How to be happy

What makes us happy? There is a lot of data on the question now, and some surprising conclusions. One surprising conclusion is cheering: almost all of us (around 95% of people in developed countries) rate ourselves as quite happy or better. The only countries to record high levels of unhappiness are countries in which living standards have declined appreciably, such as some of the countries in the former Soviet Union and its sphere of influence. To be sure, there is some room for scepticism about how much insight people have into their happiness. Dan Haybron notes how susceptible happiness ratings are to environmental infuences – for instance, the weather on the day the person is asked to rate their happiness – and argues that we cannot take these ratings of subjective well-being (as psychologists calls them) at face value. But even Haybron concedes that the differences across large groups provide us with an insight into real causes of happiness.

Another surprising result from the empirical research on happiness is that the old adage seems true: money doesn't buy happiness. As living standards rise in the developed world, happiness remains static. Moreover, the same phenomenon seems true for individuals as for groups: gains in happiness stemming from rises in income, or winning the lottery, quickly dissipate. In part, this is probably because our reference group changes when we rise in status: we stop comparing ourselves to our former neighbours and instead start comparing ourselves with our new neighbours, by comparison to whom we are doing no better than before.

But new research turns this established wisdom on its head. It seems that money can buy happiness, at least if it is wisely spent. Buying material goods for oneself does not lead to an increase in happiness, it is true, but spending money on others, and on experiences, can lead to rises in happiness. In part this is because our experiences do not seem to be subject to the same kind of deflation by comparison that material goods undergo: the value to me of my holiday in Torquay does not deflate just because my neighbours went to the Canary Islands. Prosocial spending, on gifts and donations, also leads to increases in happiness.

Why did researchers miss this result for so long? The answer seems to be that though money can buy happiness, it rarely does: people don't spend money on the things that make them happy. Why not? Perhaps part of the answer lies in 'lay rationalism'; our propensity to value things in ways that are quantifiable (especially when we think we might need to justify our choices to others). Lay rationalism causes us to trade off the things that really make us happy – whether leisure time or community involvement, donations or experiences – for things we can point to and count: money in the bank and goods in our homes. We can spend our money to make ourselves happy, but to do so we need to counter some deep seated biases which dispose us to spend badly.

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4 Responses to How to be happy

  • David Jay says:

    It seems to me that the profusion of marketing messages telling us how to spend our money is likely to confuse anyone who is trying to work out how to make themselves happy. It would be interesting to compare indices of happiness against level of exposure to marketing messages, to see if there is any detectable influence there. (Although this would require finding some subjects with low exposure to marketing messages, which may not be easy in today’s world.)

  • Most of the more recent academic research does find at least a small link between rising income and happiness, eg http://bpp.wharton.upenn.edu/betseys/papers.asp#Easterlin

    However, overall the old adage about money not buying happiness remains good advice in the contexts in which it is typically used: when people are considering important trade-offs in life between opportunities to earn more money but with potential costs to relationships or time for other things.

  • Neil Levy says:

    Right, Andrew. But the research hasn’t controlled for differences in how the money is used. It is possible that the (small) effects on individual happiness are due to spending on experiences and others.

  • Jason Lee says:

    Why would an expensive vacation make you happier than an inexpensive one? Going on more vacations might mean you will have less money but be happier. It’s not simply a matter of what you spend the money on. A great discussion on how to be happy, which also deals with the question of rating your happiness: http://www.pandalous.com/topic/how_to_be_happy

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