also evolved through eons when death by starvation was a serious threat and have learned to accumulate. And we have also been hard-wired to extend love and care to those close to us. Extending it to those less close is the challenge. We can extend the circle of care measure by measure beyond immediate family to close friends and even to less close friends. And many of them can do little things to antagonize us along the way (they are only human). But the rewards from seeing a smile on those who we can be good to are serious. We may still have a bit of trouble extending this to anonymous and distant candidates for our love and charity, but Norton and others are surely right. There are great rewards from from flexing our other-regarding muscles. There is even some happiness to be found.

The Arthur Brooks research on philanthropic giving adds another wrinkle. Those describing themselves as conservatives are more charitable. Those on the left (he finds) are generally stingier. That makes sense too. If you busy yourself with coercing society at-large to transfer wealth, your other-regarding juices might be spent.

But is there any happiness for the stingy coercers?