Parenting & Schools
Business
Happiness Exercises
Health
Relationships
Home » All, Global Policies, Money, Pathway 3 "Meaning", _2 Positive Traits

The Truth About Money and Happiness

By on May 5, 2008 – 12:15 am  14 Comments

Sherri Fisher, MAPP '06, M.Ed., Director of Learn & Flourish LLC, is a leader in the field of positive education. An education management consultant and coach, workshop facilitator and author, Sherri uses the POS-EDGE Model to incorporate research-based findings from strengths psychology and behavioral economics into positive, personalized, best-practice strategies for learning, parenting, and work. Full Bio. Sherri's articles are here.



Positive Psychology is not without its critics who wonder why we need to have empirical data that something works if it seems to work fine without knowing about constructs and statistical significance. Others wonder how one could ever really parse the components to effectively extract the “drop” of truth, especially since the effect of interventions can vary widely. That is what researchers set out to do, capture that drop, and for those of us who work in the “applied” part of the field, we must keep a careful eye on what new discoveries say about established ideas. That means reading beyond the general media to the actual studies that are sensationalized in the news.

Map

Can Money Buy Happiness?

Above is the world happiness map which shows by country where in the world the happy people are. A new study from the Wharton School of Business at the University of Pennsylvania seems to refute a widely held intuitive belief as well as one that has been well-researched. Despite what you may have believed, according to the new study, it turns out that money CAN buy happiness. Or maybe it says that money DOES buy happiness. Well, maybe both, but not exactly either, it turns out if you read the actual study and understand its constructs.

Here’s what is being challenged. The seminal study by Dr. Richard Easterlin says this: “Within countries there is a noticeable positive association between income and happiness—in every single survey, those in the highest status group were happier, on the average, than those in the lowest status group.” Was this caused by money? No, according to Easterlin. “People tend to compare their actual situation with a reference standard or norm” so it’s not really the amount of money one has but how close it is to the reference group. (This is called social comparison, and it is responsible in part for not only how happy we are when it comes to perceptions of wealth and status, but also intelligence, success, beauty—nearly anything about a person, including possessions, that has value to others.) In a country which is experiencing economic growth (this study looked at post-WWII Japan, for example), Easterlin showed that happiness increases with income, but only up to a certain point, after which it is tied to one’s genetic set-point and adaptation. This has been widely interpreted as “Money cannot buy you happiness.”

KeyWhat the new study says is this: Subjective well-being (SWB) is higher on average in wealthier countries. There is not an adaptation effect as previously believed, as SWB continues to increase with growing income. There is a statistical link—a correlation—between income and happiness. In other words, if you enjoy a higher material standard of living, you are more likely to have a higher underlying state of “chronic” happiness. The generalized conclusion is that if you live in a wealthier nation you are more likely to be happier (have higher SWB) than someone in a poorer nation.

This measure of SWB is not the same as moment-to-moment happiness which varies widely, of course. We call that experienced happiness. You might live in one of the “happy” countries, and have a high level of material comfort and not be happy from moment to moment in your life, but when asked about your overall life satisfaction you might rate it as fairly high, especially if you are comparing yourself to someone with a lower standard of living.

The Happiness Gap

So what should you do now that you know that there is a correlation between happiness and income? Should you try to increase your wealth to become happier? No, not yet, because there is another study, and this one out of Princeton looks at experienced happiness, the “real time” or “on-line” emotion that you experience throughout daily activities, averaged over time. (Hear the researcher interviewed!) Keep in mind that one’s experiences over time may seem as if they would be the same as chronic happiness, but they aren’t. This is the “Happiness Gap.”

teacherRemember that happiness is not caused by one thing. Studies show that about 50% of individual differences in happiness are determined by genes, 10% by life circumstances, and 40% by our intentional activities. Those specifics of how you spend your time have a much greater effect on your real-time happiness than how much money you make. What you do with that money does matter. Keep in mind that people overestimate the impact of an increase in income. Even lottery winners return pretty closely to their pre-winner happiness, despite a major increase in wealth. And our favorite in Positive Psychology…Other People Matter (covered earlier in articles including Advice from the Tribesmen… by Lucy Ryan, How do you share positive psychology with strangers? by Sulynn, Honoring Our Relationship with Time by Iris Marie Bloom, and The Happy-Well… by Sherri Fisher). Happier people socialize more with friends and family. They focus less on the objective measures, such as income, and more on what they do in—and with—their lives.

Car with bowDespite a positive correlation between income and happiness, it is still unknown what economic measures could be used to clearly show what causes higher SWB in wealthier countries, so don’t give up your work–life balance just yet! Is it broad measures of economic development, changes in output such as GDP or productivity that drive individual happiness? Is it the availability of the things money buys like high quality health care or education? Is it the luxury cars, vacations and fine dining? (Advertisers hope so!) The authors of the new Wharton study say this: “Unfortunately, we lack the statistical power to resolve these questions…We should note that our analysis has largely focused on establishing the magnitude of the bivariate relationship between subjective well-being and income, rather than tracing the causal effects of income on happiness. We believe that further research aimed at better understanding the causal pathways will be fruitful.” Stay tuned.

The Truth

familySo what’s the real truth about money and happiness?

We don’t know exactly why, but it seems that people in wealthier countries are happier than ones in poorer countries; within countries wealthier people are happier than poorer ones; and economic growth in a country is correlated with happiness. If you are living in an affluent nation, be grateful you’re happy, and if you are not happy, remember that you can do something about that today. Here are some ways to get you started:

* set goals
* be more grateful
* use your strengths
* practice real-time resilience
* become more mindful
* identify your pathways and agency
* savor…

Finally, here is a way to find out how satisfied you are with your life by looking at your own chronic happiness. This is the most widely used measure of its kind.

___________________________________________________
The Satisfaction with Life Scale***
By Ed Diener, Ph.D.

DIRECTIONS: Below are five statements with which you may agree or disagree. Using the 1-7 scale below, indicate your agreement with each item by placing the appropriate number in the line preceding that item. Please be open and honest in your responding.

1 = Strongly Disagree
2 = Disagree
3 = Slightly Disagree
4 = Neither Agree or Disagree
5 = Slightly Agree
6 = Agree
7 = Strongly Agree

______1. In most ways my life is close to my ideal.
______2. The conditions of my life are excellent.
______3. I am satisfied with life.
______4. So far I have gotten the important things I want in life.
______5. If I could live my life over, I would change almost nothing.

***Take it here and get your score.

Images: clipart images and map.

14 Comments »

  • jeffdustin says:

    Hi Sherri,

    I liked your article. It probed the complexity of money and happiness. I’ve always thought that “money can’t buy happiness” was oversimplifying a deep topic.

    A second issue that you bring up is about research itself. I often wonder why I sometimes trust research over my own observations. It seems that there are serious dilemmas that scientific research hasn’t resolved. One problem is the ever emerging population of new studies. If you are looking for certainty, it appears that researchers are not the ones to ask. Their research yields more questions, not less. How much money buys happiness, what if you live in a somewhat wealthy country, how is that defined? What if you have a chronic disease but are well-to-do and have no friends? Add to the mix the numerous definintions of happiness: flourishing, SWB, momentary or current happiness, I can’t even scratch the surface. Yet when asked the question, “Are you happy?”, I give the answer yes or no. What a strange world this is.

  • Hi, Jeff-

    The conundrum is this: do we want to stop researching because it leads to new and often seemingly contradictory information, or do we want to learn what the constructs mean, and read beyond media hype?

    Research regularly leads to more questions. This is what keeps fields open to and finding new discoveries. If what you seek is a comfortable concreteness, maybe psychology will always leave you wanting for exact answers. Further, you may be naturally good at finding problems to solutions. What is your attributional style? If you tend to the pessimistic, is that the fault of the study results or might it have to do with your perception of them?

    Remember that correlation is not at 100%, and your on-line experience is ultimately what matters to you 🙂

  • […] So do you want to know the truth about money and happiness? If so – click here […]

  • Jeff Dustin says:

    I’m flexibly optimistic. I don’t believe everything I hear or read. That includes well-designed research studies. Besides, I don’t think the problem is the media hype, so much as researcher’s overenthusiasm. I just completed an action research project for my Master’s and it was hard to stay objective while writing up the study’s results. I wanted to go beyond the facts.

    Do you remember when Behaviorism was the big thing in education? Operant conditioning was considered the holy grail that would solve all kinds of problems through reinforcement and punishment? Right off teachers equated punishment with mean looks, time-outs, removal of privileges. Even behaviorists make the mistake of confusing the technical term punishment with the everyday usage. Giving a child a sticker could be technically punishing if it suppresses a preceding behavior.

    The same thing happened with reinforcement. Teachers thought that M&Ms were reinforcing. What if you hate M&Ms? Actually the point is moot, because if you gave the M&Ms to a child and the preceding behavior was strengthen, it was a reinforcer. Period. Still, culturally, reinforcer means goodies such as extra free time, candy, french fries, smiles, a hug, etc. Nevermind that isn’t what reinforcement is technically about. A kick in the pants could positively reinforce behavior. So could torture!

    So here is my way of dealing with research. I see it as a complementary lens for viewing the world. It is another form of evidence that is worthwhile, but if it contradicts my views, I just wait awhile. There’ll be a more forgiving study in the future.

  • wayne says:

    Jeff,

    The problem with most research is that it relies on questionnaires that inherantly subject to self report bias. Asking somehow “how happy are you?” is silly – for example research shows that Americans tend to over report their levels of happiness when compared to day to day experience.

    Psychologists are now using alternative measures in research because of the flaws in self report questionnaires. eg implicit self esteem, physiological measures such as HRV, Magnetic Resonance Imaging.

  • Jeff Dustin says:

    Wayne,

    I wouldn’t totally rule out self-reports, but I do see their shortcomings. Even if psychologists could objectively determine whether someone was happy, if the individual said “I’m happy” I don’t know which measure I’d trust: the self-report or the objective one.

    It is quite a deep subject really.

  • Senia says:

    Jeff, Wayne, Sherri –

    I’m really liking your discussion about self-reports. I’m of two minds about them also. I’ve written a few thoughts about self-reports before.

    There’s one part of self-reports that I really like: trusting the person to know him/herself well – even that implicit trust in a self-report is empowering as opposed to saying, “we’ll take a look at what we think you’re really all about.”

    I really could argue both ways – that both methods – self- and not-self – can be effective, depending on the researcher’s goal. (By offering to argue both sides, I feel like I’m in high school – I was involved with the debate team, and it really kind of bothered me a little that the competitions were about randomly getting assigned one or the other side of an argument whether you believe it the side you got assigned or not!)

    S.

  • Jeff Dustin says:

    I LOVE debate. It is so helpful in learning to think clearly, speak well, and persuade others. It should be part of every high school in the nation, maybe even earlier grades. I even considered becoming a debate coach, because it is so important for youth.

    What is unbelievable is that debate is not a major component of public education. How bizarre! My high school, did not to my knowledge have a debate team. Maybe someday I will participate in teaching kids the art of debate.

  • wayne jencke says:

    Senia, your website makes some good points about self report. However you make a HUGE assumption – people know themselves. Most people don’t.

    And is it really useful to know yourself? I remember reading a piece of research (Sonja L i think) that talked about people who know themselves as being “wiser but sadder” – perhaps being blissfully unaware.

  • wayne jencke says:

    Jeff,

    I like debate for different reasons to you – it helps me explore ideas. I’m sure if I think debate is such a greta thing. Some of the best debaters are lawyers who ironically have the worst health outcomes. Personally I think debating is often about establishing power which ultimately isn’t good for the world.

  • map of japan says:

    […] without knowing about constructs and statistical significance. Others wonder how one could ever rhttp://positivepsychologynews.com/news/sherri-fisher/20080505728Pioneer Introduces New AIR NAVI Portable Car Navigation System with Communications Module Support in […]

  • dr chronic says:

    […] without knowing about constructs and statistical significance. Others wonder how one could ever rhttp://positivepsychologynews.com/news/sherri-fisher/20080505728Vitamin D Linked To Reduced Mortality Rate In Chronic Kidney Disease Science DailyFor patients with […]

  • […] argument about whether or not money makes you happy rumbles on (see these PPND articles about Money and Happiness by Sherri Fisher, A Rich Man’s World by Bridget Grenville-Cleave, and  Positive Psychology […]

  • zo2loty says:

    hi sherri,
    i rly liked the article. 🙂 the best sentence you’ve wrote was “Remember that happiness is not caused by one thing.” i strongly agree with you!!! 🙂

Leave a comment!

Add your comment below, or trackback from your own site. You can also subscribe to these comments via RSS.

Be nice. Keep it clean. Stay on topic. No spam.

You can use these tags:
<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

This is a Gravatar-enabled weblog. To get your own globally-recognized-avatar, please register at Gravatar.