Buying happiness

by gjm4 min read16th Jun 201634 comments


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There's a semi-famous paper by Dunn, Gilbert and Wilson: "If money doesn't make you happy, then you probably aren't spending it right". (Proper reference: Dunn, E.W., Gilbert, D.T., and Wilson, T.D., If money doesn't make you happy, then you probably aren't spending it right, Journal of Consumer Psychology, vol 21, issue 2, April 2011, pp. 115–125.) It's been referenced a few times on LW but curiously never written up properly here. The purpose of this post is to remedy that.

There is an earlier LW post called "Be Happier" which among other things references this paper and quotes some things it says, but that post is monstrously long and covers a lot more ground (hence, less details on the material in this paper).

Dunn, Gilbert and Wilson (hereafter "DGW") offer eight principles to follow. Here they are.

1. Buy experiences instead of things.

Many studies have asked people to reflect on past "material" and/or "experiential" purchases and have consistently found that they report greater happiness from (and are made happier by recalling) the latter than the former.

Why? DGW propose 5 reasons. First, deliberately sought-out experiences encourage us to focus on the here and now (something shown to increase happiness substantially); second, when things don't change we adapt to them rapidly, and "material" purchases like cars and tables tend to be pretty stable (whereas ongoing experiences are more varied); third, it turns out that people spend more time anticipating experiences before they happen and recalling them afterwards than they do for material purchases. Fourth, experiences are less directly comparable to alternatives than material things, and therefore less subject to post-purchase regret. Fifth, experiences are often shared, and other people are a great source of happiness.

2. Help others instead of yourself.

Prosocial spending correlates better to happiness than personal spending. If you give random people money and either tell them to spend it on themselves or to spend it on someone else, the latter makes them happier. Reflecting on past spending-on-others makes people happier than reflecting on past spending-on-self. (I am a little skeptical about that one: the right point of comparison would be not the past spending but the past enjoyment of whatever you spent the money on.)

Why? DGW propose two reasons. First, prosocial spending is good for relationships and relationships are good for happiness. Second, when you spend on someone else you get to feel like a good person.

Most people have wrong intuitions about this: they expect spending on themselves to make them happier. Most people are wrong.

3. Buy many small pleasures instead of few big ones.

As we saw above under #1, we quickly adapt to changes. Therefore, a larger number of varied small pleasures may be a better buy than a single big one. There is some evidence for this (though to my mind it seems to bear less directly on DGW's principle than in the other cases we've considered so far). If you correlate people's happiness with their positive experiences, the correlation with how frequent those experiences are is stronger than the correlation with how intense they are. The optimal (for happiness) number of sexual partners to have over a year is one, perhaps because that gets you more sex even if individual instances are less exciting. (I find this less than convincing; individual instances might be better because partners learn what works well for them.)

The other reason DGW suggest why more smaller things should be better is diminishing marginal utility: half a cookie is more than half as good as a whole cookie. (This is, I think, partly because of adaptation, but that isn't the whole story.)

DGW suggest that this is one reason why the relationship between wealth and happiness isn't stronger: "wealth promises access to peak experiences, which in turn undermine the ability to savor small pleasures".

4. Buy less insurance.

We adapt to bad things as well as good, which means that bad things are less bad than we are liable to expect. Our overestimation of the impact of adverse occurrences is one reason why we buy insurance, which notoriously is always negative-expectation in monetary terms.

DGW cite various studies showing that people expect to be made markedly unhappier by losses than they actually are if the losses occur, and that people expect to regret bad outcomes more than they actually do (we overestimate how much we will blame ourselves, because we underestimate how good we are at blaming anything and anyone else for our misfortunes).

5. Pay now and consume later.

The opposite of the bargain proposed by credit cards! Besides the purely financial problems that arise from overspending (which are large and widespread), DGW suggest that "consume now, pay later" is bad for our happiness because it eliminates anticipation. We may derive a lot of pleasure even from anticipating something that we don't enjoy very much when it happens. "People who devote time to anticipating enjoyable experiences report being happier in general."

You might think that moving an experience later would simply mean more anticipation (good) but less reminiscence (bad), but it turns out that anticipation generally brings more happiness. (And, for unpleasant events, more pain.)

DGW suggest two other benefits of delaying consumption. First, we may make better choices (meaning, in this case, ones yielding more happiness overall, even if less in the very short term) when we make them a little way ahead. Second, the delay may increase uncertainty, which may keep attention focused on the thing we're buying, which may reduce adaptation. (This seems a little convoluted to me; DGW cite some research backing it up but I'm not sure it backs up the "by reducing adaptation" part of it.)

6. Think about what you're not thinking about.

That is: when choosing what to spend on, take some time to consider less obvious aspects that you'd otherwise be tempted to neglect. "The bigger home may seem like a better deal, but if the fixer-upper requires trading Saturday afternoons with friends for Saturday afternoons with plumbers, it may not be such a good deal after all." And: "consumers who expect a single purchase to have a lasting impact on their happiness might make more realistic predictions if they simply thought about a typical day in their life." (Rather than considering only the small bits of that day that will be impacted by their purchase.)

7. Beware of comparison shopping.

Comparison shopping, say DGW, focuses attention on the features that most clearly distinguish candidate purchases from one another, whereas other more-common features may actually have much more impact on happiness. It may also focus attention on more-concrete differences; for instance, if you ask people whether they would more enjoy a small heart-shaped chocolate or a large cockroach-shaped one, they generally prefer the former, but if you ask them to choose one of the two they tend to focus on the size and choose the latter.

DGW also point out that the context during comparison-shopping tends to be different from that during actual consumption, which can skew our evaluations.

8. Follow the herd instead of your head.

DGW cite research supporting de la Rochefoucauld's advice: "Before we set our hearts too much upon anything, let us first examine how happy those are who already possess it." Others' actual experiences of a thing are likely to be better predictors of our enjoyment than our theoretical estimates: we may know ourselves better, but they know the thing better.

They also suggest (and I don't think this really fits their heading) looking to others for advice on how we would enjoy something we are considering buying. The example they give is of research in which subjects were shown some foods and asked to estimate how much they would enjoy them, after which they ate them and evaluated their actual enjoyment. The wrinkle is that they were also observed, at the moment of being shown the foods, by other observers, who rated their immediate facial reactions -- which turned out to be better predictors of their enjoyment than the subjects' own assessments. So "other people may provide a useful source of information about the products that will bring us joy because they can see the nonverbal reactions that may escape our own notice".

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