The headline of a recent MSN Money article was “7 Smart Ways to Buy Happiness.”  It’s odd to talk about happiness as something that can be bought; it makes it seem tangible like a car or a computer.   MP Dunleavey, the article’s author and an MSN Money Contributing Editor, isn’t talking about frequenting a happiness vendor, though, but about spending money to foster (mostly intangible) things that are likely to result in increased life satisfaction.   Much of what Dunleavey writes here is influenced by research findings from psychology and economics.  Dunleavey has written a book titled Money Can Buy Happiness, which seems to be a more extensive consideration of the topics considered in the article. 

Happiness for sale?

Happiness for sale?

Here’s Dunleavey’s list of the seven ways of spending money to increase happiness, with a brief explanation for each item:

  • Relationships–since those who have strong relationships tend to be happier, Dunleavey suggests you spend money on things that will connect you to others, such as buying a plane ticket to go visit a close friend.
  • Time–make extra time for yourself by paying others to do unappealing tasks or negotiating extra time off at work.
  • Health–buy better but pricier food, a gym membership, and the like.
  • Learning–buy books, DVDs, and experiences that will teach you something; in a broader sense, invest in activities that will create a challenge and lead to a sense of flow.
  • Debt Relief–rid yourself of one burden by paying down your bills. 
  • Givaways–donate money or time to enhance the welfare of others, since doing so makes you happier as well.
  • Security–start saving money for retirement, providing you with a greater sense of control over your life.

Though I think it’s fine to do all the things on the list, I find it rather peculiar that the reason given for doing all of them is to increase personal happiness.  Shouldn’t we get out of debt and save for the future because it’s fiscally responsible and will benefit us in the long term, not because we’ll feel better if we do so?  Aren’t strong relationships valuable for their own sake, not just because they increase our life satisfaction?  And what about giving to others just to make oneself feel good?  There is a debate between social psychologists who believe that all help given to others is meant to benefit the self and social psychologists who think that sometimes helping is solely intended to benefit the recipient. Even for someone taking the former view, though, Dunleavey seems particularly interested in what can be gained by the helper.  She writes:

Studies show that altruism not only tickles the feel-good centers in the brain, but it also creates a sense of social bonding and mutual support that enhances your personal well-being.

Can’t we help others because we genuinely care about their welfare, not because generosity will “tickle” our “feel-good centers?”  I hope that, during those too-infrequent times when I offer assistance to someone else, I do it at least in part out of concern, not hedonic calculation.   

On Santorini last summer--a purchased experience.

On Santorini last summer--a purchased experience.

Say you have $30 to spare.  What would you prefer to do: spend it on a new shirt or use it to take a date to a movie?  Or say you have not $30 but $3,000.  Would you rather put the money down on a new car or spend it vacationing at a nice resort? Whatever amount you have, would you be more inclined to purchase a material possession or an experience? 

Researchers have looked at which type of choice is more likely to increase happiness.  The conclusion: you get more happiness for your buck if you pick the experience over the possession. 

According to a 2005 review article written by psychologist Leaf Van Boven of the University of Colorado at Boulder, there are several reasons for this.  First of all, people who are highly materialistic turn out not to be very happy.  The more people agree with statements such as “Some of the most important achievements in life include acquiring material possessions” and “Buying things gives me a lot of pleasure,” the less life satisfaction they report.  Materialism is correlated with symptoms such as depression, narcissism, and paranoia.  We already know that it is also correlated with debt!

Van Boven and colleagues also conducted a series of surveys in which they asked respondents to report on their purchases of material goods and of experiences and how happy each purchase made them.  (The authors note that some purchases, e.g. a bicycle, could fit either category; they went by the person’s stated intention in those cases.)   Regardless of age, gender, ethnicity, or marital status, money spent on experiences made people happier on average than money spent on material goods.  The difference between happiness levels resulting from material and from experiential purchases increased as income level increased. 

Van Boven suggests three reasons why experiences may make people happier than material goods.  First, experiences are more likely to be reappraised favorably after the fact.  Thus, the bike trip that at the time left me cold, sore, and bored will be described later as a bracing, fitness-enhancing jaunt down wooded paths.  One way to think of such reappraisals may be that we commonly reevaluate experiences so as to construct a positive narrative of our lives, but don’t have a similar tendency to reconstruct the meaning of material goods.  A new TV just doesn’t make as good a story as a trip to the Smithsonian.

Second, experiences don’t suffer as much from negative comparisons.  My new cell phone can easily pale in comparison to your new cell phone, but it’s much harder to know whether my trip to see fall foliage was better or worse than your trip to see fall foliage. 

Third, experiences are more likely to have social value.  We usually take vacations, go out to eat, or go to the theater with others.  In contrast, wearing new clothes or riding in our new car are more likely to be solitary activities.  This last point seems to contradict the view of economist Thorstein Veblen in The Theory of the Leisure Class, published in 1899.  He coined the term “conspicuous consumption” to refer to the waste of money and/or resources in order to indicate that one has a higher status than others.  To the extent that our purchases are status displays of this sort, both expenditures on experiences and those for material goods are deeply social in character. 

Regardless, the main point is that we will be happier purchasing experiences than things.  Another benefit of experiences is that many of the best ones don’t cost anything at all.   So, go for a walk, have a good conversation, or read a (library) book.  Happy now?








Tongue in cheek, my dad gave my siblings and me the advice, “Always remember, it’s better to be rich and healthy than poor and sick.”  Well, sure, but how about the following scenario: does it make sense to work so hard to accumulate money that you ruin your health?  How happy are people who are rich and sick? 

According to recent research summarized in Slate, wealth doesn’t make all that much difference to those in poor health. The authors analyzed data from the Health and Retirement Survey, which asks questions each year to a sample of retired persons over age 50. All participants were asked whether they agreed or disagreed with the statement: “Much of the time I was happy during the past week.” The survey participants were a fairly happy lot: 87% agreed. Wealth had a noticeable effect on happiness for the more well-to-do participants: Among those with an annual income of $50,000, the percentage agreeing that they had been happy was 5% higher than among those with an annual income of $25,000. However, the effect of wealth was considerably attenuated among those who were ill. For those with several chronic diseases, the effect was only one-quarter as large.

So those who think that retiring with lots of money will make them happy should also consider how healthy they are likely to be by that point.  What good is it to be able to eat at the finest restaurant if intestinal problems or diabetes will keep you from enjoying the meal?  What’s the point of vacationing at a great resort if you can’t play golf because of your COPD, can’t dance the night away because of your arthritis, and can’t sleep because of your pain?  Being poor and sick isn’t so great, but maybe it’s consoling to know that you’re not much worse off than those who are rich and sick.

Richard Easterlin

Richard Easterlin

One of the long-accepted findings of happiness research turns out not to be true.  It is the finding that, except at low income levels, income isn’t associated with happiness.  The conventional wisdom has been embodied in what is called the Easterlin Paradox.  As described by economist Richard Easterlin in 1974, the paradox was based on a couple findings from the survey data available at the time.  On the one hand, once a nation’s per capita income got above the point at which most people could buy basic necessities, additional gains in income made little or no difference in life satisfaction.  On the other hand, within a given nation, more wealthy individuals typically expressed more life satisfaction than poorer individuals.  The typical explanation was that a person’s relative position in the financial pecking order matters more than his or her absolute wealth.  In other words, you can be happy living in a hut and walking everywhere you go, but not if your neighbor has a frame house and motorbike.  The implication for keeping up with the Joneses is obvious.  Besides, the paradox gives at least partial support to a belief that many people profess to hold (though actual behavior doesn’t always coincide with the belief), i.e. that money doesn’t buy happiness. 

It turns out that there’s no paradox after all.  In an article published earlier this year, Betsey Stevenson and Justin Wolfers of Wharton Business School pointed out that Easterlin’s conclusions were based on survey data from small and unrepresentative samples of countries.  Stevenson and Wolfers analysed the findings of surveys that have been conducted since then and found that there is a strong relationship between a country’s per capita income and the self-reported life-satisfaction of it’s citizens.  A linear relationship holds even in the counties with the highest incomes, though it is not between satisfaction and income but satisfaction and log income.   That means that the higher the income level, the more the additional amount needed for there to be an equivalent increase in happiness.  To use an example that Stevenson and Wolfers employ in their actual paper, a $100 increase in income would be associated with twenty times as great an increase in life satisfaction for a citizen of Burundi than for an American.   A New York Times article describing Stevenson and Wolfer’s study can be found here.

Wolfers wrote a series of blog entries about the findings: here is the first of his entries.  One question he addresses is why life satisfaction has been stagnant in the United States since 1972 even though real GDP has doubled since then.  The problem may lie in the recipients of the GDP increase.  The gains in income over the past few decades went mostly to the well-to-do.  Wolfers concludes, “given that these folks get somewhat less happiness per extra dollar, then perhaps it seems reasonable not to expect much of a rise in happiness.” He does note that, though the rest of us are mucking along about as satisfied with our lives as we were in 1972, the rich are more satisfied now than then. “But woe to you who are rich,” said Jesus, “for you have received your consolation.” They certainly are consoled.

There are two caveats concerning the article.  First, all the data is correlational, so it isn’t possible to conclude that it’s the increases in income that cause increases in satisfaction.  Second, the relationship with income is stronger when survey takers are asked about life satisfaction than when they are asked about happiness.  I’ll comment on the differences between life satisfaction and happiness in a later post.