Money Really Can Buy Happiness, Study Shows

Money Really Can Buy Happiness, Study Shows

Last month, the people of Great Britain were briefly transfixed by the tale of an anonymous woman with a very big secret. Three years ago, the woman, who lives somewhere in England, won £1.5 million in a lottery, but kept the news from her entire family, including her husband. Mrs. X called in to a radio program on the BBC, and explained that she had stashed the money away in her bank account and barely touched it, because she feared the effect it would have on her relatively happy middle-class life.

A sudden rush of affluence might disrupt the lives of her two young children, she said. And her husband, who had struggled to overcome a minor drug problem 15 years earlier, might want to quit work or start taking lavish holidays, which would "destroy our little family unit we've got now." So, rather than court disaster, the woman decided to tell what she calls a "huge white lie" and go on living as if the money had never arrived, tapping it only for small purchases that wouldn't raise any suspicion. After three years, almost all of it was still there.

Listener reaction to the story ranged from outraged to bewildered. How could anyone squander such good fortune? With the opportunity to raise her family's standard of living so easily, how could she decide for all of them that life was good enough as it was?

There were others, though, who could perfectly understand her fear, if not her decision. It was the product of society's most enduring love-hate relationship. Most people spend the majority of their adult lives thinking about money and pursuing it in one way or another. But we've also been told from our earliest days that practically all human misery flows from our preoccupation with wealth. The message is embedded in literature, drama and in the teachings of every major religion, from the Buddhist monk's vow of poverty to the Bible's deadly sins of greed and gluttony. Deep down, everyone remembers the fable of Aesop's dog, whose desire for yet another bone cost him the one he already had. Time and again, we're reminded that money can't buy the most fundamental human desire: happiness. It's little wonder Mrs. X feared her windfall.

But if she'd consulted the scientific evidence, she'd know that Aesop had it wrong. So did the ancient stoics, and every other scold who ever warned against the pursuit of wealth. There's a reason why Paris Hilton always seems to be smiling and blissfully distant from the trials of the real world. The evidence is overwhelming: money can buy happiness.

"What's the use of happiness? It can't buy money." - Henny Youngman

Over the past 30 years, study after study has established a definitive link between wealth and happiness.

We know, for example, that people in rich countries are substantially happier, on average, than people in middle-income countries, who are happier, on average, than people in poor countries. No big surprise there. Office politics, rush-hour traffic and midlife crises may cause people to grumble, but try walking four miles through a minefield to the nearest well, which may or may not be contaminated, to fetch water for your children - suddenly, the guy who clips his fingernails in the next cubicle doesn't seem like such a big deal. People on both sides of the poverty divide understand how the other half lives, so it's hardly a shock to discover that more money means more joy on a global scale.

The real controversy lies in the question of how money affects individual happiness. For instance, in the developed world, once all of life's most basic needs are satisfied, is there any sense in chasing ever greater prosperity? The modern-day stoics say no, and they marshall their own evidence. In particular, skeptics point to a groundbreaking 30-year-old study by economist Richard Easterlin, showing that between the 1950s and 1970s, Japan's national income increased by 10 times, and yet average happiness (measured through extensive polling) didn't budge. The story is the same in the United States where, in 1993, a professor of psychology named David G. Myers reported that the percentage of people who say they are "very happy" remained unchanged at about 30 per cent between 1960 and 1990, even as inflation-adjusted, after-tax incomes more than doubled.

So personal satisfaction doesn't grow in lockstep with the economy, and that has formed the bedrock argument for a variety of critics and activists opposed to the West's whole notion of progress and prosperity. Last year, British economist Richard Layard wrote Happiness: Lessons From a New Science, in which he argued that getting rich was a form of "pollution," which actually reduces one's ability to feel happy over time. Layard's tome, and subsequent journal articles, echoed the themes of Gregg Easterbrook's 2004 book, The Progress Paradox: How Life Gets Better While People Feel Worse. Both point to rising levels of depression, suicide and a long list of other indicators suggesting that as the world is getting richer, it's also becoming a more miserable place.

But those who've spent their careers studying the relationship between wealth and well-being say it's not enough to look at the total wealth and overall happiness of a given country - you have to look at specific groups within society to see who's happiest and why. When you do that, the patterns become obvious. "When we plot average happiness versus average income for clusters of people in a given country at a given time, we see that rich people are in fact much happier than poor people," Robert Frank, a professor of economics at Cornell University, explained in a 2004 paper for the American Academy of Arts & Sciences. That was confirmed again in a study released last year by Glenn Firebaugh, a professor of sociology and demography at Pennsylvania State University. In the United States, the more money you have, the happier you tend to be, he said. And as Swedish academic Johan Norberg noted last year in a critique of Layard's book, "The most happy and satisfied places on earth are the ones that are the most dynamic, individualist and wealthy: North America, Northern Europe and Australia."

But why? When you ask people what makes them happy, they rarely mention money. And there are volumes of scholarly research, including Firebaugh's recent study, showing that income pales next to love and good health when it comes to ensuring a happy life. A sense of belonging and purpose is also essential. Clearly, there's more to life than the size of your bankroll. But here's the catch: several of those other things that make life worth living are inextricably linked to how much money you have.

For instance, studies conducted in dozens of countries in recent decades have found that unemployment is more likely than almost anything else to make human beings despondent. The link between work and money is pretty self-evident, but Firebaugh found that physical health, education and marital status also had powerful impacts on life satisfaction. On the surface, those things seem unrelated to money, except that rich people tend to be a lot healthier, likely because they have access to better health care. The higher your education level, the better-paying and more stimulating your job tends to be. And counsellors routinely report that financial stability is one of the key ingredients of a strong and lasting marriage.

So if society is getting richer on the whole, and the rich are happier than the poor, why is it that the total number of people who feel "very happy" never seems to rise? According to Firebaugh, it's because human beings evaluate their wealth and well-being by comparing themselves with neighbours, colleagues and peers. That results in what he calls a "hedonic treadmill" - in order to remain happy, people need to raise their income faster than those around them, and since everybody's income tends to rise gradually over time, this creates the need to constantly strive for more.

Merely keeping up with the Joneses doesn't cut it. If you want to be happy, you need to see that little glint of envy in Mr. Jones's eye as you pull into your driveway in a new Mercedes convertible. And so, "families whose income earners are in jobs with flat income trajectories are likely to become less happy over time," Firebaugh says. Contrary to popular belief, then, it seems more money is often the only thing that can buy happiness. Unfortunately, this kind of financial striving is practically a zero-sum game. There will only ever be so many clear winners, a few obvious unfortunates, and a vast middle ground of people who have what they need but yearn for more.

"Money can't buy you happiness, but it does afford a more pleasant form of misery." - Spike Milligan

So if money is, at the very least, a key ingredient to happiness in modern society, why is our popular culture so rife with myths of miserable millionaires and happy hobos? And why do we believe so deeply in the destructive power of sudden wealth? Perhaps it's because the stories make us feel better about our own struggle with the hedonic treadmill. And perhaps it also has to do with the moral questions that surround money. Our fables and myths are built on the values of generosity and selflessness, and propagating the notion that it's better to give than to receive. Those themes are so entrenched in our minds that even modern tales of financial ruin take on an almost mythical quality.

Last month, the Washington Post told the story of William "Bud" Post - a man whose life, by all accounts, was ruined by the Pennsylvania state lottery. Bud won US$16.2 million in 1988. At the time, he told reporters he had $2.46 in his bank account, and he pawned a $40 ring to buy 40 tickets, one of which turned out to be a winner. The jackpot was to be paid in annual instalments of about $498,000. Within three months, Bud was $500,000 in debt, after buying a Florida restaurant, a used-car lot and an airplane, though he couldn't fly it.

Over the next eight years he went from one misadventure to the next, losing money, friends and getting caught up in court cases. His own brother tried to hire someone to kill him. He lacked enough money to finish the renovations on his dream home. Eventually he declared bankruptcy, yet somehow emerged with about $1 million in cash. He then spent it on two homes, three cars, two Harley Davidson motorcycles, two massive televisions, a luxury camper and a sailboat. None of it, it seems, filled the void in Bud's life. He ended up living on a $450-a-month disability pension, with false teeth that gave him chronic headaches, and a pile of junk where his swimming pool was supposed to be. "I was much happier when I was broke," he once told a reporter. Bud died of respiratory failure on Jan. 15 in Pittsburgh.

Such tales are hardly uncommon, and Canada has spun more than a few of its own. Nova Scotian Jimmy Cohoon won $500,000 in 1984, and drank it all away with his buddies in just 11 weeks. Perhaps saddest of all is the story of Gerald Muswagon, who won $10 million in 1998, lost it all to partying and bad investments, and hung himself last October. These stories and dozens of others have helped entrench the popular belief that lottery wins are often curses that leave victims deeply embittered and broke. But scientists see it differently. They would say things turned out badly for Bud and the others because they likely weren't very happy to begin with, and money is a poor salve for a troubled soul.

In 1978, a widely cited paper published in the Journal of Personality and Social Psychology tracked the changing attitudes and happiness of lottery winners and accident victims and found, shockingly, that both groups ended up more or less as happy after their life-changing events as they were before. The conclusion seemed to suggest that human beings are incredibly adaptable to their circumstances, and that neither tragedy nor triumph has a lasting effect on our state of mind. But again, a slightly different approach yields a different result.

That 1978 study, like most research on lottery winners, relied on people to answer questions about how they felt in the past: are you happy? happier now than you were five years ago? 10 years ago? The problem is, our recollections get skewed over time. It's extremely hard for most people to accurately remember how happy or unhappy they were at a particular time in the past.

The picture is further clouded as our expectations of life change. Virtually every study ever done on money and happiness has noted that wealth produces diminishing returns. Once we get to a point where we can afford our bills, and some basic pleasures without undue financial hardship, the effect of more money on our state of mind begins to fall off. That's why Bill Gates, who has several thousand times more money than the average American, is not several thousand times happier. In fact, research suggests he's probably not even twice as happy.

Does this mean windfalls produce nothing of value, or that we are predestined to be just as happy as we choose to be, regardless of how rich we are? Not at all, according to researchers at the University of Warwick, England. Beginning in the mid-1990s professors Andrew Oswald and Jonathan Gardner followed 9,000 people over the course of eight years, tracking various changes in their lives, and their level of happiness over time. In the course of their survey, hundreds came into an inheritance or a lottery win, which allowed researchers to track their state of mind without relying on participants' memories. They found that those who came into money were significantly happier afterwards than they were before. Windfalls of as little as £1,000 produced a measurable rise in happiness in the year following, and a win of £1.5 million or more was enough to move people from the unhappiest two per cent to the very happiest. "Lots of people would like to think that there are a lot of miserable millionaires out there, but even quite small windfalls show up in our statistics on psychological well-being," Oswald said in 2004. "Large sums are better than small sums."

"Wealth may be an excellent thing, for it means power, and it means leisure, it means liberty" - James Russell Lowell

So what of all those lottery winners, like Bud, who insist their windfalls ruined their lives? What of those who describe an overwhelming sense of emptiness once that initial rush of euphoria wore off? Well, according to Cornell's Robert Frank, the money itself is not the root of the problem. In 2004, Frank assembled much of the existing research in the emerging field of happiness economics, and argued that most people subvert their own joy through the ways in which they choose to use their newfound wealth. "Considerable evidence suggests that if we use an increase in our incomes, as many of us do, simply to buy bigger houses and more expensive cars, then we do not end up any happier than before. But if we use an increase in our incomes to buy more of certain inconspicuous goods - such as freedom from a long commute or a stressful job - then the evidence paints a very different picture."

That is the real beauty of wealth: it buys freedom and choice. The Mercedes convertible provides a thrill, maybe even a temporary respite from the hedonic treadmill, but Frank's evidence shows rich people tend to be happier because they can afford to avoid and eliminate the things that cause stress, anxiety and depression. For most people, happiness comes from devoting less energy to chores and burdens, and replacing them with more meaningful and rewarding pursuits - family, friends, exercise, travel and other "restorative activities." Those who do, says Frank, are less likely to fall ill, to miss work, to come into conflict with others, and a lot less likely to commit suicide. But that kind of freedom doesn't come cheap, especially if you're not quite capable of stepping off the treadmill of consumer culture entirely.

It may be true that money for its own sake means nothing. It may also be true that those who measure themselves by the things they own will never be satisfied. And, as far as we know, you still can't take it with you. But as Gertrude Stein said, "I've been rich and I've been poor. It's better to be rich."

Maclean's February 13, 2006