University of British Columbia psychologist and 2010 PopTech conference speaker Elizabeth Dunn made cash “rain from trees” to examine the relationship between money and happiness. Turns out that, for most of us, giving money away makes us happier than spending it on ourselves, and experiences–not possessions–bring lasting joy. By Ford Cochran National Geographic traveled to Camden, Maine last week for the annual PopTech conference. I caught up with psychologist and invited speaker Elizabeth Dunn to discuss her research into how money does, and does not, buy us happiness.
I first became interested in this question of how we could spend our money better when I suddenly started making a lot more money–went from being a graduate student to being a faculty member–and I wondered how I could use it better. I was surprised to find there was almost no good, solid evidence about how we can use our money in ways that actually make us happy.
Lots of us have theories. Obviously, marketers have theories. In the world around us, we see other people’s theories about what money can be used for in order to increase human well-being. I thought, well, let’s try to test this. I wondered whether maybe people might actually get more happiness from using their money to benefit other people, rather than themselves.
To find out, we wanted to use good experimental methodology, so we made a little money fall from the sky: We have people on the campus of the University of British Columbia a $5 or $20 bill first thing in the morning and asked them to spend it in a particular way. We asked some people to spend it on others, some people to spend it on themselves. By the end of the day, it turned out that those people who had spent it on others were happier than those who had spent the money on themselves.
That was one of our first studies. We then followed up and took it in a lot of additional directions. What are some of the things that people think they should be able to do with their money that will make them happy that you and your colleagues who are doing work in this field have found really doesn’t help?
What we see is people pouring money into material purchases. For example, we see people spending a lot of money to buy big, beautiful homes. There is no evidence that owning a home is great for your happiness. Yet that assumption is so powerful, and many people sink their money into that kind of major purchase, often overextending themselves. We would argue–we being the scientific community would argue–that maybe you need to do some empirical research and consider whether there are better ways to spend that money.
In particular, there’s some really cool work that’s been done by Leaf Van Boven, Tom Gilovich, and their colleagues looking at the value of spending money on experiences. Right now I’m here in Camden, Maine for an amazing conference called PopTech meeting all these incredible people, enjoying the beautiful fall foliage. It is an amazing experience I’m going to remember forever, and it’s something that I think affected me in a way that no material purchase could.
This is something that a lot of people find: If you think about the ways that you’ve used your money, often it’s the experiences that you’ve had (whether it’s a trip to Africa or just seeing an artist who you love perform in concert), those are the kinds of life events that really matter for us and can shape our happiness, much more so than having the biggest house with the nicest granite countertops that you can find.
Some people assume that the more money they make, the happier they’re going to be. How much money do you need to make in order to be really happy?
It’s a complicated question. Some people think money’s the most important thing in the world for happiness. That’s definitely not true. Some people think that money is irrelevant for happiness. That’s not true either. Overall, money is related to happiness, but its effects start to dwindle. In particular, one really cool recent study suggests that once you’re making about $75,000 a year, additional increases in income cease to have any real impact on your day-to-day emotional well-being.
Obviously, it’s a very complicated picture. It’s a hard question to answer. But what I think is interesting is that for so long we focused on the relationship between how much money we have and our happiness. I think it’s time to start considering what we do with that money. Once you’ve got that money, whether you’re earning $2 a day or $200,000 a year, what do you do with that money in a way that’s going to actually promote your happiness. That’s what I think is the exciting question that’s just beginning to pop open for us. I recognize that if you live in extreme poverty and have no opportunities to escape it, you might well be miserable, and understandably so. So for countries in extreme poverty, I’m guessing, extreme unhappiness is fairly prevalent. But when you get to the top of the economic scale, do people who’ve looked at “Gross National Happiness,” as the Bhutanese would say, find that the happiest countries are the wealthiest countries? Or are the countries where, overall, the public reports being most happy not the wealthiest ones in the world?
The answers you get do depend a bit on how you ask the question. But there have certainly been lots of worldwide happiness surveys. In general, it’s better to live in a wealthier country than a poor country. So if you’re throwing a dart at a world map and determining where your children are going to be born and spend the rest of their lives, they’re probably going to be happier growing up in a wealthy country than a poor country, on average.
That said, there are poor countries that have pretty high levels of happiness, there are wealthy countries where levels of happiness are relatively low. So [wealth] is certainly not the only factor. Everyone recognizes that bringing developing countries out of poverty is a good thing, but I think we have to think about what are the other factors that need to be considered, too. We need to make the bottom line not wealth, but well-being.
More from PopTech 2010:
Photograph of Elizabeth Dunn by Kris Krüg
Ford Cochran directs Mission Programs online for National Geographic. He has written for National Geographic magazine and NG Books, and edits BlogWild–a digest of Society exploration, research, and events–and the Ocean Now blog. Ford studied English literature at the College of William and Mary and biogeochemistry at Harvard and Yale, with a focus on volcanoes, forests, and long-term controls on atmospheric CO2. He was an assistant professor of geology and environmental science at the University of Kentucky before joining the National Geographic staff.
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