Do we need Money to make us Happy?

Scott peck famously said that :

“Life is difficult. This is a great truth, one of the greatest truths. It is a great truth because once we truly see this truth, we transcend it. Once we truly know that life is difficult-once we truly understand and accept it-then life is no longer difficult. Because once it is accepted, the fact that life is difficult no longer matters.”

How do we really know when we are truly happy? What does happiness entail? Is it different for each of us? What do we need to be happy? What role does financial security play?

Once we escape the trap of poverty, levels of wealth have an extremely modest impact on levels of happiness, especially in developed countries. Even worse, it appears that the “richest” nation in history – 21st century USA – is slowly getting less pleased with life.

Needless to say, this data contradicts one of the central assumptions of modern society, which is that more money equals more pleasure. That is why we work hard, worry about things like the stock market and save up for that expensive dinner/watch/phone/car/house. We’ve been led to believe that money is delight in a physical form.

But the statistical disconnect between money and happiness raises a fascinating question: Why doesn’t money make us happy? One intriguing answer comes from a new study by psychologists at the University of Liege, published in Psychological Science.
The scientists explore the “experience-stretching hypothesis,” an idea first proposed by Daniel Gilbert. He explains “experience-stretching” with the following anecdote:

“ I’ve played the guitar for years, and I get very little pleasure from executing an endless repetition of three-chord blues. But when I first learned to play as a teenager, I would sit upstairs in my bedroom happily strumming those three chords until my parents banged on the ceiling…Doesn’t it seem reasonable to invoke the experience-stretching hypothesis and say that an experience that once brought me pleasure no longer does?”

A man who is given a drink of water after being lost in the desert may at that moment rate his happiness as eight. A year later, the same drink might induce him to feel no better than a two.

What does experience-stretching have to do with money and happiness? The Liege psychologists propose that, because money allows us to enjoy the best things in life – we can stay at expensive hotels and eat exquisite food and buy the nicest gadgets – we actually decrease our ability to enjoy the mundane joys of everyday life. (Their list of such pleasures includes “sunny days, cold beer, and chocolate bars”.) And since most of our joys are mundane – we can’t sleep at the Ritz every night – our ability to splash out actually backfires. We try to treat ourselves, but we end up spoiling ourselves.

The study itself is straightforward. The psychologists gathered 351 adult employees of the University of Liège, from custodial staff to senior administrators, for an online survey. (I should note that it remains unclear whether happiness and other aspects of well-being can be meaningfully measured with a multiple choice test.) The scientists primed the subjects by showing them a stack of Euro notes before asking them a series of questions which attempted to capture their “savoring ability.” Here’s how the savoring test worked:

Participants are asked to imagine finishing an important task (contentment), spending a romantic weekend away (joy), or discovering an amazing waterfall while hiking (awe). Each scenario is followed by eight possible reactions, including the four savoring strategies referred to in the introduction (i.e., displaying positive emotions, staying present, anticipating or reminiscing about the event, and telling other people about the experience). Participants are required to select the response or responses that best characterize what their typical behavior in each situation would be, and receive 1 point for each savoring strategy selected.

Interestingly, the scientists found that the more wealthy the person, the less they scored on the savoring scale. This suggests that simply looking at money makes us less interested in relishing the minor pleasures of life. Furthermore, subjects who made more money in real life – the scientists asked all subjects for their monthly income – scored significantly lower on the savoring test.
A subsequent experiment duplicated this effect among Canadian students, who spent less time savoring a chocolate bar after being shown a picture of Canadian dollars. The psychologists end on a bleak note:

“Taken together, our findings provide evidence for the provocative notion that having access to the best things in life may actually undermine one’s ability to reap enjoyment from life’s small pleasures. Our research demonstrates that a simple reminder of wealth produces the same deleterious effects as actual wealth on an individual’s ability to savor, suggesting that perceived access to pleasurable experiences may be sufficient to impair everyday savoring. In other words, one need not actually visit the pyramids of Egypt or spend a week at a luxury spa resort for one’s savoring ability to be impaired—simply knowing that these peak experiences are readily available may increase one’s tendency to take the small pleasures of daily life for granted”.

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