Can Money Buy Happiness?

Jaret James

University of Arizona
Overview:

The purpose of life can be defined a million different ways by a million different people,

but it’s a safe bet that most would answer that their purpose in life is to be happy. However,

happiness is also a very abstract state of one’s life, and it varies from person to person. There is

no universal formula for what it takes to be happy, and although there are many different aspects

in life that are thought to bring joy to life, the fact of the matter is that it differs for everyone. So,

we start to look at things that are potentially thought to be linked with emotional satisfaction, and

of course one of the first things that we tend to think about is this age old question “can money

buy happiness?” In the first twenty-some odd years of our lives, we meticulously complete

thousands of assignments and papers and projects, not because we want to but because we

believe the end goal is a “good” job that pays “good” money. From the day we are born we are

conditioned to work and work because we are eventually going to have a family who needs a

house and food and clothes, and none of that can be obtained without money. So, for those who

do not fall into the particularly wealthy category by the end of the journey, it may seem to be an

obvious answer: “of course money can buy happiness”. However, the reality is people don’t look

into the question in terms of what burdens higher amounts of wealth can bring. They see it as a

very one-sided question where higher monetary wealth only brings benefits, and their

assumption is that money and happiness are directly proportional, meaning the common belief

would be that more money leads to a happier life. So, are they right? Do higher salaries correlate

to an increase in happiness within individuals?

After initially sitting down and looking at the very popular debate, I believed that with

limitations, higher salaries would lead to an increase in happiness, but the two were not infinitely

linear. I believed that eventually there would be a point where the higher amounts of money

would no longer have any more marginal utility in terms of “units” of happiness, and at that

point the burden of having an abundance of wealth would outweigh the true benefit of whatever

it brings. This point (whatever monetary value it may be) would be the theoretical peak of

happiness. After that, happiness would plateau, and it would even eventually end up decreasing

as the amount of money continued to increase.

After reviewing the research, the framing question turned out to be much more

complicated than anticipated, but my initial hypothesis showed a very strong resemblance to

what the researchers anticipated. That being said, just like many of the seemingly obvious

questions that we look at, there isn’t a direct “yes” or “no” answer because there are simply too

many other variables that factor into what it takes to make people happy. In other words, some

studies believed that you cannot just look at however much money someone makes and

magically create a gauge as to how happy they should be. Some people may have higher amount

of money, but if spending that money on materials and such doesn’t fit the individual's

personality, then it’s essentially useless. Other cases hypothesized that higher salaries do increase

one’s evaluation of their life, but their emotional well-being remained unchanged. This ended up

paralleling very well with my original hypothesis, as both proposed positive effects of money

and happiness, but it was never completely analogous in the research.

While looking into this interesting topic, the research that was found offered more or less

two distinct answers in terms of how money can (or cannot) affect our happiness. On one side,

scholars gathered some 450,000 responses through assorted questions of everyday Americans

with a variety incomes and found out that while money doesn’t always correlate to a stronger

emotional well-being of an individual, it does lead to a better outlook on life. On the other side,

researchers focused more on how people spent whatever money they had, and they in turn found

out that money can indeed lead to increases in happiness if the money is spent on things that

suited the buyer’s personality. As a general consensus to most of the work done in these journals

and the initial hypothesis, income showed positive correlations with life evaluation, and spending

did seem to increase happiness when it was closely associated with an individual’s disposition,

but it was not unanimous throughout the research. There were certain limitations and exceptions

that ultimately went against the mentioned findings that prohibited income and emotional

well-being from being directly proportional to one another.

One of the big ideas emphasized in some of the research was the underlying differences

how money affects people’s life evaluation versus the actual state of their emotional well-being.

Life evaluation was defined as the way one perceives the quality of his or her life, and this

tended to be much higher for people who were experiencing more money coming into their bank

account (Kahneman and Deaton, para. 2, 2010). The group then looked at the emotional

well-being of the individual, which they defined as “the frequency and intensity of experiences

of joy, fascination, anxiety, sadness, anger, and affection that make one’s life pleasant or

unpleasant”(Kahneman and Deaton, para. 2, 2010) and judged based on three specific reports:
happiness, enjoyment, and the frequency of smiling or laughter (Kahneman and Deaton, para. 8,

2010). Interestingly enough, there was not an obvious linear trend when compared with higher

incomes. However, they did notice that when we looked at initially lower incomes, the two

factors seemed to rise with each other, but as predicted there eventually came a peak point in

which this was no longer the case. The research inferred that “beyond about $75,000/yr, there is

no improvement whatever in any of the three measures of emotional well-being” (Kahneman and

Deaton, para. 15, 2010). A journal headed by Nikhil K. Sengupta helped elaborate on Kahneman

and Deaton’s inference by putting it in terms of basic economics. As salaries get bigger, “the

diminishing effects of increases in raw income merely reflect the diminishing marginal utility of

each added dollar” (Sengupta and Osborne and Houkamau, para. 12, 2012). More simply put, if

someone is already making $100 million/yr, giving him/her another $1 million will not produce

as much happiness as if it were given to someone who may only be making $50,000 per year.

The higher salaries get, the less important the additional money becomes for whoever may be

earning it, and if the money has zero importance, then there is no way it could continue to

increase happiness.

When looked at through a lens that consisted of analyzing the comparisons between what

an individual is like and how they spend their wealth, another conclusion arose regarding

whether or not money can buy happiness. By surveying participants of various personalities and

incomes, researchers matched transaction histories with personality tests. The general groups of

personalities and purchases were split between extroverts and introverts (extroverted purchase

examples being pubs or motor sports, introverted purchases being gardening or health insurance)

who were then asked to complete questionnaires that measured life-satisfaction after the
purchases were made (Matz and Gladstone and Stillwell, para. 13-18, 2016). This served as an

attempt to see if people experienced greater joy when they purchased things that correlated with

the kind of person they were. After crunching numbers and organizing the vast amount of the

data they collected, researchers confirmed that “personality-matched consumption indeed results

in higher levels of happiness” (Matz and Gladstone and Stillwell, para. 23, 2016). Elizabeth W.

Dunn, professor at the University of British Columbia, led a similar study that also aimed at

discovering whether or not spending money properly could indeed lead to an increase in

happiness. Her team came up with eight ways that concluded the fact that money increased

emotional well-being when spent the “right”way, but her first remedy further supported Matz,

Gladstone, and Stillwell’s personality-matched consumption claim. They emphasized how

experiences bring greater joy than material items, and how important it was for individuals to

spend money on personal experiences because “[they] are more centrally connected to our

identities” (Dunn and Gilbert and Wilson, para. 4, 2011). In other words, people spend money of

different experiences, and different experiences make them happy, which leads to the conclusion

that if individuals spend money on things that associate with their personality, happiness can

theoretically be bought.

Conclusion:

Even after studying four different cases from all across the world, the framing question

still resulted in two relatively different answers. According to some researchers, money does lead

to a better outlook on the quality of one’s life, but emotional well-being is only positively

affected up until a certain monetary value. It is at this point where the individual supposedly

peaks and receives no get gain of happiness from any extra amount of money. If we switch sides,
other researchers do believe that money can buy happiness, but only if the individual makes

purchases that are contingent with his/her personality. However, just because the answers

seemed to be contradictory doesn’t mean that one is right and one is wrong. Rather than

accepting one as truth and scrapping the other as fiction, the two answers could be combined to

form an solution that both answers the initial question and visits all possible facets of discussion

for the given topic.

Deaton, Angus & Kahneman, Daniel. (2010). High income improves evaluation of life but not

emotional-well being. ​Proceedings of the National Academy of Sciences of the United

States of America, 107(​38). 16489–16493.

Dunn, E. W., Gilbert, D. T., & Wilson, T. D. (2011). If money doesn't make you happy, then you

probably aren't spending it right. ​Journal Of Consumer Psychology (Elsevier Science),​

21​(2), 115-125. doi:10.1016/j.jcps.2011.02.002

Matz, S. C., Gladstone, J. J., & Stillwell, D. (2016). Money Buys Happiness When Spending Fits

Our Personality. ​Psychological Science (0956-7976),​ ​27(​ 5), 715-725.

doi:10.1177/0956797616635200

Sengupta, N. K., Osborne, D., Houkamau, C. A., Hoverd, W. J., Wilson, M. S., Greaves, L. M.,

& ... Sibley, C. G. (2012). How much happiness does money buy? Income and subjective

well-being in New Zealand. ​New Zealand Journal Of Psychology​, ​41​(2), 21-34.