Can Money Buy Happiness?

Philosophers postulate about it. Marketers of everything from cars to cruises to computers promise it. It’s a national duty to pursue it. But what exactly is the elusive and much-desired state of mind known as happiness?

Over the past couple of decades, a cadre of psychologists, sociologists, economists and political scientists have sought scientifically verifiable answers to some of the eternal questions: Can money buy happiness? Does freedom make people happy? Are some nations happier than others? Can people make themselves happy, or do they have to be born that way? And what is happiness good for, anyway? The intellectual quest of “hedonic psychology”—or “happiness studies,” to use the friendlier colloquialism—is to go beyond the folk wisdom of Oprah to determine what Daniel Kahneman, winner of the 2002 Nobel Prize in economics, calls “objective happiness.”

There is more at stake than the opportunity to settle old philosophical quarrels. The pursuit of “objective happiness” could be—and, some argue, should be—the basis of public policy. In his introduction to Well-Being: The Foundations of Hedonic Psychology (Russell Sage Foundation, 2000), Kahneman expresses the hope that hedonic science will prompt economics to shift its focus from “those aspects of life that can be traded in the marketplace” to “desirable goods such as love, mental challenge and [reduction of] stress.”

He’s not alone. Other studies have concluded that freedom of choice is a significant variable in the happiness of nations as a whole. And drawing from other experiments, one psychologist has even called for regulatory limits on advertising that promotes our lust for possessions.

How close are we to knowing what objective happiness is? Will we find a definitive answer to what every self-help-book buyer is asking? Unlikely. In fact, according to Ed Diener, a psychologist at the University of Illinois, the evidence thus far suggests there is no such thing as a “key” to subjective well-being—or “SWB,” the term social scientists prefer to the vaguer word happiness. For instance, even people who have qualities that are important for high SWB—solid mental health and strong social relationships, for example—can be unhappy. Moreover, the field bristles with warring theories, and not one of them can account for all the data that has been collected about happiness. Nevertheless, there are some basic questions investigators feel they can answer with a degree of certainty.

These include the classic: Can money buy happiness? The Beatles offered an opinion four decades ago, but by no means settled the debate. In fact, the influence of income and wealth on happiness is one of the most widely studied phenomena in the field. And despite all the behavioral evidence—the mushrooming of McMansions equipped with pricey spa bathrooms and six-figure restaurant-style kitchens; the waiting lists for $48,000 Hummer H2s; the lingering lust for luxury goods—it appears the Beatles had it right all along. Money isn’t the answer.

“Income has a moderately strong relationship to happiness at the low end of the economic scale, the significantly low end,” says Aaron Ahuvia, professor of psychology at the University of Michigan at Dearborn. “In my research, I’ve found the cutoff around $20,000.”

After that, happiness doesn’t seem to budge much as income rises. The British Household Panel Survey, an ongoing study based on interviews done over time with a group of working adults in the U.K., shows that, on average, people earning the equivalent of $80,000 a year are not significantly happier than those making $30,000. Other studies have found that a mere 3 percent of the difference between the happiness of individuals can be attributed to income.

Likewise, research that tracks people’s SWB over time has found that happiness levels are not lastingly affected by drops or increases in income. Once you’ve escaped the lowest levels of Maslow’s pyramid, having more money seems to offer little assistance in the pursuit of realizing your full potential.

What is true for individuals also appears to be true for nations, at least according to broad survey measures. It’s true that poor countries are considerably more unhappy than rich ones, and a wealth increase in those impoverished countries tends to have a significant impact on national well-being. But again, after a significant proportion of people reach a certain level of material comfort and security, more money fails to raise the level of national happiness. Income data from U.S. government agencies, combined with happiness data from the National Opinion Research Center’s General Social Surveys, shows that while inflation-adjusted average American income has risen 100 percent since 1956, the percentage of people who say they are “very happy” has not changed.

Important, too, to a nation’s general level of happiness is the way income is distributed: More equality translates to higher SWB. Little wonder, then, that the Netherlands, with its absence of income extremes and its cultural distaste for flashy affluence, won the SWB crown in a study conducted in the early ’90s by Dutch sociologist Ruut Veenhoven on the happiness of 48 countries. (The U.S. ranked 10th.)

Research shows that not only will that big raise you’ve been hoping for not make you happier—at least not for very long—focusing on it (and on the stuff you can buy with it) might actually make you miserable. Working with various colleagues, Tim Kasser, a psychology professor at Knox College and author of The High Price of Materialism (MIT Press, 2002), has turned up evidence that materialistic people dream more about death and falling than nonmaterialists do. Teens who fixate on the things money can buy are more likely to suffer from separation anxiety and to worry about what others think of them than those who don’t. Perhaps most damning, materialists are often not very nice people—they are more likely to be ungenerous and to suffer from envy. Of course, it may be that unhappy people use possessions to cope with their misery, but the relationship between materialism and low SWB appears to be mutually reinforcing.

But if money can’t make people happier, what can?

There are a number of competing theories, but they all have a common thread. Happiness comes from satisfying intrinsic rather than extrinsic needs—by tackling a challenging but doable task, by expressing oneself, by sharing emotional bonds with others. Ironically, although happiness studies begins as as a scientific inquiry into the unproven maxims of philosophers from Aristotle to Clarence the Angel from It’s a Wonderful Life, it often leaves us with the aphorisms with which we started.

One doesn’t have to be an academic social scientist, then, to know that SWB comes from within. And indeed, a majority of Americans do know it, according to consumer research. In the 2002 Yankelovich Monitor, a mere 19 percent of respondents said they consider money to be a meaningful measure of success. Between 1992 and 2002, the percentage of people saying they believe success is measured by intangibles grew, while the percentage saying they believe in the badge value of an expensive car and jewelry shrank. As sociologist Ronald Inglehart predicted in a landmark 1970s study, our culture has become “post-materialist”: We are more interested in emotional fulfillment than security. We value freedom and personal betterment over stability.

Of course, as anyone who has counted the ads in a recent issue of Real Simple knows, post-materialism does not preclude having, even coveting, lots of nice stuff. The obsession with “spirituality” that has gripped consumer culture since the 1990s went hand in hand with a hysterical gold rush. In fact, judging from the burgeoning square footage of our homes, the proliferating luxuries in our cars and the increasingly gourmet meals on our plates, the more that customers value intangibles, the more money they will spend on material stuff.

Not that any of this is lost on marketers, who, for the sake of the business, have been doing their own happiness studies for years. Having traded its banker grays for a guru’s robes, Citibank now offers fortune-cookie sentiments that deride obsession with material concerns while championing consumers’ souls. MasterCard, that great enabler of consumer debt, has made the folk wisdom “There are some things money can’t buy” its own. And who needs a shrink, a current commercial asks, when you can self-actualize behind the wheel of the Acura TL?

All of which begs the question: If money does not make people happy, and if large numbers of people know this, why are so much of life’s energies devoted to making and spending the stuff? Why, judging from our behavior, does post-materialism just make us more materialistic?

Kasser places part of the blame on marketing and advertising’s habit of turning activities like meditation, which offer people intrinsic rewards, into opportunities to sell meditation pillows. Human nature may be at fault, too. The human species, which spent its formative evolutionary years in scarcity and want, may simply lack the necessary sense of surfeit. “It’s an issue of enough,” Kasser says. (This same theory is invoked to explain the current obesity crisis.)

Ahuvia uses a food metaphor to explain our fixation on the transient, ultimately unsatisfactory joys of consumption. “Nobody thinks that eating a chocolate-chip cookie will make you happy in life,” he says. “Nobody thinks that eating more chocolate-chip cookies than everybody else on the planet will make you more happy than everybody else on the planet. You eat a chocolate-chip cookie because it makes you happy while you’re eating it.”

While that example may be apt, it sounds more like the rhetoric of self-help books than science. Can science explain why these post-materialist materialists do not choose what would make them happy?

It could be that they simply don’t know what would make them happy in the first place. Kahneman, who shook up economics with his studies of the irrational ways people make choices, continues his assault on the “rational economic actor” theory of economics in experiments that show how bad people are at predicting what will make them happy. One study looked at students who moved from the flat, cold, boring Midwest to sunny, happening California with the idea that it would make them happier. They were wrong. Another experiment indicated that people could not predict what would make them happy because they “misremember” past experiences of pain.

Studies by other psychologists confirm how bad people are at choosing happiness. For example, many people say they would rather be dead than have to live as a paraplegic after an accident. But studies of people who have suffered such a catastrophe indicate that, over time, they adjust and return to something near the level of happiness they experienced before. Studies of lottery winners prove this proposition in reverse: The financial windfall that most people think would solve all their problems actually proves to have no significant effect on winners’ SWB.

Add to this the idea of the “hedonic treadmill.” This theory holds that once one is habituated to a new, SWB-boosting pleasure—a raise in salary, a new kitchen, a novel taste treat, even a new marriage—that pleasure soon ceases to increase happiness, and SWB drops to its previous level. Thus, people can not only be mistaken in their expectations of what possessions will do for their happiness, they can be mistaken over and over again.

Though some who are involved in happiness studies use their work to critique global consumer culture, the concerns and values of the field can hardly be understood apart from that culture. The explosion in happiness studies during the past decade exactly parallels the “spiritualization” of consumer values in that period. Kahneman may urge economists to forget that which “can be traded in the marketplace” and remember “love.” But the marketplace has gotten there first, selling the things the money can’t buy.