Happiness, Money and Giving it Away
Project Syndicate, July, 2006
Would you be happier if you were richer? Many people believe that they would be. But research conducted over many years suggests that greater wealth implies greater happiness only at quite low levels of income.
People in the United States, for example, are, on average, richer than New Zealanders, but they are not happier.
More dramatically, people in Austria, France, Japan and Germany appear to be no happier than people in much poorer countries like Brazil, Colombia and the Philippines.
Comparisons between countries with different cultures are difficult, but the same effect appears within countries, except at very low income levels, such as below US$12,000 (RM44,400) annually for the US.
Beyond that point, an increase in income doesn’t make a lot of difference to people’s happiness. Americans are richer than they were in the 1950s, but they are not happier. Americans in the middle-income range today — that is, a family income of US$50,000-$90,000 — have a level of happiness that is almost identical to well-off Americans, with a family income of more than US$90,000.
Most surveys of happiness simply ask people how satisfied they are with their lives. We cannot place great confidence in such studies because this kind of overall "life satisfaction" judgment may not reflect how much people really enjoy the way they spend their time.
My Princeton University colleague Daniel Kahneman and several co-researchers tried to measure people’s subjective well-being by asking them about their mood at frequent intervals during a day. In an article published in Science on June 30, they report that their data confirm that there is little correlation between income and happiness.
On the contrary, Kahneman and his colleagues found that people with higher incomes spent more time in activities that are associated with negative feelings, such as tension and stress. Instead of having more time for leisure, they spent more time at and commuting to work. They were more often in moods that they described as hostile, angry, anxious and tense.
Of course, there is nothing new in the idea that money does not buy happiness. Many religions instruct us that attachment to material possessions makes us unhappy.
The Beatles reminded us that money can’t buy us love. Even Adam Smith, who told us that it is not from the butcher’s benevolence that we get our dinner, but from his regard for his self-interest, described the imagined pleasures of wealth as "a deception" (though one that "rouses and keeps in continual motion the industry of mankind").
Nevertheless, there is something paradoxical about this. Why do governments all focus on increasing per capita national income? Why do so many of us strive to obtain more money, if it won’t make us happier?
Perhaps the answer lies in our nature as purposive beings. We evolved from beings who had to work hard to feed themselves, find a mate and raise children. For nomadic societies, there was no point in owning anything that one could not carry, but once humans settled down and developed a system of money, that limit to acquisition disappeared. Accumulating money up to a certain amount provides a safeguard against lean times, but today, it has become an end in itself, a way of measuring one’s status or success, and a goal to fall back on when we can think of no other reason for doing anything, but would be bored doing nothing. Making money gives us something to do that feels worthwhile, as long as we do not reflect too much on why we are doing it.
Consider, in this light, the life of the American investor Warren Buffett. For 50 years, Buffett, now 75, has worked at accumulating a vast fortune. According to Forbes magazine, he is the second wealthiest person in the world, after Bill Gates, with assets of US$42 billion. Yet his frugal lifestyle shows that he does not particularly enjoy spending large amounts of money. Even if his tastes were more lavish, he would be hard-pressed to spend more than a tiny fraction of his wealth.
From this perspective, once Buffett earned his first few millions in the 1960s, his efforts to accumulate more money can easily seem completely pointless. Is Buffett a victim of the "deception" that Adam Smith described, and that Kahneman and his colleagues have studied in more depth? Coincidentally, Kahneman’s article appeared the same week that Buffett announced the largest philanthropic donation in US history — US$30 billion to the Bill and Melinda Gates Foundation and another US$7 billion to other charitable foundations. Even when the donations made by Andrew Carnegie and John D. Rockefeller are adjusted for inflation, Buffett’s is greater. At a single stroke, Buffett has given purpose to his life. Since he is an agnostic, his gift is not motivated by any belief that it will benefit him in an afterlife. What, then, does Buffett’s life tell us about the nature of happiness?
Perhaps, as Kahneman’s research would lead us to expect, Buffett spent less of his life in a positive mood than he would have if, at some point in the 1960s, he had quit working, lived on his assets and played a lot more bridge. But, in that case, he surely would not have experienced the satisfaction that he can now rightly feel at the thought that his hard work and remarkable investment skills will, through the Gates Foundation, help to cure diseases that cause death and disability to billions of the world’s poorest people. Buffett reminds us that there is more to happiness than being in a good mood.