Does money buy happiness?

The implication from psychological studies of happiness to Chinese development

Yuchen Lin, Senior in Psychology

Research Assistant to Prof. Ed Diener

The Paradox Between Material Wealth and Psychological Wealth

• China is now the World’s second largest economy.• the newest World Happiness Report ranks China the 93th place in terms of life

evaluation out of 156 countries it surveyed (96% of global population).

• The US: 17th; Brazil: 24th; Thailand:36th; Taiwan: 42th: Denmark:1st;

• The rising wealth does not seem to bring much life satisfaction.

• What is this World Happiness Report anyway?

World Happiness Report

• A document submitted to the United Nations by leading experts in economics, psychology, survey analysis, national statistics and more to describe how measurements of well-being can be used effectively to assess the progress of nations.

• Used data from the Gallup World Poll, which randomly draws a sample of 1000 citizen from each country (around 150 countries in total) every year (assessed over 1 millions people in total) and ask the question like this:

• imagining your life as a ladder, with the best possible life for them as a 10, and the worst possible life as a zero. Where will you put your life?

• Point: This is not what Western people say about Chinese life satisfaction. This is what Chinese people say about Chinese life satisfaction!

Before we start. Let’s look at what you think….

• Q1: How would you define happiness?• Q2: Do you think there is a gap between the material

wealth people now have and low level of happiness people are experiencing? (Talk about China or other countries)• Q3: If yes, why do you think that this happened?

•Why you should not believe in me.

•Goal:•1) show complexity•2) show promising future.

Does money buy happiness (Subjective Well Being) ?

• How to define happiness? (meaningful and measurable)

• 40 years ago: you can’t do it.

• Until 15 years ago: life satisfaction (Diener. 1984).

• The past 15 years: life satisfaction (your judgment of your life as a whole) and positive affect (the amount of positive emotion you experience) (Kahneman, 1999)

Why are the two different?

Experience Pain and Remembering Pain

• Patients that undergone colonoscopy （结肠镜检查） （ Redelmeier & Kahneman, 1996 ）

• Real-time measures of pain intensity as patients going through the medical procedure.

• After the procedure, patients were asked to judge the total amount of pain experienced.

Who remember more pain?

Who experienced more pain?

Who remembered more pain?

Patient B

Patient A

What matters to your memory of past experience?

• The peak value

• How it ends.

Happiness works in the same way

• Life satisfaction is a judgment of the life you remember.

• Positive affect is the amount of positive emotion you experience.

• Fundamentally different.

• How could I predict whether you will find your last spring break trip enjoyable?

• ---Your peak experience.

• ---How the trip ends.

• ---Duration is not important.

Why care about life satisfaction then?

• People care a great deal about the story they make up.

• That is how you made decisions! Look at it from a policy point of view.

Hard Evidences On The Relationship Between Money And Happiness

• The German Socio-Economic Panel Study (n=21,135)• National representative household panel study that tracks a variety of variables

among resident of the past 24 years. Among which are life satisfaction and annual income.

Hard Evidences On The Relationship Between Money And Happiness

• Gallup’s 2006 World Survey data • ( about 150 countries )

The association between income and positive effect is much less, but still noticeable. That means, Income matters much more for you life satisfaction than the amount of positive emotion you experience everyday.

Hard Evidences On The Relationship Between Money And Happiness

• Overwhelmingly, the between persons data suggests that money are crucial to human happiness. You are happier if you have more money.

Why do people doubt it?

Track The Development Of One Country Over Time

• Easterlin Paradox: The life satisfaction level of the US does not rise after the World War Two despite of huge increase on income.

• 24 years of tracking happiness level in Germany shows no increase in life satisfaction.

• What are other evidences?

The Case of Kolkata

• the capital of the Indian state of West Bengal (Victoria Memorial).

Here lives some poorest of the poor. More than 100000 homeless children in the city, and as many as half of the 15 million inhabitants live below the poverty line.

The Case of Kolkata

• Dr Robert Biswas-Diener, the son of Dr Ed Diener, stayed in Kolkata for quite some time. He collected life satisfaction data from the poorest of the poor. What did he find?

• They are around the mid-point on life satisfaction scales. Not very happy, but certainly not very unhappy, either.

• In many other poor regions in the world psychologists found similar results.

• How can it be possible?

Adaptation To Positive and Negative Circumstances

• Classic adaptation theory of well-being ( Brickman & Campbell):

Humans have a pre-determined set point for happiness. Any life event, positive or negative, can only have transitory influences on people’s well-being.

Just like people’s noses quickly adapt to many scents and smells thereafter disappear from awareness, one’s emotion system adjusts to one’s current life circumstances (Diener, Lucas & Scollon, 2006).

Eg: in general, people adapts to the joy of marriage after a year.

This is troublesome findings—especially for policy makers…

Adaptation To Positive and Negative Circumstances

• Luckily, or unluckily…we do not adapt to all the things.

• Things that we do not adapt to completely:

• Noise.• Widowhood.• Unemployment.

Do We Adapt To Money?

• It depends..

• In some situations money fails to buy happiness because there are other factors that also influence happiness.

• What are these factors?

Aspirations

Happiness= What you have (attainments)/ What you want (aspirations).

Study of Amish people: no worldly goods and technologies, no televisions, computers, or telephones.

The Amish people reported being satisfied with their lives. Furthermore, They report high satisfaction with their income, housing, food and other material goods.

This might explain why happiness did not rise (China, US, Germany).

Social Comparison

• It is not about how much you earn, but about how much you earn relative to other people, and, how important is the comparison for you.

• The German Socio-Economic Panel tracks people’s life satisfaction for 24 years. Psychologists explored what explained the change of well-being level of each individuals—relative imcome.

• The European Social Survey asked people “How important is it for you to compare your income with other people’s incomes?” and those who said income comparisons were more important were also on average less satisfied with their lives – a common finding (World Happiness Report, 2012)

Social Comparison

• Who do people compare themselves to?

• Rural China: others in the same village.

• Western countries: Colleagues.

• The role of Media.

• Compare themselves with richest countries.

Materialism

• Wanting money and materials good more than you want other things, such as love or leisure time ( Diener & Biswas-Diener, 2008)

• 12894 individuals who entered freshman class at 1976. Predict who is happier 19 years later based on how important money was for them.

Conclusion

• The answer to “does money buy happiness” is far more complex than “Yes” or “No”. It depends on what kind of “happiness” you are talking about. It also depends on other factors that influence the relationship between money and happiness.

• In general, rich people are happier than poor people; rich countries are happier than poor countries. However, the rise of money does not necessarily increase happiness because the relationship is also influenced by aspiration, social comparison and materialism.

• Implication to Chinese development?

Questions or comments?

Discussion