Trading Money for Happiness

George is Watching You by peasap

George is Keeping an Eye on You by peasap

A story that was posted earlier this year on the Wall Street Journal blog, “The Wealth Report,” described a wealthy man who gave away his entire fortune as a means of achieving greater happiness.  His feeling was that money and a luxury lifestyle were obstacles to being happy, so he decided he wanted to give everything away.  He claims to have wanted to help the poor and so he planned to give all his money to microfinance charities (ironic that he would give money as a source of aid since he seemed to feel the money was only a hindrance to his personal happiness.) 

This story elicits strong reactions from people.  I posted this out on facebook and twitter (see my friend Lisa Nielsen’s excellent blog about using your social network as a  personal learning network) and got diverse reactions from different people.  Some people admired the man for doing something which is clearly difficult and admirable.  We all like to read (and pass on, and talk about at cocktail parties, etc.) the research that suggests that money and happiness are not as closely related as most people think.  But it is rare to find an example of someone who actually tests this hypothesis by giving their riches away.  Others who read this story think the guy is a nutjob and should accept responsibility for the fact that he couldn’t convert his cash into happiness.  To this camp, the money is not the problem–he is.  They believe happiness is not about what you have or don’t have, but about what you do with what you have. 

Then there is the wonderful story of Kevin Salwen who wrote, “The Power of Half” (who is maybe only half as nutty as the individual above.)  His 14 year-old daughter convinced him to sell his house and give half the proceeds away to charity.  Reading this story (you can read Nicholas D. Kristof’s New York Times write up here,) you get the sense that both of the reactions to the above story are appropriate.  On the one hand, giving away large amounts of your hard-earned money and property is admirable and inspiring.  On the other hand, the way you do it has a lot to do with how it might impact your happiness.

In Salwen’s case, it evolved as a family project.  Because the family worked on it together, it brought them closer together.  They found that moving into a smaller house also forced them to spend more time together.  As he described it to Kristof, they “essentially traded stuff for togetherness and connectedness.” This seems like a good deal and a worthwhile investment if you can figure out how to convert your own nest egg into a better bond with your loved ones.

If these stories interest you, you might also like  “The Spirit Level: Why Greater Equality Makes Societies Stronger” by Richard G. Wilkinson and Kate Pickett.  They argue that redistribution of wealth is a way to make everyone happier.  Their book provides an overwhelming amount of research that a nation’s health and functioning can be predicted by measuring the gap between the wealthiest and the poorest of the nations citizens.  They show how creating greater equality in a society would create greater well-being for everyone. 

The relationship between money and happiness is complex (see my article on this here,) and may not be as simple as Wilkinson and Picket would have us believe.  The London Review of Books highlights some of the challenges (lies, damn lies, and statistics) in interpreting the data they present (their review is aptly titled “How messy it all is”).  Recent research done by Maarten Berg and Ruut Veenhoven of Erasmus University Rotterdam showed that when the wealth of a nation is a controlled for, income inequality appears to have no effect on the happiness of a people. 

So what is the takeaway from all of this seemingly contradictory evidence?  Is there a relationship between money and happiness, and if so what is it?  Is the best way to convert money into happiness the act of giving it away?  It seems clear that at least for some people the answer is yes.  But the research on this is not conclusive.  So before you give away all of your money . . . or even half . . . maybe donate just a little and see how that feels.   If you like how that feels, give a little more.  And when you’re ready to talk about giving away the really big numbers, give me a call.  I’ll be happy to help you unload it.

References and recommended reading:

Berg, M. & Veenhoven, R. (2010). Income inequality and happiness in 119 nations. In search for an optimum that does not appear to exist. In: Bent Greve (Ed.), Happiness and Social Policy in Europe, Edgar Elgar (in press).

Salwen, K. & Salwen, H. (2010). The Power of Half: One Family’s Decision to Stop Taking and Start Giving Back.  New York: Houghton Mifflin Harcourt. 

Wilkinson, R. & Pickett, K. (2009). The Spirit Level: Why Greater Equality Makes Societies Stronger. New York: Bloomsbury Press.

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6 Responses to Trading Money for Happiness

  1. Lisa Sansom November 16, 2010 at 11:53 am #

    If you get overwhelmed with offers, let me know – I’m there for ya!! 🙂

    Then again, as Mae West (that famous positive psychologist) said, “I’ve been rich and I’ve been poor. Believe me, rich is better.”

  2. Dan Bowling November 16, 2010 at 10:32 pm #

    Jeremy, I hesitate to say you are becoming a beautiful writer, because it implies you weren’t already, but – heck, you are. I read a lot of words every day and yours really stands out.

    An appropriate response to the topic would take quite awhile. There are several New Testament stories of rich men giving away riches in search of a better life – but in a better after-life, mostly. I personally only one really rich who gave it all away to seek happiness in this life – and it didn’t work out too well. Guess I agree with the premise of your conclusion – Aristotelian moderation.

  3. Dan Bowling November 16, 2010 at 10:33 pm #

    Jeremy, I hesitate to say you are becoming a beautiful writer, because it implies you weren’t already, but – heck, you are. I read a lot of words every day and yours really stands out.

    An appropriate response to the topic would take quite awhile. There are several New Testament stories of rich men giving away riches in search of a better life – but in a better after-life, mostly. I personally know only one really rich couple who gave it all away to seek happiness in this life – and it didn’t work out too well. Guess I agree with the premise of your conclusion – Aristotelian moderation.

  4. Jeremy McCarthy November 17, 2010 at 8:18 am #

    Thanks Dan! I really appreciate that! I guess its like any investment. When you’re giving your money away you have to choose your investments wisely. But I love the idea of it.

    There is also the issue of what you do with your life when you have no money. Yesterday I saw Eric Saperston speak who made the documentary “The Journey” about his road trip around the country meeting with some of the most famous and powerful people in the world in order to capture and share their knowledge with others from his generation. He funded his trip by selling “sexy kind grilled cheese sandwiches” for $1 each out of his VW bus at rest stops along the way. Great story.

    One the most powerful parts was how his vision was so engaging that people joined him along the way to help even though there was no extrinsic compensation. In fact, when they needed someone to film what they were doing, a cinematographer they met along the way turned down her job offer from MTV to ride along with them. As Eric described it, “invisible hands” helped him along because he was following his bliss (borrowed from Joseph Campbell.) It’s a cool story and worth googling or buying his DVD.

  5. Shannon Polly November 22, 2010 at 6:49 pm #

    Hey Jeremy;,

    Great article! There is also a lot of research that money does make you incrementally happier although it falls off after you have taken care of your basic needs (and specifically near the $100,000/year mark). I think this is in Ed Diener’s book. But I do remember him debating with Marty the (damned lies) statistics of the “log 10” where it would show that money does make you significantly happier.

    I think the point you make with the family and the house is the most important. That being with others and having experiences makes you happier. Or, as I posted on Facebook, http://voices.washingtonpost.com/checkup/2010/11/the_downside_of_day-dreaming.html?hpid=sec-health,
    sex, working out and being in conversation with other people….makes you happier than sitting in front of a computer.

    So, I’m going to go now and phone a friend.

  6. Jeremy McCarthy November 22, 2010 at 10:34 pm #

    Thanks Shannon. I agree the “log 10” stuff is interesting and captures what I usually try to get at with all of this stuff–that there is a relationship between happiness and money but it might not be what most people think. the log 10 shows an exponential relationship which is somewhat ironic since most people are scrambling to get a 10% increase in pay which won’t make a dent in life satisfaction above the poverty level. Thanks for reading!

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