Can money buy happiness?

Money is they key to end all your woes
Can you tell me last time that love bought your clothes
-Run DMC

Many people dream of earning more money so that they can buy more things, but does buying things really make you happy? Does retail therapy work?

Well, yes and no.

The link between GDP and happiness

There is quite a clear correlation between the wealth of a country and the happiness of its population as shown in the graph below. Richer countries tend to be happier.

Source: The Atlantic

However, it must be noted that this correlation is logarithmic, doubling your income from 1000 to 2000 dollars has the same effect on happiness as increasing your income from 50k to 100k.

Buying things vs buying experiences

Buying the shiny new thing, be it a nice watch or some designer jeans, does increase happiness, but only in the short term.  However, buying experiences does increase long-term happiness. Why?

The memory of our experiences distorts over time. We only tend to remember the good bits. Goods, however, lose their value very quickly, they become old and out-of-date. Humans are also very good at adapting. While a new possession might be exciting soon after you buy it, it quickly becomes just something you have, it’s not special anymore.

Also, experiences tend to be shared with others, and there is nothing quite like spending time with other people to increase happiness.

Buying things for oneself vs buying things for others

There is also quite a clear link between happiness and selfishness, or materialism. People who are more materialist , hence more likely to spend money on things for themselves, have lower self-esteem and are less happy than people who tend to buy things for others. People become much happier after providing for others rather than for themselves.

Will I be happier if I win the lottery?

Image credit: Magnus D

A study conducted by Dr Philip Brickman in the 70s analysed what happens to the happiness of people who win the lottery. What he found was that, on average, the happiness of people who won the lottery was on the same level as the control group, with one tiny difference. Those who had not won the lottery had a much easier time appreciating the simple things in life.

So can I buy happiness or not?

Yes, as long as you:

  • spend your money on experiences: go to the cinema, go out for a meal, etc. The more sociable the activity the better.
  • spend money on others. It doesn’t have to be a lot, even the smallest gift can provide a large and long-lasting boost to happiness.

-Francesco

Feature image by MediaPhoto.Org