June 29, 2006

Why money doesn’t bring happiness

ANN ARBOR, Mich.—The more money you earn, the more time you are likely to spend working, commuting and doing other compulsory activities that bring little pleasure, according to an article in the June 30 issue of Science that provides a novel explanation for why money doesn’t bring happiness. 

For the article, titled "Would you be happier if you were richer? A focusing illusion," Princeton University psychologist Daniel Kahneman and colleagues, including University of Michigan psychologist Norbert Schwarz, analyzed the link between money and happiness, presenting new evidence showing that what they call "the focusing illusion" affects how people respond when asked how happy or how satisfied they are with their lives.

"When people consider the impact of any single factor on their well-being—not only income—they are prone to exaggerate its importance," they wrote. 

Previous studies have shown, for example, that if people are asked about their marriage or their health before they are asked how happy they are with their life, their answer to the second question is linked more closely with the first question than if the question order is reversed.

"People do not know how happy or satisfied they are with their life in the way they know their height or telephone number," according to the authors. "The answers to global life satisfaction questions are constructed only when asked, and are therefore susceptible to the focusing of attention on different aspects of life."

To test the power of the focusing illusion, the authors asked a sample of working women to estimate the percentage of time they were in a bad mood the day before. Respondents were also asked to predict the percentage of time people with various life circumstances, including no health insurance and close work supervision, along with high- and low-income, typically spend in a bad mood. These predictions were compared to the actual reports of mood provided by respondents with the relevant circumstances.

Respondents overestimated the prevalence of bad mood in general, and grossly exaggerated its prevalence among people with undesirable circumstances. For example, while those with household incomes of less than $20,000 a year reported that they spent 32 percent of the previous day in a bad mood, other respondents predicted that people at that income level would spend 58 percent of their day in a bad mood.

The researchers reviewed several possible reasons why income has a weak effect on happiness, including their own explanation -- as income rises, people’s time use does not appear to shift toward activities associated with improved affect. 

Citing evidence from a nationwide survey of a representative sample of people they conducted recently, they noted that people with greater income tend to devote relatively more time to work, compulsory non-work activities (such as shopping and childcare) and active leisure (such as exercise) and less time to passive leisure (such as watching TV and just relaxing). 

"When someone reflects on how more income would change subjective well-being, they are probably tempted to think about spending more time in leisurely pursuits such as watching a large-screen plasma TV or playing golf," the authors wrote.  "But in reality,  people should think of spending a lot more time working and commuting and a lot less time engaged in passive leisure and other enjoyable activities."

Schwarz is affiliated with the U-M Institute for Social Research, the Ross School of Business, and the U-M Psychology Department.  In addition to Kahneman and Schwarz, co-authors of the article include Alan B. Krueger of Princeton University and the National Bureau of Economic Research; David Schkade of the University of California at San Diego; and Arthur A. Stone at Stony Brook University.

Established in 1948, the Institute for Social Research (ISR) is among the world's oldest survey research organizations, and a world leader in the development and application of social science methodology. ISR conducts some of the most widely-cited studies in the nation, including the Survey of Consumer Attitudes, the National Election Studies, the Monitoring the Future Study, the Panel Study of Income Dynamics, the Health and Retirement Study, and the National Survey of Black Americans. ISR researchers also collaborate with social scientists in more than 60 nations on the World Values Surveys and other projects, and the Institute has established formal ties with universities in Poland, China, and South Africa.  ISR is also home to the Inter-University Consortium for Political and Social Research (ICPSR), the world’s largest computerized social science data archive. Visit the ISR Web site at www.isr.umich.edu for more information.

Norbert Schwarz

Contact: Diane Swanbrow
Phone: (734) 647-9069