01 Mar 2018
Money (Actually) Can Buy Happiness
How you spend your cash can change how you see the worldby April WhiteTopics:
Professor Michael Norton and Assistant Professor Ashley Whillans
(image by John Ritter)
People aren’t very good at predicting what will make them happy, say Professor Michael Norton and Assistant Professor Ashley Whillans, who both study the intersection of time, money, and life satisfaction. Humans, it seems, are wired for immediate gratification, while “a lot of the things that make us happiest require time and effort,” Norton says. Understanding this disconnect and interventions that could change it can make people—and companies—a little happier.
Professor Norton, you have looked at the cliché that “money can’t buy happiness” and shown it to be false.
MN: My collaborator, Elizabeth Dunn [of the University of British Columbia], and I started out looking at whether giving money to others makes you happier than spending it on yourself. About the same time, Tom Gilovich and his colleagues [at Cornell University] were studying whether spending money on experiences makes you happier than buying stuff for yourself.
From those studies, we learned that—across cultures and income levels—giving is better than buying for yourself, and that experiences are better than stuff. So we took a step back and asked, What’s the fundamental relationship between money and happiness? We were interested in answering that question in order to design interventions: What can we change for people?
Professor Whillans, your research looks at a related cliché that “time is money.” What have you learned?
AW: There’s a lot of interesting research that shows that hourly wage workers think about their time differently than salaried employees. When you take the resource of time—which typically links you to things you care about such as socializing with your friends and family—and you start quantifying it, then you start thinking about time with a market mindset.
One study by Sanford DeVoe [of UCLA] showed that thinking about time as money makes you less helpful; suddenly you are less willing to give up your time for free. On the flip side, I think there’s the opportunity for this “time is money” mindset to make you more strategic or more efficient with your time—but there’s not much research on that yet.
Recently, we studied how people could spend their discretionary income to promote happiness: What would happen if you spent your money to have more time, by outsourcing disliked tasks like cleaning or cooking or doing your taxes? We ran survey studies with people living in the United States, Canada, Denmark, and the Netherlands, including millionaires as well as people who are less wealthy. And we found consistent evidence that people who give up money in order to have more time report greater overall satisfaction with their lives.
One of the things we are working on now is understanding how decisions about time, money, and happiness play out in the context of romantic relationships. What is the optimal way you and your partner should be spending your discretionary income together to promote happiness?
How can this research be used in the workplace?
AW: Some employers offer employees a lot of choice when it comes to incentives: for instance, cash, luxury goods, experiences, or time off. They think, “Choice is the answer.” But from our research, we know people don’t always make decisions that are optimal for happiness. Employees might think money or goods will make them happier, when research shows it is usually experiences or time. By reconsidering the incentives they offer, employers can nudge employees toward the choices that will probably make them happier.
MN: Another basic insight from the research—that giving even small amounts of money to other people can make you happy—can also be applied by organizations.
On the employee side, you could give someone a $25 bonus for a job well done, or you could give them $25 to reward a teammate on a job well done. We found that when you get a $25 bonus for yourself, not much happens. But if you get $25 to spend on a teammate, it makes you happier, and in some cases, it can also improve the coordination of the team.
On the customer side, we’ve done experiments where a company gives customers money to donate to charity, instead of having them buy a product and then 10 percent of that goes to charity, as is typical. Giving customers money to give to others makes them happier and is a strong signal that the company is really genuine.
This question is especially important for companies employing millennials who say they want meaning and purpose in their jobs and a work-life balance. They want happiness.
How do these ideas of time, money, and happiness play out in interpersonal relationships?
AW: Much of the research on these questions has been done with individuals, but in real life, we make these types of decisions with our partners. We have some data now on time-saving purchases and heterosexual couples. The general pattern is that time-saving purchases promote relationship satisfaction for both partners. In fact, we surveyed 200 couples and found that spending money in a typical month on time-saving purchases is as good for relationship satisfaction as receiving adequate emotional support from your partner.
But there’s a funny finding here: When the purchase saves time for the women, who are typically doing more chores at home, the men actually benefit more.
MN: Another area that we’re interested in is how parents should think about these things with their kids. How should we think about teaching our kids about time and money so that they make decisions that science says are good for them? What are parents’ theories for teaching their kids about these things? How do they go about it? Are they effective or are they not effective? It’s in the early stages, but it’s such a great intervention in general to make parents articulate to their kids what’s good.