The Science Behind Money and Happiness

What to make of all the contradictory evidence.

“Money may not buy happiness, but it can damn well give it,” declared Freddie Mercury. So goes the rockstar’s take on one of civilization’s most persistent questions: Does wealth, in the end, make us happier?

It’s a complicated inquiry, one which psychologists, economists, and researchers have worked hard to find answers for. There’s a massive mount of scientific literature about the influence of money on the mind, but the studies, when taken in total, can form a confusing and overwhelming picture.

Interest in money-and-happiness science has been reinvigorated by a new study at the University of Cambridge. What makes this particular study especially notable is the sheer size of its research. Following 625 participants, psychologists collected data from over 76,000 bank transactions spanning a period of six months. In what some are calling groundbreaking research, Cambridge psychologists were able to give some evidence-backed ammunition to partisans in the “greed is good” camp.

Their study concluded that cash indeed elevates our spirits. Entitled “Money Buys Happiness When Spending Fits Our Personality,” the Cambridge psychologists correlated participants’ spending habits to personality and observed the enjoyment derived from each. “Our findings,” said psychologists Sandra Matz, “suggest that spending money on products that help us express who we are as individuals could turn out to be as important to our well-being as finding the right job, the right neighborhood or even the right friends and partners.”

And this is just the latest study in a long tradition of conflicting and varying research.

More Significant Research

A prevailing theme of affirmative, money-can-buy-happiness studies is that you have to spend your money the right way. This makes a good deal of sense. The Cambridge study found, for instance, that extroverts are more likely to be happy spending money at the pub, while the conscientious are happier spending money on the gym. In this same vein, researchers have found that spending on experiences, not material goods, is a surer way to gaiety and joy.

Researchers Leaf Van Boven and Thomas Gilovich published a paper in the Journal of Personality and Social Psychology that found people were not only happier when indulging and spending on experiences, but thinking about them, as well.

Those surveyed reported higher levels of satisfaction for experiential purchases (concerts, ski trips, travel, dining) over the material (jewelry, electronics, clothing, CDs). This makes sense for many reasons. First, experiences tend to be less lonely, and it is far easier to share a concert with someone than it is a diamond ring. And crucially, experiences, not things, beget memories. Memories last just as long, if not longer, than material possessions, and lend themselves to reinterpretation with time. The malleability of memory comes in handy in a life. Or, as novelist André Aciman observed about the human condition in his essay “In Search of Proust”: “We are driven by something as simple and obvious as the desire to be happy, and, if that fails, by the belief that we once have been.”

But the aforementioned formula isn’t invincible. Money makes us happy because it can buy experiences, which is not the same as saying money buys happiness. One recent survey by Fidelity highlights this distinction. The company found that 25 to 35 year-olds would give up an average of $7,600 in salary for a more accommodating and flexible work schedule. Participants here value life-experiences as a source of happiness, and showed they were willing to give up more money if they believed the work involved might interfere.

To money’s credit, however, there are other ways research has found it conducive to happiness. In a paper, “Economic Growth and Subjective Well-Being,” economists evaluated varying scientific research and concluded:

Income is positively related to wanting to have more days like yesterday, with feeling well rested, with feeling treated with respect, with being able to choose how to spend one’s time, with smiling or laughing, with feeling proud, with having done something interesting, and with eating good-tasting food.

Science has also shown that the brain is wired for wealth. The first paper published about observing money’s effect on the brain found that cash, and cash alone, was enough to get dopamine flowing and excite joy. While further studies have even proven that money activates the same area of the brain that love and cocaine do.

Money Too Has Its Price

Money changes our brains, and not always for the better. Dacher Keltner at UC Berkeley has conducted studies that have shown that drivers of expensive cars are less likely than drivers of cheaper cars to yield to other vehicles at an intersection. Even more startling is the fact that drivers of expensive cars ignore a pedestrian’s right of way nearly half the time. Further studies have also found that wealthy people are more likely to shoplift than the poor, and are markedly predisposed to cheating and stealing, too. Empathy, unsurprisingly, takes a frequent back-seat, as well.

While this might not exactly prove that that money makes us miserable, it at least suggests money-mindedness contributes to a collective inheritance of ugliness and misery. That money corrupts our characters is an idea as old as the Bible and morality itself, and for good reason. “As you move up the class ladder,” said psychologist Dacher Keltner, “you are more likely to violate the rules of the road, to lie, to cheat, to take candy from kids, to shoplift, and to be tightfisted in giving to others.”

Not that the rich don’t suffer at the hand of their perspective, either. Many of the world’s wealthiest people never feel like they have enough. In a survey of a bank’s richest clients, for instance, Harvard business professor Mike Norton found that most people would need two or three times what they had to be happy. However, there’s another way to get satisfaction from your wealth. In a separate study, Norton discovered that spending money on others is a far more reliable way to convert dollars into joy.

It is a good piece of wisdom that a life of self-indulgence and self-satisfaction will only leave us more empty. The trick is finding balance. Prevailing belief among many psychologists and economists is that there is a household-income plateau, after which elevations in income have diminishing sway over happiness. For some time, $75,000 was considered this “happiness benchmark,” but that figure is an average, and fails to account for discrepancies in the cost of living. In Mississippi, the happiness plateau is best put at $66,000, while in Hawaii it exceeds $122,000. The numbers may change, but it pays to keep in mind the principle that it just might be happiest in the middle.

All at once, money can have an elevating, corrupting, enlivening, and diminishing power over the human spirit. In the wake of so much contradiction, the question—Can money buy happiness?—might ultimately be misguided. Money, in the end, might have little more dominion over our happiness than sunsets or cabbages. Attitude, not the thing itself, makes all the difference when it claiming happiness, especially within the workings of a exhausting and difficult system like economics.