March 20, 2008, 2:01 pm Yes, Money Can Buy Happiness . . . By John Tierney

Tags: altruism, behavioral economics, psychology

. . . but probably not in the way you imagined. Spending it on yourself may not do much for your spirits, but spending it on others will make you happier, according to a report from a team of social psychologists in the new issue of Science.

The researchers confirmed the joys of giving in three separate ways. First, by surveying a national sample of more than 600 Americans, they found that spending more on gifts and charity correlated with greater happiness, whereas spending more money on oneself did not. Second, by tracking 16 workers before and after they received profit-sharing bonuses, the researchers found that that the workers who gave more of the money to others ended up happier than the ones who spent more of it on themselves. In fact, how the bonus was spent was a better predictor of happiness than the size of the bonus.

The final bit of evidence came from an experiment in which 46 students were given either $5 or $20 to spend by the end of the day. The ones who were instructed to spend the money on others — they bought toys for siblings, treated friends to meals and made donations to the homeless — were happier at the end of the day than the ones who were instructed to spend the money on themselves.

“These experimental results,” the researchers conclude, “provide direct support for our causal argument that spending money on others promotes happiness more than spending money on oneself.” The social psychologists — Elizabeth Dunn and Lara Aknin of the University of British Columbia, Vancouver, and Michael Norton of Harvard Business School — also conclude that “how people choose to spend their money is at least as important as how much money they make.”

I asked Dr. Dunn if she had any advice for Lab readers on how much to spend on others. Her reply:

I think even minor changes in spending habits can make a difference. In our experiment with college students, we found that spending just $5 prosocially had a substantial effect on happiness at the end of the day. But I wouldn’t say that there’s some fixed amount that everyone should spend on others. Rather, the best bet might be for people to think about whether they can push themselves to devote just a little more of their money to helping others.

But why wouldn’t people be doing that already? Because most people don’t realize the personal benefits of charity, according to Dr. Dunn and her colleagues. When the researchers surveyed another group of students, they found that most of the respondents predicted that personal spending would make them happier than spending the money on other people.

Perhaps that will change as word of these experiments circulates — although that prospect raises another question, which I put to Dr. Dunn: If people started giving away money chiefly in the hope of making themselves happier, as opposed to wanting to help others, would they still derive the same happiness from it?

“This is a fascinating question,” she replied. “I certainly hope that telling people about the emotional benefits of prosocial spending doesn’t completely erase these benefits; I would hate to be responsible for the downfall of joyful prosocial behavior.”