To Be or Not to Be, Happy with Money, That Is the Question

Dunn, Elizabeth, & Norton, Michael. (2013). Happy Money: The Science of Smarter Spending. New York: Simon & Schuster.

Most experiences of money do not increase happiness.  Some do.  So say 2002 Nobel laureate in economics Daniel Kahneman and his colleagues (Kahneman & Deaton, 2010; Kahneman, Krueger, Schkade, Schwarz, & Stone, 2006).  In their new book Happy Money (2013), professors Dunn and Norton show us the research that explains why.  From an Ecosynomics perspective, this research shows that happiness comes from the experience of potential and development and things, light and motion and matterthe interweaving experience of all three levels of perceived reality.  The lack of happiness comes from valuing only the things level of reality.  Dunn and Norton say it so well, that I use quotes from their book to explain the observation.

Only the Things Level.  What happens when people experience money only at the things-matter level? “Material purchases offer clear, concrete benefits, explaining their appeal.  We can see them in front of us and hold them in our hands” (Dunn & Norton, 2013, p. 22).  And the value we experience, in terms of increased happiness, fades quickly with material purchases.  In many cases, we derive more happiness from the anticipation of the purchase than the actual purchase.  “Why do we fail to recognize that consuming later can enhance enjoyment?  Research shows that when something nice is available immediately, the “power of now” dwarfs all else” (Dunn & Norton, 2013, p. 90).  “It’s difficult to overcome the power of now, but it’s possible to harness this force” (Dunn & Norton, 2013, pp. 102-103).

Both the Development and Things Levels.  What happens in experiential purchases (over time) versus material-transaction purchases, when both the development and things levels of reality are perceived?  “Research shows that satisfaction with experiential purchases tends to increase with the passage of time, while satisfaction with material purchases tends to decrease” (Dunn & Norton, 2013, pp. 23-24).  “Because the benefits of experiences are often more abstract than the benefits of material goods, it’s easier to appreciate the value of experiential purchases with the psychological distance that time provides”  (Dunn & Norton, 2013, p. 23).

And the Possibility Level. “The ability to generate pleasant thoughts about the future is a hallmark of psychological health…Anticipating good things produces a distinct pattern of neural activation in the nucleus accumbens, a region of the brain linked to the experience of pleasure and reward” (Dunn & Norton, 2013, p. 82; Knutson & Peterson, 2005, p. 310).  “The same region of the brain that responds when we anticipate something good (the nucleus accumbens) loses interest once we’ve gotten it” (Dunn & Norton, 2013, p. 86; Knutson & Peterson, 2005, p. 310).

The authors suggest five principles of happy money, making choices about how we spend money on experiences we have in all three levels of perceived reality (possibility, development, things), and not just the things level.  They provide the research that shows these five principles will increase the happiness we derive from the use of our money.  I highly recommend Happy Money as a very accessible journey through the research that shows how to get the most value of one’s experiences around money.

References

Kahneman, Daniel, & Deaton, Angus. (2010). High Income Improves Evaluation of Life But Not Emotional Well-being. Proceedings of the National Academy of Sciences, 107(38), 16489-16493.

Kahneman, Daniel, Krueger, Alan B, Schkade, David, Schwarz, Norbert, & Stone, Arthur A. (2006). Would You Be Happier If You Were Richer?  A Focusing Illusion. Science, 312(5782), 1908-1910.

Knutson, Brian, & Peterson, Richard. (2005). Neurally Reconstructing Expected Utility. Games and Economic Behavior, 52(2), 305-315.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s