New research reveals some new ways to buy happiness, sort of

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It turns out that money actually can buy happiness, but not a lot of it. At some point, well under $100,000, the happiness value of a dollar starts to plummet, according to Richard Easterlin, economics professor at University of Southern California. This is because social interactions impact happiness more than money does.

But here’s a new way to look at the money and happiness equation, from a new study by Nattavudh Powdthavee of the University of London: If you make sure to see a friend or relative in person almost every day, that is like increasing your salary by $180,000 a year.

However buying incremental happiness with a six-figure income is very costly. For example, Powdthavee says if you are going to relocate from a city where your family and friends live to a city where you have no family or friends, you would need to earn $133,000 just to make up for the lack of happiness you feel from being far from those people.

Powdthavee drives home the importance of making a conscious choice about your time when he writes, “Since it normally requires both time and effort to achieve either higher income or a stable social relationship with someone, the weight attached to each individual’s investment decision thus depends upon the type of possession — money or friendship — that he or she believes will yield a larger impact on happiness than the other.”

It’s great that Powdthavee does the money vs. relationship math for us, because as humans we are absolutely terrible at predicting what will make us happy and maybe shouldn’t even bother. For one thing, we are all likely to tell ourselves we’re happy, whatever we are doing, in order to justify what we’re doing. This is a fine predisposition for maintaining our sanity, but it’s not a great attitude to have if you are trying to figure out how to change your life to be happier. Our judgment about our own happiness is so bad that Andrew Oswald, economist at the Warwick University has written a paper that to calls for researchers to stop drawing conclusions based on asking people if they are happy.

So I recommend believing that the research is right and your personal predictions are wrong. But the caveat with all this money research is that when we ditch our relatives to take a high paying job, we’re not actually interested in the money, per se. It’s something else.

In a study where people make decisions about sharing money, Harvard University economist Terry Bernham showed that when it comes to money, we don’t strive for some idea we have of what is “enough” but rather to have a little more than our friends. The Economist describes Burnham’s study and reports, “What people really strive for is relative rather than absolute prosperity. And this is likely to be particularly true in individuals with high testosterone levels.”

The Economist concludes that this is totally rational behavior, because while more money has not been shown to get more sex, more money does buy the social status to have more choices for sex partners. So money isn’t an end in itself, but social status is, whether we like it our not, because it has been our means to preserve our DNA.

This explains the study that blogger Gautam Ghosh quotes showing that someone who is a gatekeeper for a hospital can be happier in their work than a doctor based on their perceived contribution to the community. And it also explains the drive to forgo a big salary to make art: If your art hangs in the Guggenheim, you get your choice of girls to go home with, even if your home is sort of shoddy.

So what can we do?

1. Recognize that you should make relationships your top priority. Really. Most of us say we do this, but many of us could not actually point to a time when we took a big hit in the money department just so we could preserve regular date night with our significant other.

2.Admit it’s an uphill battle to care less about social standing. But it’s worth it. The more you care about where you stand in relation to others, the less happy you’ll be. Social standing can take so many forms. Instead of patting yourself on the back for not buying a McMansion, be honest about the fact that you didn’t want one anyway. Understand how you measure your social rank, and try to tame it. For my part, I tell myself that if I check fewer times a week, I’ll be a happier person. (Maybe true. But look, I still linked to it.)

3. Trust the research when you are faced with a tough decision. Yes, all research is like diet research — one decade cheese is bad, next decade cheese is good. But just because the research is not perfect doesn’t mean you should go off and do whatever your gut tells you. Your gut tells you pizza is great and so is grilled cheese. But duh, it isn’t. And your gut tells you that you will be happier with a little more money, and you could relocate from family if you make sure to visit a lot. But you know what? Duh. You know the truth.

Hat tip: Senia Maymin

35 replies
  1. Chuck Westbrook
    Chuck Westbrook says:

    This is my favorite post I’ve seen here since I started following your site. There is nothing more powerful than a big dose of perspective when you have gotten myopic about work.

    By focusing on the brass ring at the expense of other aspects of your life, you are just inviting a miserable work experience.

    Thanks Penelope, this is a great one.

  2. Jacqui
    Jacqui says:

    Thanks so much, Penelope. I’ve been contemplating a lot of really big decisions lately, and I almost let out a sigh of relief when I finished reading your post.

    Thanks for making me feel like it’s okay to feel the way I do about these issues.

  3. Paula G
    Paula G says:

    This is a great post. How they actually quantify their numbers, I don’t know, but you can’t really put a price on relationships and things you are about. No matter how great the job looks or even might be, it is not the rock on which to build your foundation. That is better built on faith (however that has personal meaning to you) and relationships (starting with the relationship you have to your self).

    Jobs can come and go in a heartbeat. Literally I know because my “day job” ala venture capital as I build my business job vanished in the blink of an eye yesterday during a company reorg. Companies, jobs, and “business” is not “personal”, but life and happiness is.

  4. Tracey P
    Tracey P says:

    I read about you in the Tampa Tribune recently and am so glad I did. I love your ideas. In my field of work there is a type of national certification I can receive and everybody is all hot to get it. Most people have to spend 200-400 hours over 2-3 years to get it. If you earn the certification you can reap additional financial incentives (up to $13,500 per year for 10 years). Well this summer I was a scorer for the process and I saw it from the inside. Now I just feel like it is a big “hoop jump” if you know what I mean. I just don’t see jumping through hoops just for the money—and that’s what it would mean to mean—just the money. Your ideas have given me permission to say no to going through this process. Thanks…now I just have to tell my husband the “bad” news…


    * * * * * * *
    Hi, Tracey. Thank you for leaving this comment. It’s always interesting to hear someone’s thought process while making a shift in thinking. I think this is how we all create a life that’s in line with our values — by making hundreds of decisions like this one. They all add up.


  5. Mary
    Mary says:

    Oh, I love! I just wish there was something like that for non-virtual interactions. I’m naturally competitive and would love to see various graphs of my interactions (social, business and family) measured against those of others I know. I’m kind of kidding, but at the same time — ummm, not really.

    Also, in terms of “our brains are more likely to tell ourselves we’re happy” neuroscientists are leaning more and more to the theory that many of our actions are initiated by the subconscious and our conscious brain’s biggest task is to create stories that justify why we chose the pink sweater instead of the blue one or why we chose sweet Mr. X over rich Mr. Y to be our mate.

    * * * * * *
    Love the honesty, Mary. I think we’d all like to have a pulldown menu for all aspects of our lives.


  6. Dave Y
    Dave Y says:

    Your post made me immediately think of a book I just read on the same topic, Stumbling on Happiness:

    The theme of the book is similar to your post, except the author tries to get you to understand why you will or won’t be happy as much as figuring out how to be happy in the first place. I highly recommend it.

    His suggestion on knowing what will make you happy, by the way, is to ask others who are already where you want to be and see whether they’re happy. (Which is apparently something most people won’t do.) You often recommend similar advice in the job arena, so I figured you’d get a kick out of that. :)

    * * * * * * *
    Thaks, Dave. I love Stumbling on Happiness, and Dan Gilbert was one of the most fun of any interview I’ve ever done. He’s got a happiness statistic for everything. I didn’t link to him in this post becuse I link to him constantly and I thought I’d mix things up. Great to see that even if I leave him out, someone puts him in.


  7. Mike Berry
    Mike Berry says:

    There’s a great interview this week with comedian Patton Oswalt at The Onion’s AV Club. This part of it really struck a chord with me (expletives deleted):

    I think people mistake liberty and freedom, and they mistake having a lot of money and possessions with, "Now I'm … free, I've got two cars and a house." But that actually limits your liberty. I remember Tom Lennon saying, "I don't want to own a house that's gonna force me to do things to keep it." Tom Lennon lives in this nice little house that he can more than afford, so he's not like in this constant cycle of debt just to make it look like he's successful. Me, too. I have a very tiny house in Burbank. I drive an 8-year-old car. I'm gonna drive it into the ground. I enjoy what I enjoy. I wanna have enough money, to steal from Hercule Poirot, to meet my needs and my caprices, but I don't want to be this, "Oh, my … monthly nut. I hate this … movie, but I've gotta do it."

  8. Jonathan
    Jonathan says:

    I definitely agree about people not being able to determine what will what them happy. But I think the reason is that there are too many choices today. The increased flexibility in the workforce has allowed vastly increased the life choices of people. My grandfather frequently tells me about how people in his day, "choose a good company and stuck with it." Now, people see the value in choosing a lifestyle for themselves. Some people want the big incomes so that they can fit in with their peers. Others, less of an income and more of a work-life balance. I think what makes the decision part hard is that it takes time to experience both ends and decide what is ultimately the best. However, I do think this brings a lot of merit to having several different jobs at a young age. People can see what their peers lives are like and come closer to a decision about what is best for them.

    * * * * * * *
    Yeah, I agree that the choices are really overwhelming. Additionally,the goals we have are so different from the goals previous people in the workforce had, that it’s hard to find anyone’s life to look at as a way to elevate/eliminate choices that we face today.

    And, of course, now is a good time to bring up the book The Paradox of Choice, which explains how more choices do not make people more happy. A lot of times i think people don’t want to make a choice becuase they don’t want to eliminate chioices. But elinimating choices has it’s upside — I experienced that by moving from NYC to Madison. A lot of times my husband and I make jokes about how incredibly few choices — for anything — there are in Madison compared to NYC. But I can feel that the lack of choice is a relief, too.


  9. Alan
    Alan says:

    I agree that having the company of friends or relatives almost everyday is a cheaper way of having fun. Since we humans are social beings, it’s much easier to have fun even if we are just with some friends and relatives.

  10. Mary Baum
    Mary Baum says:

    That business of social standing shows up in the weirdest ways.

    A tennis team, for instance, fields its players hierarchically: the best players play Court #1; the second-best team plays #2; and so on, until all the courts for each side are full.

    Rarely is anyone happy with where the coach plays her (unless of course they also happen to practice a profession of some kind — we tend to be a little more laid-back about the whole thing.)

    But not everyone is unhappy about the same issue: some want to play higher in the lineup, even if it means winning fewer matches, while others want to play farther down and have a clearer shot at winning the match.

    Either way, I’ve always imagined that the real issue wasn’t so much about the actual court assignment or play of the match — it was more about what a player was going to tell herself and/or other folks about the match after it was over, win or lose.

    Or, in other words, social standing.

  11. Suze
    Suze says:

    Another great post, Penelope! Social interaction has been a KEY part of my life and has made me happier than anything else (of course, I’ve never made much money so there are those who would argue that I don’t know how much happiness money would bring.)

  12. Emily
    Emily says:

    On the money question, it’s interesting how it plays into relationship dynamics… and how that plays into happiness.

    We’re about to move so I can take a job that I hope I’ll love, which happens to pay significantly more than the job my husband is leaving behind to move with me. The money is not the only factor — it also moves us much closer to my family (and about the same distance from his family as we are now) and gets us into a much more reasonable housing market… but the role reversal in primary income generator is… interesting.

    As an additional factor, I wonder how that generous salary will (or hopefully won’t) influence relationships with good friends and family… I know that I keep having to fight the impulse to say, “Let me pay for everything” because it feels like I’ve received this windfall and I should be generous and share it with those I love; while for them I’m sure its an irritant and somewhat patronizing…

    ** * * * * *
    I understand the impulse to share the money. When I was making a lot of money I bought two friends cars. In hindsight, it was not the smartest move. My ability to earn a lot of money was so different without kids and with kids. The value of money totally changes once there are kids because the value of time changes. I wish I had understood that. I don’t have great answers here, except that I am positive that I should have gotten help figuring out how to deal with such a large amount of disposable income.


  13. Fran
    Fran says:

    True. Relationships should be our top priority. We can’t always buy happiness if we don’t have friends and relatives to share it with. Besides, happiness from friends is different from the happiness that we can buy.

  14. Daniel Dessinger
    Daniel Dessinger says:

    This is why I am working towards taking my entire family with me to an island. Me, my wife, my kid(s), parents, mother-in-law, sister (if available), and maybe even my cousin.

    That would provide me with insta-community and the knowledge that I am providing for my extended family (which is a very high priority for me).

    Imagine the Godfather without all the crime and horse heads. That’s me. I plan on taking care of my family. I want my parents and in-laws to enjoy the latter half of their lives and give them the opportunity to really know and impart wisdom to my children.

    We really miss out when we miss the multi-generational childhood. There’s something irreplaceable that comes from real relationship (rather than just holidays) with parents, grandparents, cousins, aunts, and uncles.

  15. Sam
    Sam says:

    I knew they were all lying when they said money can’t buy happiness! You are right though, I’d rather be poor with someone to love than to be rich and have nobody. There is much to be said about social interactions with others.

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