Money, or the love of same, is the root of all evil. So sayeth the Bible. But humans have no trouble turning that wisdom on its head and shaking loose the opposite axiom—Greed is Good. All of us have occasionally looked to money as a route toward happiness, notwithstanding the fact that one of the most banal lessons of Hollywood movies is: Money CANNOT buy you happiness. Think Scarface, whose leetle friend was no substitute for the real thing.
So which is it? Study after study has suggested that income level, beyond the level of basic needs, has very little effect on personal satisfaction, self-worth, or overall happiness. Yet research by Robert H. Frank and others had demonstrated that most people implicitly assume personal spending will lead to more happiness.
Two psychologists at the University of British Columbia in Vancouver, Elizabeth W. Dunn and Lara B. Aknin, together with Michael I. Norton of the Harvard Business School, wondered whether the matter was governed not by how much money you had, but rather by how you spent it. "Specifically," the researchers reported in Science vol. 319 (sub. required), "we hypothesized that spending money on other people may have a more positive impact on happiness than spending money on oneself."
With that biblical hypothesis in mind (think rich men and camels and the eye of a needle), the researchers set out to identify situations where money DID buy some happiness. That’s not easy, because "the mere thought of having money makes people less likely to help acquaintances, to donate to charity, or to choose to spend time with others." (Science Vol. 314).
Not a promising situation. The researchers first took a nationally representative sample of Americans and had them rate their general happiness and break down their spending into two categories: personal (bills, expenses, gifts for themselves) and prosocial (gifts for others, donations to charity). Regression analysis revealed strong support for the group’s hypothesis: Personal spending was unrelated to perceived happiness, but higher prosocial spending was associated with greater happiness.
Next, the researchers tried the "windfall bonus" approach, tracking employees who received profit-sharing bonuses, and who reported levels of happiness before and after the cash award. As expected, “prosocial spending was the only significant predictor of happiness” two months after the bonus.
Finally, the psychologists gave participants an envelope containing either $5 or $20. They told one randomly selected group to spend the money on themselves, and another group to spend it on a gift or give it away as a charitable donation. Once again, "participants in the prosocial spending condition reported greater postwindfall happiness…"
To the researchers, it appeared that "intentional activities" like giving to charity have longer-term effects than relatively circumstantial factors like bill paying or eating dinners out. Earlier work had shown much the same. But the cruel rub is that most people behave as if the opposite were true. Participants in the national survey reported spending ten times as much money per month on personal use, compared to prosocial spending.
A policy that promotes the overlooked emotional benefits of prosocial spending, the researchers conclude, might work "in the service of translating increased national wealth into increased national happiness."