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(Spending) money makes us happy
Maybe our preoccupation with earning money is a bit misguided — and for more than one reason
Imagine receiving a bonus of, say, £2,400. Not an insignificant amount — it is close to the median disposable monthly household income in the UK. Imagine how it is being transferred into your bank account, checking your balance and seeing that it has indeed gone up by that amount. Now imagine spending that same amount. You can choose to blow it all in one go on a bathtub full of champagne, or in small chunks — maybe some clothes or gadgets, a nice meal out, some overdue repairs on your house or your car. Which of the two imagined situations makes you happier?
Two recent papers suggest that, for most people, it is consumption rather than income that predicts well-being. Thomas Carver and Arthur Grimes, two economists at Motu, a New Zealand economic and public policy research institute, come to this conclusion in a paper using their country’s General Social Survey data. Independently, Gordon Brown and John Gathergood, psychologists at Warwick University and Nottingham University, used longitudinal US household survey data. They too found that changes in life satisfaction are associated with changes in consumption, not income.
