Money and Happiness — Happiness 6 (C1)

HAPPINESS · LESSON 6

Money and Happiness

C1 (B2–C2) · 90 minutes

Guess the line

Task Write your guesses privately. No research, no phones.

1. In a large US study, above what yearly household income, if any, did extra money stop making people feel better day to day? Write a figure, or "no limit".

2. Students were given an envelope of cash and told to spend it by 5 p.m., either on themselves or on someone else. Which group was happier that evening?

3. Some envelopes held $5, some $20. Did the amount make a difference?

4. True or false: in Germany, people with long commutes are paid enough extra to be just as satisfied with their lives.

READING

The $75,000 question

In 2010 the psychologist Daniel Kahneman and the economist Angus Deaton published one of the most quoted findings in happiness research. They analysed more than 450,000 answers to a daily Gallup survey of 1,000 US residents, collected in 2008 and 2009, and separated two things. Life evaluation is a judgement: people placed their life on a ladder from 0, the worst possible life, to 10, the best. Emotional well-being is a feeling: whether people had felt enjoyment, worry, sadness and so on during a lot

of the previous day, answered yes or no. Life evaluation rose steadily with the logarithm of income: each doubling brought a similar gain, with no ceiling. Emotional well-being rose too, but stopped improving, they reported, at around $75,000 a year.

In 2021 Matthew Killingsworth reported the opposite. A smartphone app asked 33,391 employed US adults "How do you feel right now?" at random moments, on a continuous scale from "very bad" to "very good".

READING · CONTINUED

The $75,000 question

This experience sampling produced 1,725,994 reports, and average happiness kept rising with log income well beyond $200,000.

Kahneman and Killingsworth then ran an adversarial collaboration: a joint study by rivals, with the psychologist Barbara Mellers as arbiter. Published in 2023, it reanalysed Killingsworth's data and found both patterns. For the least happy 15 to 20 percent of people, happiness rose with income up to about $100,000 and then flattened.

For the majority it kept rising, and for the happiest 30 percent it rose faster above $100,000. The 2010 yes/no questions, the authors concluded, had mostly measured unhappiness: they could not tell the content from the very happy. Money seems to ease many miseries, but perhaps not those, such as grief or clinical depression, that remain at any income.

Five lines, not one

The 2023 study split Killingsworth's sample by how happy people were, and drew a separate line for each level.

Happiness and income at five levels of happiness

Experienced happiness (0 to 100)

Killingsworth, Kahneman and Mellers 2023, Fig. 2

80

$100,000

1.99

75

0.78

85th percentile

70

1.18

1.92

70th

65

1.25

1.47

50th

60

1.32

1.21

55

1.90

0.34

30th

15th

50

$15,000

$30,000

$60,000

$120,000

$240,000

$480,000

Household income (log scale)

Above $100,000 the least happy line goes flat; the happiest lines climb faster.

Slopes as published; line positions approximate, redrawn from the paper's Figure 2.

Five lines, not one

How strong is the link?

How big is that?

The correlation between income and momentary happiness in these data is 0.09. The median happiness of people on $15,000 and on $250,000 differs by about five points on the 100-point scale.

In Kahneman and Deaton's data, a roughly fourfold difference in income had about the same effect on mood as a weekend, and less than a third of the effect of a headache.

1. Is an effect "the size of a weekend" large or small?

2. Why might extra money stop helping the unhappiest people above $100,000?

3. These are employed US adults. Would the lines look the same where you live?

READING

Giving it away

In 2008 Elizabeth Dunn, Lara Aknin and Michael Norton argued in Science that how people spend may matter as much as how much they earn. In a national sample of 632 Americans, those who spent more on gifts and charity reported greater happiness, while spending on themselves was unrelated to it. Sixteen employees who gave more of a profit-sharing bonus to others were happier six to eight weeks later. Finally, 46 students received $5

or $20 to spend by 5 p.m. Those told to spend it on someone else ended the day happier than those told to spend it on themselves, and the amount made no difference.

Prosocial spending travelled well. In 2013 Aknin and colleagues found the same link in Gallup survey data from 136 countries, rich and poor, with experiments in Canada, Uganda, India and South Africa.

READING · CONTINUED

Giving it away

Then the field began retesting famous findings in larger, preregistered studies, whose methods are fixed in public before any data are collected. Prosocial spending survived, but shrank. A close replication of the 2008 experiment (Kim and colleagues, 2022) with 133 people found no reliable effect on the original measure, and a small one on a more direct happiness question. The original team's own registered

replication (2020) found the effect in a spending study of 730 people; when people merely recalled past spending, one study found nothing and another, of 5,199 people, a small effect. A 2022 review of 15 preregistered experiments, by Aknin, Dunn and Ashley Whillans, concluded that the benefit is real in large samples, especially when people choose to give and can see what their gift achieves.

READING

Time, things and experiences

In 2003 Leaf Van Boven and Thomas Gilovich proposed that experiential purchases (a trip, a concert, a meal out) make people happier than material purchases (clothes, gadgets), partly because experiences become part of who we are and are shared with others. In a US telephone survey of 1,263 adults, 57 percent said their experiential purchase had made them happier, and 34 percent their material one. But the gap narrowed with income: respondents with the lowest

incomes were equally likely to name either. In 2018 the psychologists Lee, Hall and Wood found the experiential advantage only among people of higher social class; for those with fewer resources, things made them as happy, or happier.

A third option is to buy time. Ashley Whillans and colleagues (2017) surveyed 6,271 people in the United States, Canada, Denmark and the Netherlands, including 850 Dutch millionaires.

READING · CONTINUED

Time, things and experiences

Those who paid to escape disliked tasks, such as cleaning, reported greater life satisfaction, across the income range. In a field experiment, 60 working adults in Vancouver received $40 on two weekends, spending one on a time-saving service and one on a material item. On the time-saving days they reported more positive feelings and less time stress. Yet almost half of the millionaires spent nothing on buying time.

Time is also sold for money.

Standard economics predicts that people accept a long commute only when higher pay or a cheaper home makes up for it. Using 19 years of German panel data, Alois Stutzer and Bruno Frey (2008) found that people with longer commutes reported lower life satisfaction: the commuting paradox. By their own rough estimate, an average commute of 22 minutes each way would need about a third more monthly earnings to make up for it.

The pitch

Task Mira is a fictional influencer; Plenti is a fictional app. For each numbered line, write (a) which of the three answers it promises: Pleasure, Desire or Flourishing; and (b) backed, stretched or unsupported by today's readings. Then agree which line would fool a smart viewer, and why.

The pitch

(a)

Pleasure

Desire

Flourishing

(b)

backed

stretched

unsupported

(a)

(b)

1. Mira: Okay, real talk. Everyone says money can't buy happiness. Science says that's a myth: the more you earn, the happier you get. No limit.

2. Mira: So why are you still cleaning your own bathroom? People who pay to get chores done are more satisfied with their lives. Fact.

3. Mira: And stop buying stuff. Experiences make everyone happier than things. Every single time.

4. Mira: My favourite feature? Gift-a-Treat. Send a friend a coffee and you'll be happier than if you'd drunk it yourself. Literally proven.

5. Mira: Plenti members are 40% happier than non-members.

6. Mira: Thinking of a bigger place out in the suburbs? Plenti Ride makes the long commute easy, so the extra space is pure gain.

7. Mira: Upgrade to Plenti Gold and you'll feel the difference every single day.

8. Mira: Use my code MIRA20. You deserve to be happy, and happiness is just a subscription away.

Grade the claims

Task Write a letter for each claim, using today's readings. Then compare with the letters you gave claims 1 and 4 in Lesson 1. Has either grade moved? Why?

S Strong

M Mixed

W Weak

F Failed

1

Money can't buy happiness. (Lesson 1, claim 1)

2

Spending money on other people makes you happier than spending it on yourself. (Lesson 1, claim 4)

3

Above about $75,000 a year, extra money stops improving how people feel day to day.

4

Buying experiences makes people happier than buying things.

What the evidence says: money

“Money can't buy happiness.”

S Strong

M Mixed

W Weak

F Failed

F: failed to hold up. Within countries, richer people both judge their lives as better and, on average, feel better day to day: life evaluation rises with log income without a ceiling (Kahneman and Deaton 2010), and momentary happiness keeps rising for about 80 percent of people (Killingsworth, Kahneman and Mellers 2023). Experiments point the same way: a 2022 review of 45 studies of cash transfers in low- and middle-income countries (McGuire, Kaiser and Bach-Mortensen) found small but significant gains in well-being, measured on average about two years later. What survives is a gentler claim: each extra dollar buys less than the one before, the overall link is weak, and for the least happy fifth of people, income above about $100,000 brings no further gain.

What the evidence says: giving

“Spending money on other people makes you happier than spending it on yourself.”

S Strong

M Mixed

W Weak

F Failed

M: mixed. The famous 2008 experiment had only 46 participants, and an independent close replication with 133 found no reliable effect on the original measure (Kim and colleagues 2022). Larger preregistered studies by the original team found a real but smaller effect, which was absent in one recall study and small in another of 5,199 people (Aknin and colleagues 2020). The best current reading: giving probably brings a modest lift, mostly in mood that same day (Pleasure), and most of all when people choose to give and can see what the gift does. "Happier than spending on yourself" as a general rule goes further than the evidence.

The windfall

Task Groups of 3 or 4. Spend Rafael's windfall (no more than 6 months' pay) and choose for him between the pay rise and the four-day week. For each choice, name the evidence from today's readings behind it and which of the three answers it serves. Finally: would your plan change if he earned half as much? Twice as much?

Rafael's situation

Rafael, 36, is a hospital lab technician. He commutes 75 minutes each way, lives alone, sees his sister in another country once a year, and still owes money on a loan. His aunt has left him a sum equal to six months of his take-home pay.

The second choice

His manager offers him a 10% pay rise, or the same pay for a four-day week.

The windfall

The options (cost in months of pay)

A

Move to a smaller flat near the hospital, same rent: commute falls to 15 minutes. Deposit and move

1

B

Pay off the loan, ending a monthly repayment

2

C

Three weeks travelling with his sister

2

D

A cleaner and a laundry service for two years

2

E

Repair his parents' leaking roof

2

F

Give to a cause he cares about

any amount

G

Save for emergencies

any amount

Money and a good life

1. Which of the three answers does money serve best, and which least?

2. If life ratings rise with income but daily mood barely moves, which should governments target?

3. Is it fair to tell people on low incomes that money can't buy happiness?

4. Where you live, do people compare their income more with neighbours, colleagues or people online?

5. Should employers offer more time off instead of pay rises?

6. Is giving still generous if you do it because it makes you happier?

Pleasure

Desire

Flourishing

How does your life feel?

Are you getting what you want?

Is your life going well?

hedonism

desire theories

objective-list theories

More money

Private reflection

Task Choose one prompt and write privately. Nobody will read what you write. Sharing afterwards is optional.

Prompt 1

Think of someone you know who changed how they used money or time: a move, a new job, a gift, a cut in hours. What changed for them, and which of the three answers did it serve?

Prompt 2 (lighter)

A stranger hands you an envelope with a small sum and one rule: spend it by tonight. What do you do, and why?

Before Lesson 7

This week, notice one advert that sells happiness. Which of the three answers is it really selling?

Pleasure

It might be a car, a holiday, a bank or an app. Note what it promises, whether any evidence is offered, and whether the promise would still feel true a year after buying.

Desire

Next lesson: The Adaptable Mind. Why do a pay rise, a lottery win or a setback fade so fast, and is there anything we never get used to?

Flourishing

TEACHER'S REFERENCE · SKIP OR DELETE BEFORE CLASS

Answer key (1)

GUESS THE LINE

1 It depends on who you ask. Kahneman and Deaton (2010) reported a plateau in emotional well-being at around $75,000. Killingsworth (2021) found no plateau at all. The 2023 adversarial collaboration found a plateau at about $100,000 only for the least happy 15 to 20 percent; for everyone else there was no limit in the data.

2 The group told to spend on someone else, in the original 2008 study (46 students). Later replications found the effect smaller and less reliable: see "What the evidence says: giving".

3 No. The amount ($5 or $20) made no significant difference in the 2008 study.

4 False, in Stutzer and Frey's data (2008): people with longer commutes reported lower life satisfaction, which is why the authors called it a paradox.

THE PITCH suggested; most lines can be argued

1 Promises Pleasure (and Desire). Stretched. Life ratings and average mood do rise with income, with no ceiling for most people, but on a log scale (each doubling, not each dollar), the link is weak (a correlation of 0.09), and it flattens above about $100,000 for the least happy fifth.

2 Desire (life satisfaction). Backed, with caveats: Whillans and colleagues (2017) found this link in 6,271 people across four countries, plus a 60-person field experiment. "Fact" overstates a mostly correlational finding.

3 Pleasure. Stretched. The experiential advantage is an average (57 versus 34 percent in Van Boven and Gilovich's survey), not "everyone, every time", and it shrinks or vanishes for people with fewer resources (Lee, Hall and Wood 2018).

TEACHER'S REFERENCE · SKIP OR DELETE BEFORE CLASS

Answer key (2)

4 Pleasure. Stretched. Prosocial spending probably gives a modest lift, but the effect shrank in replications; "literally proven" goes well beyond the evidence.

5 Pleasure. Unsupported. No source, no measure, no comparison group, and people who join may already be different from those who don't.

6 Flourishing or Desire (a better home). Unsupported, and the readings point the other way: Stutzer and Frey's commuting paradox (2008) found longer commutes linked to lower life satisfaction.

7 Pleasure. Unsupported. No evidence given; Lesson 7 asks how long such feelings last.

8 Pleasure. Unsupported. A slogan, not a claim with evidence; it also contradicts the readings, where buying things is among the weaker routes.

GRADE THE CLAIMS

1 F. See "What the evidence says: money".

2 M. See "What the evidence says: giving".

3 F. As a claim about people in general, it failed to hold up: Killingsworth (2021) found mood rising well beyond $200,000, and the 2023 adversarial collaboration found a plateau (at about $100,000) only for the least happy 15 to 20 percent. The 2010 measure mostly captured unhappiness.

4 M. The average advantage for experiences is well replicated in surveys (Van Boven and Gilovich 2003) and in experience sampling (Kumar, Killingsworth and Gilovich 2020), but it depends on resources: it shrank with income in the 2003 survey and appeared only among higher-class participants in Lee, Hall and Wood (2018).