Interesting research findings on wealth and happiness 5

Photo: sean-b via Flickr

The better news: You can't spend that money on yourself. Instead, to get the most smiles per dollar, you have to spend money on other people.

Dr. Elizabeth Dunn at the University of British Columbia, Vancouver and colleagues found that [experimental subjects] report significantly greater happiness if they spend money "pro-socially" -- that is on gifts for others or on charitable donations -- rather than spending on themselves.

The researchers apparently looked at three different kinds of studies: a nationwide survey, a specific study of how employees spent their bonuses, and a controlled experiment on psychology undergrads. In all cases, the evidence showed that giving money away made people happier. In fact, donating as little as $5 was enough to boost happiness on any given day. But the amount of money people spent on themselves had no appreciable effect on how happy they were.

In short, new research confirms an old adage: it really is better to give than to receive.

But, on a somewhat more dismal note, there's another route to convert money into happiness: choose friends who aren't as wealthy as you are.

Researchers have long understood that wealth effects are positional -- people care far less about their absolute level of income or consumption than about how they're doing relative to their peers. That's why a millionaire among billionaires can feel deprived -- and it's probably what motivates many phenomenally wealthy people to acquire even more.

Once again, scientists have something to say about all this. An experiment involving MRI scans, for example, showed that the "reward systems" in a person's brain are particularly stimulated by relative success. Subjects in the experiment were paired up, and each was given money for performing a task well. It wasn't a zero-sum game -- each test subject's financial reward was independent of their partner's performance. Still, brain scans revealed that people's "reward systems" were most active when they did well but their partners did poorly. It's the wealth effect in microcosm: you get a little boost from earning money by performing a task well, but a much bigger boost from knowing that you're doing better than your peers.

But perhaps the most important result of this study was that losses mattered more than gains. The decline in "reward" activity for losers was apparently much steeper than the increase for winners. The lead researcher puts it succinctly:

[T]he pain of having less is stronger than the joy of having more.

Combining the two lines of research, giving away more money could be a double whammy for happiness. Giving brings joy to the giver, and perhaps (depending on who the recipient is, and how the gift is given) the recipient won't feel such a sharp sting from having less.

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