“Anybody who thinks money can’t buy happiness doesn’t know where to shop”
- Unknown

“Anybody who thinks money will make you happy, hasn’t got money.”  
- David Geffen

Or can it?

We humans are obsessed with money.  To many people, it’s a commodity in and of itself.  And it seems we’re gradually getting more obsessed.  In the 1960s, 80% of US college students said it was essential to develop a meaningful philosophy of life, and 40% said it was essential to be very well off financially.  By the mid-1990s, you could reverse those figures. (1)

It seems like many people just want money.  They don’t want to have made a product, provided a service or found some other way to offer value, and have their money reflect the value they have given.  They want money as the end goal, not particularly caring how it was obtained.

Not all people are like that, of course, but a lot are.  And it’s quite natural that they are, given what people think money can do for them.  It’s the Holy Grail, isn’t it?   You get freedom, security, status and…. happiness?

Or do you?  Isn’t it also the root of all evil?  Some might argue money changes you for the worse, and leaves you with little time for other people.  Others say that attachments to material things like money are the source of all suffering.

Psychologists have been studying the title question of this article question for many years now, and have come to some interesting conclusions.  So what did they find?  Does money buy happiness?

…Yes.  And no.  It’s complicated.

Money can buy happiness, but only if you don’t have it to start with, and it’s subject the law of diminishing returns.  If you live in poverty, it’s likely that many of your basic physical needs aren’t being met.  You might not have an available food or water supply.  You might have inadequate shelter, warmth or safety.  

Within nations, measurements of happiness correlate only slightly with income, so money isn’t a good way of predicting how happy a person is.  Between countries, the correlation is stronger – here’s the famous graph from the World Values Survey, showing the GDP per head of different countries:

So the tailing off point looks to be about $15,000 per year – below this point, the answer is yes: more money does buy happiness.  If you go from barely scraping by each month to getting by OK, that’s a big leap – you’re out of poverty, your basic needs are met, you’re struggling less and you’re happier.  After this point, as you can see, the returns tail off.  Essentially, once you’re out of poverty and into the middle-class, extra money doesn’t buy much more happiness.  

In 1985 the Forbes 100 wealthiest Americans, each with a net worth over $125m, had their happiness measured by psychologists, and their results turned out to be only slightly higher than the average for the country.  Think about that; the top 100 wealthiest people, out of however-many-millions, were slightly happier than average. (2) 

How can this be?  We’re socialised into believing that material luxuries are what will make us happy, and more than that, we know we get happier when we get a pay rise.  What’s going on?

One answer is that we adapt.  We’re a very adaptive bunch, us humans.  If we’re exposed to a particular environment for a long enough time, we get used to it.  It becomes the norm.  What was once a luxury becomes a necessity.  

Ever heard someone say, “I couldn’t live without my mobile phone?”  Have you ever said it?  This is a good example.  Let me tell you now, you absolutely could live without your mobile phone.  I used to call my friends’ house phones, make arrangements to meet up, and then turn up.  It worked fine.  

Now, if I’m running late, I can text people to let them know.  What a great convenience!  This used to be quite the novelty.  Now it’s the norm.  I expect it.  If I lose my phone, that’s annoying!  Even though I was once fine without one and would be again, it doesn’t matter.  I’ve adapted to life with a mobile phone so I feel the loss when it’s gone.

The same rule of adaptation applies to just about anything that money can buy.  Adaptation explains how we can live in paradise but get frustrated by a traffic jam.  You don’t think you live in paradise?  Look up how people lived 2000 years ago, or how people live in the developing world now.  You get incredibly frustrated at being 10 minutes late for work, simply because you’ve adapted to all the luxuries you have around you.

Our everyday motivation is to get more money so we can buy more things, but as far as being happier is concerned, our efforts are better placed elsewhere.  Of course, there are many other benefits of a good income; you’re less likely to be a victim of a violent crime, and higher earners tend to get lower sentences for the same crimes as poorer people.  But in terms of happiness, we’ll soon adapt, and return to our previous level.  Oh well, easy come easy go!

There is an exception to this rule, however, which is spending money on other people.  If you use your money to perform acts of kindness for others, it can increase your own happiness, as well as the receiver of your gift.  A researcher measured the happiness of a group of people, and then gave each of them some money, between $5-$20.  Some were asked to spend it on themselves, some were told to spend it on others.  Then happiness was measured again, and it was the latter group who showed an increase (3).  

So it seems how much money you earn isn’t as important as how you spend it.  Perhaps the famous quote at the start of this article should read: “those who think money can’t buy happiness, don’t know who to shop for”.

Recommended Reading:

• The How of Happiness: A New Approach to Getting the Life You Want

References

(1)  Dey, E. L., Astin, A. W., & Korn, W. S. (1991). The American Freshman: Twenty-five year trends. Los Angeles: Higher Education Research Institute, University of California, Los Angeles.
(2) Diener, E., Horwitz, J., & Emmons, R. A. (1985). Happiness of the very wealthy. Social Indicators, 16, 263-274. 
(3) Dunn, E.W., Aknin, L., & Norton, M. I. (2008). Spending money on others promotes happiness. Science, 319, 1687-1688

This entry was posted on Saturday, February 28th, 2009 at 1:48 pm and is filed under Happiness and Well-Being, Materialism, money, and modern life.