Jul 28, 2010

Why Money Makes You Unhappy

“Money is surprisingly bad at making us happy. 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 America – is slowly getting less pleased with life. (Or as the economists behind this recent analysis concluded: “In the United States, the [psychological] well-being of successive birth-cohorts has gradually fallen through time.”)

Needless to say, this data contradicts one of the central assumptions of modern society, which is that more money equals more pleasure. That’s why we work hard, fret about the stock market and save up for that expensive dinner/watch/phone/car/condo. We’ve been led to believe that dollars are delight in a fungible 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 Mojave 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 sushi 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 beers, and chocolate bars”.) And since most of our joys are mundane – we can’t sleep at the Ritz every night – our ability to splurge actually backfires. We try to treat ourselves, but we end up spoiling ourselves.”

Read more at Wired

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