“I’ve been poor and I’ve been rich,” quipped the comedian Sophie Tucker. “Rich is better.”
There is merit to Tucker’s argument. All else being equal, more money is better. This is because, as professors Elizabeth Dunn and Michael Norton point out in their very useful book, Happy Money, money provides access to things—products, experiences, and services—that improve happiness levels.
And yet there’s also a stream of research that shows that wealthier people are not happier.
One reason is that wealth seems to make us less generous, both in dollar terms and in behavioral respects. Consider results from a series of studies conducted by Paul Piff and his colleagues from the University of Berkeley. In one study, participants were paired to play a game of Monopoly. The game was rigged so that one of the participants quickly became far wealthier than the other. The researchers then observed, through a one-way mirror, the participants’ behaviors. It turned out that the wealthier a participant grew, the meaner he/she progressively became. For example, the wealthier participants started assuming more dominant postures and began talking down to their “poorer” counterparts. They also consumed a greater share of a bowl of pretzels meant to be shared equally. Results from another study showed similar effects: when given $10 and told that they could contribute any or all of it to another participant, the richer participants contributed, on average, 44% less. In the world outside the lab, researchers have found that wealthier people tend to give a smaller percentage of their income to charity.
This has important implications for personal happiness; results from a massive study of over 200,000 respondents revealed that being generous had a positive effect on one’s happiness in a whopping 93% of (120 of 136) countries. Notre Dame researchers looked at generosity indicators such as giving money, volunteering, and even being emotionally available to friends and found that the more generous people were, the happier they reported feeling.
Harvard Business Review
Raj Raghunathan - Why Rich People Aren’t as Happy as They Could Be
How Money Actually Buys Happiness, by Elizabeth Dunn and Michael Norton
Warren Buffett’s advice about money has been scrutinized — and implemented — by savvy investors all over the world. But while most people know they can benefit from expert help to make money, they think they already know how to spend money to reap the most happiness. As a result, they follow their intuitions, using their money to buy things they think will make them happy, from televisions to cars to houses to second houses and beyond.
The problem with this approach is that a decade of research — conducted by us and our colleagues — demonstrates that our intuitions about how to turn money into happiness are misguided at best and dead-wrong at worst. Those televisions, cars, and houses? They have almost no impact on our happiness. The good news is that we now know what kind of spending does enhance our happiness — insight that’s valuable to consumers and companies alike.
Buffet recently penned an op-ed titled “My Philanthropic Pledge” — but rather than offer financial advice about giving, he suggested we give as a way to enhance our emotional wellbeing. Of his decision to donate 99% of his wealth to charity, Buffett said that he “couldn’t be happier.”
But do we need to give away billions like Buffet in order to experience that warm glow? Luckily for us ordinary folks, even more modest forms of generosity can make us happy. In a series of experiments, we’ve found that asking people to spend money on others — from giving to charity to buying gifts for friends and family — reliably makes them happier than spending that same money on themselves.
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