The Science of Happiness - Freakonomics Style - Can Money Buy Happiness?

Nattavudh Powdthavee, a research officer at University of London’s Institute of Education, did a study that assigns monetary values to good health and relationships.  He surveyed 10,000 Britons about their health, money and happiness and they were asked to rank each answer on a scale from 1(bad) to 7(amazing).  He then analyzed how much extra money a person would have to make in order to move up on the scale, here are some examples: Increasing time spent with friends and family from rarely to often feels like getting $179,000 raise, and talking to your neighbors more often is like getting a $79,000 extra bonus each year.

Steven D. Levitt and Stephen J. Dubner point out in their Freakonimics blog a study by Nattavudh Powdthavee, a research officer at the University of London’s Institute of Education, that assigns monetary values to intangibles like good health and relationships.

Powdthavee surveyed 10,000 Britons and asked questions about their health, wealth, and social relationships. Respondents were then ranked on a”life satisfaction scale” from 1 (miserable) to 7 (euphoric).

Powdthavee then determined through regression analysis (a statistical procedure that studies multiple independent variables simultaneously to identify a pattern or patterns) exactly how much extra money per year a person would need to earn to move from one point to another on the scale.

Here are Powdthavee’s estimates:

• An individual who sees friends or relatives less than once a month to never would require an additional $133,000 annually to be just as satisfied as someone who sees friends or relatives on most days.
• Increasing face time with friends and relatives from “once or twice a month” to “on most days” feels like getting a $179,000 raise.
• Talking to neighbours more often is worth the equivalent of about $79,000 extra per year.
• An improvement in health from “very poor” to “excellent” provides as much happiness as an extra $631,000 a year.
• A decline in health from “excellent” to “poor” has a psychic cost of $480,000 in financial losses.
• Widowhood packs a psychic punch of $421,000 a year in losses.
• Getting married provides the equivalent happiness of $105,000.

So, does money buy happiness? According to Powdthavee:

“Money buys happiness, but not a lot of it.”

The feelings of happiness we get are short-lived.

And therein lies the problem. In our instant-gratification world, we want what we want when we want it - and the when is always NOW.

“That’s the flaw of human nature, really,” says Powdthavee. “Almost all of us have what professor Daniel Gilbert from Harvard University calls affective forecasting: the sense that we mispredict what would make us happier in the future.”

Is it any wonder? We live in a culture that bombards us from every angle and at every opportunity with the message:

“You can have it all and do it all.”

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