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?
Patient B
Who remembered more pain?
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