Yes, if you give it away.

One of the big questions in psychology is “Can Money bring you happiness?” … “Yes, if you give it away”. A very odd answer. Let’s look into some experiments and studies.

Psychologists and other social scientists are very often accused of stating the obvious when they conduct their experimental research. Surely this is one of those questions that ‘most people know’ the answer. After all no one seeks a salary cut in order to have a happier life; when taxes are lowered or the mortgage rate drops, people are generally happy about the change.

The Study

people’s happiness was correlated with how much money they gave away rather than how much they spent

The Canadian psychologists who did this study decided to narrow the question down a little, so that they could be a bit more specific and quantative. Data from around the world has shown that although real incomes within developed countries have risen dramatically in recent decades, people have not reported a corresponding surge in their happiness levels. It seemed that people were pouring their new money into purchases and pursuits that actually didn’t make them any happier. So the psychologists decided to look more closely at how people spent their money, and see whether different ways of spending money produced different levels of happiness. Their first finding was surprising – people’s happiness was correlated with how much money they gave away rather than how much they spent !

At this point we should be careful about this rather bold statement of a correlation between these two events. It’s a well-known pitfall in science to believe that a correlation, that is two things increasing or decreasing at the same time, means a common cause. For example, one scientific study reported that young children who sleep with the light on are much more likely to develop myopia (short-sightedness) in later life. Further investigation showed that short-sighted children were more likely to have short-sighted parents, and short-sighted parents were more likely to leave a light on in their children’s bedroom.

Re-appraising the findings

With this pitfall in minde the researchers did another experiment to try to see whether the cause of people’s happiness really was due to the fact that they gave money away.

They gathered together 50 people were asked to rate their level of happiness in the morning and then given either $5 or $20, which they were asked to spend by 5 p.m. the same day. Half of the subjects were told to spend the money on themselves and the other half to spend it on somebody else or to give it to charity. After 5 p.m. the subjects were again asked to report on their level of happiness. The results were unambiguous – the people who had been told to spend the money on others finished the day happier than they had been at the start, and the increase in happiness was greater than for those who spent the money on themselves.

So why should this be ?

To try to explain why increased income on its own doesn’t bring happiness, psychologists have pointed out that it’s not the circumstances of our lives – income, gender, religious affiliation – which predict happiness levels, but the choices we make and the practices we choose to engage in. So how we choose to spend our money is at least as important as how much money we have.

One final finding of this research is that giving away quite small amounts, as little as $5, can have a disproportionate effect on the happiness of the giver. The researchers ended their report by suggesting that government policy that encouraged people to spend more on others rather than themselves may increase the sum total of human happiness.