What Science Says About Money and Happiness | Dr. Elizabeth Dunn

Oct 30, 2023 Episode Page ↗
Overview

Dr. Elizabeth Dunn, a UBC psychology professor and co-author of "Happy Money," discusses how to use money to boost happiness and critiques the current state of happiness research, particularly concerning common strategies like meditation and exercise.

At a Glance
17 Insights
1h 2m Duration
16 Topics
4 Concepts

Deep Dive Analysis

Dr. Elizabeth Dunn's Journey into Happiness Research

Critique of Current Happiness Research Methodologies

Weak Evidence for Meditation, Exercise, and Nature on Happiness

Understanding Methodological Rigor: Experiments, Sample Size, and Pre-registration

Defining Happiness: Subjective Well-being Components

Hope for the Future of Happiness Research

The Mystery Experiment: Studying Large Cash Transfers and Happiness

Impact of $10,000 Windfall on Happiness and Giving

Intrinsic vs. Reputational Motivations for Generosity

Happy Money Principle 1: Investing in Others

Happy Money Principle 2: Buying Experiences

Happy Money Principle 3: Making it a Treat

Happy Money Principle 4: Buying Time

Happy Money Principle 5: Paying Now, Consuming Later

Personal Impact of Studying Money and Happiness

Assessing Purchases: How They Affect Your Average Tuesday

Replication Crisis

A significant problem in science where many well-known findings, particularly in behavioral science and cancer research, could not be reproduced by other scientists. This crisis highlighted issues with past statistical practices that allowed researchers to 'massage' data to find desired results.

Pre-registration

A critical scientific practice where researchers publicly declare their exact study design, expected findings, and analysis methods before conducting the experiment. This helps prevent 'drawing the bullseye on afterward' by ensuring transparency and reducing false positives.

Subjective Well-being

The scientific term for happiness, which comprises two main components. It includes an emotional aspect, meaning experiencing more positive emotions than negative ones, and a cognitive evaluative aspect, which is feeling satisfied with one's life and the kind of life one is leading.

Hedonic Adaptation

A fundamental human tendency where individuals get accustomed to things they enjoy, causing the pleasure and happiness derived from those things to diminish over time. This means that repeated exposure to a positive experience or possession leads to less impact on overall happiness.

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Can money buy happiness?

While received wisdom suggests money cannot buy happiness, research indicates that if money is used smartly, it can indeed boost happiness, depending on how it's spent and who receives it.

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How strong is the scientific evidence for common happiness strategies like meditation, exercise, and nature?

For non-clinical populations, the evidence specifically linking meditation, exercise, and spending time in nature to increased happiness is surprisingly weak, often based on studies that lack modern methodological rigor like large sample sizes and pre-registration.

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What are the key components of happiness as defined by scientists?

Scientists define happiness as subjective well-being, which includes an emotional component (experiencing more positive than negative emotions) and a cognitive evaluative component (feeling satisfied with one's life and the life one wants to lead).

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Does receiving a large sum of money make people happier, and who benefits most?

Yes, people become significantly happier after receiving a large cash transfer. Those in lower-income countries experience about three times as much happiness from the windfall compared to people in higher-income countries.

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Do people spend money given to them primarily on themselves or others?

In a study where people received a $10,000 gift, recipients spent the majority of the money in ways that benefited others, even if they were quite disadvantaged themselves.

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Does public recognition influence how generously people spend money on others?

A study found no significant difference in pro-social spending between those who publicly shared their windfall on Twitter and those who kept it secret, suggesting that generosity is often intrinsically rewarding rather than driven by reputational concerns.

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What types of purchases lead to more happiness: experiences or material goods?

People generally derive more happiness from buying experiences, such as trips, concerts, or special meals, than from buying material things. The happiness from experiences also tends to grow over time, unlike material possessions.

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How can one combat the tendency to get used to enjoyable things and maintain happiness from them?

By 'making it a treat,' which involves taking breaks from regularly consumed pleasures. This strategy, like giving up chocolate for a week, can help renew one's capacity for enjoyment and appreciation.

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Can using money to save time increase happiness?

Yes, research shows that people who use money to buy their way out of dreaded tasks, like cleaning, are happier. However, many individuals, even millionaires, often overlook this opportunity due to a sense of guilt about paying for tasks they could do themselves.

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What is the recommended approach to paying for things to maximize happiness?

Psychological research suggests paying now and consuming later. This practice separates the pain of paying from the pleasure of consumption, allowing for greater enjoyment and also helping to restrain overspending.

1. Assess Purchases by Daily Impact

Before making a purchase, ask yourself if it will affect how you spend your time on an average day. If it will make a real positive difference to your daily life, it’s likely a good use of money, even if you’re reluctant to spend.

2. Prioritize Buying Experiences

Spend money on experiences like trips, concerts, or special meals rather than material possessions. Experiences tend to deliver more lasting happiness, especially those that connect you with others, feel unique, or contribute to your sense of self.

3. Invest in Others for Happiness

Use your money to benefit other people, as this robustly promotes happiness. The emotional benefit is greater when you can clearly see or envision the positive impact your generosity is having.

4. Use Money to Buy Time

Combat feelings of time pressure by using money to outsource dreaded tasks, particularly those you least enjoy. People who buy their way out of unpleasant chores are generally happier, as it frees up time for more enjoyable activities.

5. Practice Thoughtful Consumption

Periodically abstain from your favorite pleasures to renew your capacity for enjoyment and turn them back into treats. When you do consume them, do so thoughtfully and less often to enhance appreciation and get more happiness from the experience.

6. Pay Upfront, Consume Later

Pay for purchases immediately and, when possible, delay consumption. This separates the pain of paying from the pleasure of consumption, making the experience feel ‘free’ and can also help to restrain overspending.

7. Donate to Lower-Income Countries

If you have disposable income to give away, consider sending it to lower-income countries. Each dollar donated to these regions can have up to triple the happiness impact compared to donations within higher-income countries.

8. Diversify Charitable Giving

Balance your charitable giving portfolio by donating to large, trusted organizations for their broad impact, and also reserving some funds for smaller, local organizations where you can more directly see the impact of your contributions.

9. Practice Private Generosity

When engaging in charitable acts, keep your generosity private. This approach can enhance your personal joy from giving by removing concerns about reputational motives and fostering a more intrinsic reward.

10. Grant Permission for Happiness Spending

Give yourself permission to spend money on things that genuinely enhance your happiness, even if they seem like a splurge. This includes services that buy back precious time or significantly improve your daily well-being.

11. Balance Frugality with Strategic Spending

While a frugal mindset can help restrain overspending, recognize that sometimes it’s important to strategically spend money on things that can truly make a difference for your happiness, rather than only buying absolute necessities.

12. Live Below Your Means Early On

In your early career, consider living well below your means, treating significant income as a temporary ‘contract.’ This builds financial security and provides flexibility to make happiness-enhancing choices later in life, such as outsourcing help when needed.

13. Experiment with Well-being Practices

Engage in practices like meditation, exercise, or spending time in nature, and observe the benefits in your own life. Personal experimentation helps determine what truly works for your individual well-being.

14. Continue Practices That Work For You

If a particular well-being strategy, such as meditation, exercise, or nature exposure, consistently makes you feel calmer or improves your mood, continue doing it. The lack of broad scientific evidence doesn’t negate its personal effectiveness.

15. Recognize Person-Activity Fit

Understand that different activities work well for different people. Not every happiness-promoting strategy will be effective for everyone, so seek out what resonates with your individual needs and preferences.

16. Follow Clinical Interventions

If a therapist or medical doctor has prescribed a specific intervention, such as exercise or meditation, for a clinical disorder, continue to follow their guidance, as this advice pertains to non-clinical populations.

17. Be Skeptical of Blanket Recommendations

Approach widespread recommendations for happiness-promoting strategies with a critical eye. Scientific evidence for many popular tips, especially for non-clinical populations, may be weaker than commonly perceived.

What we thought was a pretty strong wall of evidence for these strategies turns out basically to be a pile of pebbles.

Elizabeth Dunn

If we don't pre-register our studies, we can essentially throw a bunch of darts at a wall and then draw the bullseye on afterward and say, you know, bingo.

Elizabeth Dunn

By giving this money away, this wealthy couple created 225 times more happiness than they could have gotten by keeping the money for themselves.

Elizabeth Dunn

Just because you can do it yourself doesn't mean you should do it yourself.

Elizabeth Dunn

Will this affect how I spend my time on an average Tuesday?

Elizabeth Dunn

Happy Money Principles for Boosting Happiness

Elizabeth Dunn
  1. Invest in Others: Use your money to benefit other people, especially in ways where you can clearly see or envision the positive impact your generosity is having.
  2. Buy Experiences: Prioritize spending your money on experiences like trips, concerts, or special meals over material possessions, particularly those that connect you with loved ones, feel unique, or contribute to your sense of identity.
  3. Make it a Treat: Combat hedonic adaptation by intentionally taking breaks from consuming your favorite things. By giving them up for a period, you can renew your capacity for enjoyment and appreciation.
  4. Buy Time: Use your money to pay for tasks you least enjoy or that fill you with dread, such as house cleaning, to free up your time for more fulfilling activities. Evaluate purchases by asking if they will genuinely affect how you spend your time on an average Tuesday.
  5. Pay Now, Consume Later: Pay for goods or services upfront and, when possible, delay consumption. This strategy helps to separate the pain of paying from the pleasure of consumption, enhancing enjoyment and also helping to restrain overspending.
$2 million
Donation for Mystery Experiment Provided by a wealthy couple to fund the study on cash transfers and happiness.
$10,000
Amount per Recipient in Mystery Experiment Given to each of 200 participants across seven countries.
200
Number of Recipients in Mystery Experiment Individuals who received $10,000 in seven countries (Kenya, Indonesia, Brazil, U.S., U.K., Canada, Australia).
100
Number of Control Group Participants Individuals chosen at random who did not receive any money in the Mystery Experiment.
3 times as much happiness
Happiness Impact (Lower vs. Higher Income Countries) Received by people in lower-income countries compared to those in higher-income countries from the $10,000 windfall.
225 times more happiness
Happiness Multiplier from Giving Estimated happiness created by the wealthy couple by giving away the money compared to keeping it for themselves.
Over $6,400
Average Spending on Others (Broad Definition) Out of the $10,000 received, spent by recipients in ways that benefited people other than just themselves.
About 17%
Average Spending on Charity (Narrow Definition) Of the money received, given as donations to charity by participants in the Mystery Experiment.
Nearly 200
Number of Experiments on Mindfulness/Meditation and Happiness Experiments conducted testing the benefits of mindfulness and meditation for happiness, many of which Dr. Dunn's review found to have weak evidence.
$11
Cost of Kale Smoothie Example of an expensive regular purchase that Elizabeth Dunn turned into a 'treat' by consuming it less often and more thoughtfully.
60% of normal salary
Elizabeth Dunn's Sabbatical Salary Her income during her sabbatical, yet she still plans to pay for weekly cleaners to buy back her time.