If money doesn’t bring happiness, then why do people behave as though it does?
It seems only natural that happiness should flow from having more money. Even if they don’t admit it, people still behave as though it were true. More money means you can have what you want and do what you want. The house you dream of? It’s yours. The new car you desire? Here are the keys. The freedom to enjoy your favourite pastimes? Here’s your racket, the court is down there, just past the pool.
So the puzzle is this: why do social scientists consistently find only moderate relationships between having more money and being happy? Some have even suggested that this moderate connection might be exaggerated. In reality money might have very little to do with happiness at all.
Most puzzling, though, is that people often seem aware at some level that money won’t make them happy. And yet they continue to work away earning money they don’t objectively need.
First, though, let’s look at the three reasons money doesn’t make us happy:
- It’s relative income that’s important. As I’ve noted previously, money is relative. It turns out we don’t mind so much about our actual level of income, so long as we’re earning more than other people around us. Unfortunately as we earn more money we’re likely to be surrounded by richer people so we often end up failing to take advantage of the positive comparison.
- Material goods don’t make us happy. Acquiring things like houses and cars only have a transient effect on happiness. People’s desires for material possessions crank up at the same, or greater rate, than their salaries. Again, this means that despite considerably more luxurious possessions, people end up no happier. There’s even evidence that materialism make us less happy.
- People don’t shift to enjoyable activities when they are rich. People who earn more money don’t spend their time enjoying themselves, they spend their time at work, in activities likely to cause them more stress and tension. This may be because of ‘the focusing illusion’. When people think about earning more money they probably imagine they would use the money on recreational activities. In fact, to earn the money, they have to spend more time at work, and commuting to and from work.
The focusing illusion
These three reasons naturally raise the question of why psychological findings are so out of step with people’s everyday experience. Surely if money doesn’t lead to happiness, most people would have worked that out by now. So why do people still chase the mighty dollar/pound/yen like their lives depended on it?
Nobel-prize winning psychologist Daniel Kahneman and colleagues put forward the idea that the reason people continue to think money makes them happier is that chasing it leads to conventional achievements (Kahneman et al., 2006). Conventional achievements include things like getting that coveted promotion or being able to afford that big house – in other words things that say loud and clear: hear I am and this is what I can do.
So, when people ask themselves whether money brings happiness, they immediately think of the big promotion and the big house. They conclude that because they have these things, they must be happy. In fact, people with more money and status are just more satisfied with their lives, not happier (before you scoff at this think about whether you’d rather be satisfied or happy).
But how do we know people aren’t happier with more money? Well, psychologists have a trick up their sleeves. That trick is called moment-by-moment sampling. The conventional way of asking people about their happiness is using an overall measure. There’s evidence that this is inaccurate and ends up tapping satisfaction more than happiness. Instead psychologists have started asking people how they’re feeling many times each day, in that precise moment, then adding up these reports.
In one example of this type of research 374 workers at 10 different sites in a variety of different jobs were asked how happy they were every 25 minutes over a whole workday (Schnall et al., 1998). The correlation between happiness and income was so tiny, it wasn’t statistically significant. Worse, higher earners were more likely to experience intense negative emotions and greater arousal during the day. These types of findings have also been seen in other studies on how earnings affect happiness.
It appears, then, that the focusing illusion might partly explain why we think money makes us happy, when actually it doesn’t. This explanation, though, only goes so far. This is because many people know that a more high-powered job means more stress, and perhaps even understand that it won’t make them happier, and yet they will still choose the money and the high-powered job. Why? To answer this question we need to zoom out from psychology to social theory.
No alternative to chasing money?
The question that Professor Barry Schwartz asks is why people focus on money to the exclusion of those things that are proven to increase happiness (Schwartz, 2007). Things like doing work that is meaningful to us or improving our social relations. The sad answer that Schwartz gives is that people do not see any alternatives. Everyone knows that it all comes down to money, and to say otherwise is to announce your naivety.
Sure, you don’t have to live your life as though you worshipped the acquisition of money, but almost everything tells us we should do. Television, billboards, newspapers, other people: they’re all screaming at us to get money. The effect of these messages is to ‘crowd out’ any other ideas we might have about how to live our lives.
Of course there are alternatives, but where are the role-models for these alternatives? Few and far between. Where are the messages telling us that it’s OK not to go all out for cash money? Barely audible.
Money and happiness in a nutshell
So we end up with this: money doesn’t make us happy on a day-to-day basis. We are, though, bombarded by messages telling us that we should value money and seek it out. So, like good members of society, we follow the convention.
Acquiring money and status makes us feel satisfied with life. Through the ‘focusing illusion’ we convince ourselves that satisfaction equals happiness. Unfortunately it doesn’t. Even though we appear to have everything, we are left feeling that something is missing, but are unable to identify what that thing is.
That thing is simply this: feeling happy. Right now. In the moment.
What will make you feel happy right now?
[Image credit: DryIcons]
Kahneman, D., Krueger, A. B., Schkade, D., Schwarz, N., & Stone, A. A. (2006). Would You Be Happier If You Were Richer? A Focusing Illusion. Science, 312, 1908-1910.
Schnall, P., Landsbergis, P., Belkic, K., Warren, K., Schwartz, J., & Pickering, T. (1998). Findings In The Cornell University Ambulatory Blood Pressure Worksite Study: A Review. Psychosomatic Medicine, 60, 697.
Schwartz, B. (2007). There Must Be An Alternative. Psychological Inquiry, 18, 48-51.
The Psychology of Money
→ This post is part of a series on the the psychology of money:
- Avoid The Relativity Trap – How Thinking Globally Can Save You Money
- Social Versus Financial Thinking – When Money Makes People Lazy and Selfish
- FREE! But at What Price?
- 6 Quirks of Ownership: How Possessions Bend Our Perceptions
- The 3 Reasons Money Brings Satisfaction But Not Happiness
- Do Big Money Bonuses Really Increase Job Performance?
- Money and Self-Control: The Battle Between Thoughts and Emotions
- Why Money is Part of Human Nature: Money as Both Tool and Drug
- Why We Buy: How to Avoid 10 Costly Cognitive Biases
- 8 Psychological Keys to Spending Wisely
- How Does The Cleanliness of Money Affect Our Spending?
Published: 8 April 2008