Guess What? Money Can Buy Happiness

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Everyone knows that “Money can’t buy happiness.” It turns out, though, that this is yet another case where the conventional wisdom is wrong. Money can buy happiness if you spend it the right way. And in this case, the right way is charitable giving.

A study published in this week’s edition of the journal Science found a consistent relationship between giving and happiness. For example, they studied the employees of a medical supply company who were given bonuses of several thousand dollars each. Researcher Michael I. Norton, assistant professor at Harvard Business School, said that they determined “the size of the bonus you get has no relation to how happy you are, but the amount you spend on other people does predict how happy you are.” Professor Elizabeth Dunn of the University of British Columbia in Vancouver, who led the study, also said that those employees who devoted more of their bonus to “pro-social” spending came out higher on the happiness scale. This confirmed the results of an initial survey of 632 Americans, which also showed a clear correlation between spending on other people and general happiness.

It is true that having money can’t provide happiness. In the words of an older article in the Washington Post, about a $30 billion pledge (yes, thirty billion dollars) by investment guru Warren Buffett:

A wealth of data in recent decades has shown that once personal wealth exceeds about $12,000 a year, more money produces virtually no increase in life satisfaction. From 1958 to 1987, for example, income in Japan grew fivefold, but researchers could find no corresponding increase in happiness.

By focusing upon possible recipients of all that money, the Washington Post completely missed the point, and came to exactly the wrong conclusion. Having money doesn’t buy anything. It’s not the having, it’s the spending. Warren Buffett was doing the buying, and he most certainly was buying happiness.

So, would you like to be happy? We’d be happy to help.

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12 Responses

  1. YM says:

    Andrew, thank you for explaining this – it makes more sense now. Now my question is, what is considered “expenses”; is it the minimal or moderate necessary expenses of life, or does it include travel, new cars and beautiful houses?

  2. Bob Miller says:

    Typically, expenses expand to eat up the available money (a quasi-Parkinson’s Law). I suppose it would make us happy, though, if we could also sock away at least $12K a year.

  3. Ori says:

    Andrew, what do you mean by income exceeding expenses? Income by itself is useless, unless it lets you buy things (= expenses).

  4. Andrew says:

    The $12,000 does not refer to income earned. It’s personal wealth, meaning the amount of income that exceeds expensese. The study seems to assume that your monthly income exceeding your expenses by $1,000 is all that is needed for maximum happiness. Anything more is wasted energy. .

  5. Bob Miller says:

    Ori raises an interesting point. To follow it further, consider living accommodations. The typical Orthodox congregation in the US is in a relatively high-priced neighborhood. This makes owning or renting a home or apartment unusually expensive to start. If we want to put a reasonable upper limit on our financial goals, we’ll also have to find better ways of creating affordable housing within a easy walk of shuls and other Jewish infrastructure. For some examples of less costly commnities, see:
    http://www.ou.org/ou/print_event/36560

  6. Ori says:

    YM, I assume this is $12,000 while living in a cheap rural area and sending one’s children to public school – my in law’s strategy. They manage to be happy with it.

    If you’re going to live in New York, send your kids to private schools, and be expected to donate to various charitable causes, then of course you need more money as a minimum. Same thing if you’re going to surrounded by people who make more, and be expected to spend the same as they do.

  7. Yaakov Menken says:

    Joel, Tzura — it looks like they did account for that possibility, and thus the determination that the giver could *go up* a point, not merely remain happier.

    Noah, I assure you the last line was a footnote, and “happy to help” a pun. It’s not why I wrote the article. But since Project Genesis / Torah.org provides the infrastructure, design, support, etc. for Cross-Currents, it’s entirely appropriate to fund-raise for Project Genesis on Cross-Currents. I’m changing the link to the more obvious one.

  8. Andrew says:

    “… once personal wealth exceeds about $12,000 a year, more money produces virtually no increase in life satisfaction.”

    YM, it doesn’t say income of $12,000. I assume an increase in personal wealth means after all expenses are paid. It’s talking of one’s income exceeding expenses by $1,000 each month.

  9. Tzura says:

    Just from reading the linked Boston.com article, it seems like they were measuring the change in overall happiness after spending the bonus, so it controls for the subject’s general level of happiness pre-bonus. (It should be easy to see from this data set if there is, as Joel suggests, a correlation between the pre-bonus level of happiness and the level of subseqeunt pro-social spending of the bonus).

    “The researchers used a five-point scale, asking people, “Do you feel happy in general?” There were five answers provided: yes, most of the time, sometimes, rarely, or no.

    They found that people could expect to *go up a full point* on the scale if they spent about a third of the bonus on others…”

  10. YM says:

    $12,000 per year doesn’t seem like enough to be the happiness threshhold.

  11. Noah Katz says:

    While the thought is valid (and valued), I think it is in poor taste to use this forum as a fund-raising venue for your own organization by placing a direct link for donations to (only) your own institution.

    It may have been more appropriate to provide a link to a page with a listing of a number of venues through which people could make donations.

    It might also be relevant to point out the relevance of donating in this specific season: Matanot L’Evyonim (gifts for the poor) on Purim – where in this month of Adar we are increasing in happiness; Ma’os Chittim (literally Wheat Money) in the runup towards Passover to afford others the chance to prepare for a fulfilling and joyous holiday.

  12. joel rich says:

    The pintele yid in me agrees, the actuary reminds us that:
    From Wikipedia, the free encyclopedia

    Post hoc ergo propter hoc, Latin for “after this, therefore because of this”, is a logical fallacy (of the questionable cause variety) which states, “Since that event followed this one, that event must have been caused by this one.” (meaning here it could be that happier people give more, not that giving more makes you happy.

    KT