In his new book, The price of civilisation: reawakening American virtue and prosperity, progressive Columbia University economist Jeffrey D Sachs argues that the relationship between income and happiness is not as strong as people often imagine. Above a (lowish) minimum level, income doesn’t make a big difference.
But money could make us happier if only we’d spend it in different ways. Drawing on the research of Harvard psychologist Daniel Gilbert and his colleagues, he cites eight principles for deriving more happiness from your income:
First, buy experiences instead of things, since experiences (vacations, trips to the museum, concerts, dining out) offer long memories to savor.
Second, and crucially, use our incomes to help others instead of ourselves, because as hypersocial animals, “almost anything we do to improve our connections with others tends to improve our happiness as well.”
Third, buy many small pleasures instead of a few big ones, in essence slowing down to smell the roses.
Fourth, buy less overpriced insurance (such as product warranties), because we adjust much better to adverse shocks than we suppose.
Fifth, pay now and consume later, rather than buying now on the credit card and paying later. The anticipation of a future purchase will give us anticipatory joy, which the authors call a source of “free” happiness. Impatient purchases, on the other hand, give us fleeting benefits and long-term debt.
Sixth, be attentive to the details of a purchase, since they may disproportionately affect the happiness of the experience.
Seventh, beware of too much comparison shopping, since it can focus our attention on unimportant distinctions.
Eighth, listen to others about what can bring happiness. They can add new and useful perspectives
The source of these principles is a paper published earlier this year in the Journal of Consumer Psychology, If money doesn’t make you happy then you probably aren’t spending it right, by Elizabeth Dunn, Daniel Gilbert and Timothy Wilson. If you follow that link you can read the complete paper (it’s not technical and it’s not very long). Here’s the conclusion:
When asked to take stock of their lives, people with more money report being a good deal more satisfied. But when asked how happy they are at the moment, people with more money are barely different than those with less…..This suggests that our money provides us with satisfaction when we think about it, but not when we use it. That shouldn’t happen. Money can buy many, if not most….of the things that make people happy, and if it doesn’t, then the fault is ours. We believe that psychologists can teach people to spend their money in ways that will indeed increase their happiness, and we hope we’ve done a bit of that here.
Note: the quote from Jeffrey D Sach’s book is from page 127 of my electronic edition. I’m not sure if paper copies will be the same, but if not it’s at the start of Chapter 9, The Mindful Society. Random House will publish the book in paperback in Australia on 1 December – note that I’ve linked the book to Amazon above because Random House Australia has the cover right but the blurb is about a different book altogether!