Planet Money - Can money buy happiness?

Episode Date: September 18, 2024

People often say that money can't buy you happiness. Sometimes, if you ask them to tell you more about it, they'll mention a famous 2010 study by Nobel Prize winners Daniel Kahneman and Angus Deaton. That study found that higher household income correlates with greater emotional well-being, but only up to around $75,000 a year. After that, more money didn't seem to matter.This was a famous study by two famous academics. The result stood for over a decade. And it feels good, right? Maybe the rich aren't so much happier than anyone else. But researchers have recently done a complete 180 on this idea. In 2021, psychologist Matt Killingsworth found nearly the opposite: That more money does correlate with more happiness. And that the relationship continues well beyond $75,000 per year.Today on the show: Does more money mean fewer problems? Two researchers with totally different takes come together to hammer out a better understanding of the relationship between money and happiness.This episode was hosted by Sally Helm and Nick Fountain. It was produced by Sean Saldana, Sam Yellowhorse Kesler, and Emma Peaslee. It was edited by Meg Cramer and fact-checked by Sierra Juarez. Engineering by Cena Loffredo. Alex Goldmark is Planet Money's executive producer.Help support Planet Money and hear our bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

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Yeah. The key finding, or at least the key finding that I took from it when I was in my twenties, was that money can buy happiness, but only up to a certain point. After you make about $75,000 a year, it doesn't matter. Nick, I also heard about that happiness plateau back when I was in my twenties, and so did Bernadette Joy Cruz Mullion. I called her up because I wanted to talk about this happiness finding with someone

who felt like they had lived it. And Bernadette turned out to be the perfect person. I noticed that around that mark was where I do remember feeling like, okay, I'm not lacking for anything and I'm not in this bracket where I feel like I have to keep up with the not lacking for anything and I'm not in this bracket where I feel like I have to keep up with the people with like the nice cars and shoes and all this other stuff.

Bernadette confirmed for her $75,000 a year felt like this happiness sweet spot. She'd grown up middle-class, her dad was an accountant, her mom was a bookkeeper, they were a big family, money was tight. Like she loves roller coasters. And she said growing up, going to the museum park was like a really special occasion. They could only afford to send her maybe

once every four years. Bernadette had a well-paying corporate job in her 20s. And after she hit that milestone, $75,000 a year, she really felt like money wasn't improving her life. I was making exactly $100K. And it was such a shock to my system that the more money that I made, I actually felt like the less happy I became. So Bernadette changed her whole life. Not to make more money, but to find a path that would make her happier. She quit her job, took out

loans to go back to school. After she graduated, she started a business, hustled to pay off her debt, bought and sold some real estate. And eventually, even though it had not been her explicit goal, Bernadette and her husband actually had a lot of money in the bank. All right, so you're like a millionaire. We are in fact, a millionaire, yeah. Her and her husband's total net worth today is about $1.7 million, most of that in retirement. Last year, their household income was nearly $300,000

and they're debt-free. And in her 30s, Brunadette started to be like, wait, if you spend it on the right things, having money is actually awesome. My husband and I have a lot of freedom of time and we have a lot of hobbies and interests. And I think because we are debt free, I have this literal feeling that I don't owe people anything.

And so then I have the freedom to choose how I want to spend my time. For example, remember Bernadette loves roller coasters. My husband and I, we have a season pass at our local amusement park and I ride roller coasters by myself on like random Wednesday evenings. She also loves the mega famous K-pop group BTS. And in 2022, she went to see them perform in Vegas. I remember just thinking, like, I don't care how much this is going to cost. Like, I'm going to go to this concert with my best friend,

no matter what happens. They all went to the concert. It was amazing. She felt alive again. And she said afterwards, she turned to her husband and is like, I feel so happy. And money made this possible. And she says, that was the moment when she realized she'd been wrong about how more money didn't mean more happiness. Now she felt like it did.

Yeah, in other words, maybe that $75,000 plateau idea is bunk. And at the end of our interview, I just asked her the big question, can money buy happiness? My answer is a resounding yes. Over the past decade, Bernadette has done a complete 180 on this question.

And in the background, social science has been making almost the exact same 180, taking another look at what had seemed to be settled science. Hello and welcome to Planet Money. I'm Sally Helm. And I'm Nick Fountain. When it comes to economics in our everyday lives, this is kind of the mother of all questions. How is money connected to our happiness? The data on this once seemed pretty definitive, but recently it has come under fire.

Today on the show, two researchers with totally opposite takes come together to try and hammer out a definitive answer about how income affects our happiness. And they find something that neither of them expected. This message comes from Grammarly. The work week can be fast-paced, and it's hard to focus on getting everything done. Let Grammarly be your AI writing partner. It can help you write and quickly edit with suggestions wherever you write. 93% of professionals report that Grammarly

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All right, Sally, we started with this idea about a happiness plateau, that as you make more money, you get happier, but that the relationship levels off when you're making about $75,000 a year. And beyond that point, more money does not correlate with more happiness. a year. And beyond that point, more money does not correlate with more happiness. This idea comes from a paper by two famous Nobel Prize winners, Angus Deaton and Daniel Kahneman, famous economist and famous psychologist. They wrote it in 2010. And one thing to know is that in the world of psychology, Danny Kahneman was an enormous deal. He actually died quite recently in March of this year. So I called up another happiness researcher, Matt Killingsworth at the University of Pennsylvania.

I asked him about Kahneman and his work. Matthew Feeney I mean, he's just a giant in the field. I mean, probably, possibly the most important person who's ever existed and certainly the most important scientist has been alive in my lifetime. Wait, did you say possibly the most important person who's ever existed? In that area of science, what psychologist has been more influential scientifically? Matt himself was really influenced by Danny Kahneman. They actually met once when Matt was a grad student.

Kahneman gave him some advice for a study he was designing to answer the question, is life worth living? And I just remember Danny responding after a little pause, that's a very good question. Huh. With sort of a twinkle in his eye. Not that one thing he really respects about that 2010 study is the careful way that it looks at the different parts of happiness. Because there are really a couple of ways you could define it, right? Like, one way is to just ask, how satisfied are you with your life? But the one that we're going to focus on,

and that everyone focuses on when they talk about this paper, it has to do with emotional well-being. Just like moment to moment, as you go about your regular day, how do you feel? Which is kind of hard to pin down, hard to study empirically. So what Kahneman and Deaton did was they looked at people's answers to a bunch of different questions about their day yesterday. 450,000 adults in the US were asked, did you smile or laugh a lot yesterday? Did you experience happiness during a lot of the day yesterday? How about enjoyment? They put all that together to try to get a measure of happiness.

When it came to people's sort of day-to-day emotional state, kind of how they're feeling, that rose but only up to a point. Once, as they argued in the paper at least, once you got up to $75,000 a year, that didn't seem to change. Yeah, this is that really famous finding in the 2010 study, a happiness plateau. Two quick caveats here. One, the $75,000 number is a little imprecise.

The paper actually finds that there's basically no effect after the $60,000 to $90,000 income bracket. So $75,000 is just the midpoint of that range. And two, correlation is not causation. Scream it from the rooftop, Sally. A tattoo it on my heart, Nick Fountain. This study looks at correlations between money and happiness, but it actually does not speak to the question

of whether more money is causing greater happiness. But nevertheless, people really latch on to this idea. They love it. And you can see why. It's nice to know that science says what we know from the tabloids, that rich people, they're just like us, just as happy or miserable as us. I was entering the workforce right when the study came out. And I took it quite literally to mean aim for that solid middle-class salary, but not the rat race, because it's not going to make me happier to be super rich. Aaron Ross So many people are so focused on money, and maybe the idea that at least some aspect of our quality of life might not depend on that could

be kind of liberating. I mean, so what if that person's on the yacht and, you know, I'm watching reruns of Frasier at home, but are they really having a better life than me? Maybe not. Exactly. Over 75K, who cares? They're just miserable in the mansion. When do you decide to take this study down?

Well, I wouldn't quite say take it down. I mean, yeah, that really, really wasn't at least where I was trying to come from. A couple of years ago, Matt Killingsworth found himself taking on the most important person who has ever existed, Danny Kahneman. And Matt truly like wasn't even trying to do this. His data almost did it for him. A big part of how I've approached my research is doing really large-scale what's called experience sampling, which is basically the idea of, you know, rather than bringing people into the labs or, you know, sending them a paper survey to fill out, what if we could collect some data as people were going about their

regular everyday lives? Experience sampling really is the gold standard for measuring moment-to-moment feelings. Over the years, scientists have found a number of ways to do it. They check in with people throughout the day using beepers and then palm pilots. Matt is in grad school in the late 2000s, and he launches a project called trackyourhappiness.org to do experience sampling with smartphones. So people get sort of pinged at random moments, and then I ask them a series of questions about their experience at the moment just before the ping. Yeah, so imagine you're like doing laundry. You get a ping.

How do you feel right now? You can answer on a spectrum that goes from very bad to very good. Move the little slider anywhere you want along that spectrum. So like, how happy am I doing laundry? I think maybe like a little bit over the midpoint in general. I kind of like doing laundry. Weird. Anyways, so what Matt's doing is not totally dissimilar from what Connaman was looking

at. Did you smile a lot yesterday, etc., etc.? Except Matt is looking at it right in the moment. Obviously, this is self-reported happiness, and there are ways that these self-reports might be messy. Maybe people are lying to you or lying to themselves. But Matt does ask a lot of people at all income levels and he asks them over and over, which should help him separate out the signal from the noise.

And this was really the first big project of its kind. Matt has collected millions of data points from hundreds of thousands of people and he's still going. The data points feed into this statistical software. They're updating all the time. I spend time almost every day looking at it. I mean, it feels a little bit like going in and looking at the code in the matrix. It's like, here are all of these different variables

from this gigantic number of people, and I kind of get to peek behind the curtain. One day, Matt realizes, wait a second, I'm collecting all this data about how people feel throughout their day. I also have income data. I wonder if when I look at my data, I will see Danny Kahneman's famous happiness plateau of around $75,000. And so at some point I looked in my data and saw, huh, it's actually, it doesn't look like that at all. There's no hint of a curve or a flattening

or anything like that. It just keeps going up. So you are finding there is not this happiness plateau at $75,000 that we've all been told about. It's not there. That's right. Rich people are happier. That's right. Rich people are happier. That's right. To at least some degree.

More money, more happiness. Yep. Which is kind of a bummer, right? I mean, yeah. Like Matt himself got into this happiness research in part because he felt like people focus on money too much. Like he wanted to broaden their horizons. But now he was finding higher income correlates

with more happiness, with no plateau. And he's feeling like a little bit of trepidation here. I mean, that plateau is so famous. I felt like I was pretty, I was totally confident. Like statistically, this is what I'm seeing. There's no question. And I think the quality of the data is very, very high, but I'm not quite sure how this is gonna go.

If I start saying this is what's Danny Kahneman going to think, what's the world going to think? I don't know. But at some point I just decided, you know, I'm seeing what I'm seeing. I'm gonna just go ahead and say it and we'll see what happens. What happens when he publishes his paper in 2021 is that people are very interested.

It really kind of happened in like an avalanche. So I, you know, because that previous finding had been so influential, people were then incredibly curious about this, you know, conflicting evidence that seemed to show something different. He's hearing from all sorts of people, but not from one particular person, Danny Kahneman. Matt's been of the one time, but it's not like they know each other. He'd never reach out. And then one day, he hears through the psychology research grapevine that Danny has read the paper and he wants to talk. That's after the break. Hey, it's Mike and Ian.

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They're catching up. And he said, oh, by the way, do you happen to know a guy by the name of Matt Killingsworth? And I said, As a matter of fact, I do. And if you'd like me to introduce him to you, and if you'd like me to be an arbiter, I'd be happy to do that. So you knew what he was thinking. I knew exactly what he was thinking. It seems he was not thinking, I want to take down that young Matt Killingsworth. I'm going to humiliate him in front of all his psychology heroes.

No, no. Danny Kahneman wanted to collaborate, and he needed Barb's help. Yeah, he wanted to do something he called an adversarial collaboration, where researchers with scientific beefs try to figure out the truth. They agree to design a study and write a paper together. I think Danny just hated the common way of engaging in disputes, which is exchanges in journals where each side sort of caricatures the other. So he proposed an alternative method in which both sides jointly design an experiment that

gets to the heart of the dispute. Why is that? Is there an incentive to kind of caricature the other side in journals? Why does that happen? Oh, that's human nature. That's, that's our natural, more base instinct, I think. But in this case, Danny does not want to attack Matt's research. He wants to do this adversarial collaboration thing to work

together to find the truth. And he asks Barb to help set it up and serve as arbiter to mediate any disputes. So Barb reaches out to Matt, asks if he's game to meet. Matt says yes, of course. Their first conversation is on Zoom. And Matt told me there was a little bit of tension in the air. Danny was maybe not 100% pleased.

He was a little bit prickly, which was understandable. But stressful, maybe. Yeah. On my side of the equation, I mean, you know, he's kind of at the pinnacle of influence and prestige. And, you know, having someone like that, even 1% not happy with you doesn't necessarily feel great. But at the same time, there's kind of part of me that's like, you know, I'm a scientist, I study data, here's what I found, and that's what it is. So you know. Right.

And you'll know he will respect that. Like, that's what he's like too. 100%. The question we were trying to answer was this. Barb Mellors again. Could there be a reality in which both Danny and Matt might be right? Suppose we start with the assumption that both of their data sets are valid and good.

How could it happen? What do we have to know that would put the pieces together? Barb was like, look, everyone agrees that Matt's experience sampling data is awesome. It's very good, yeah, unusually good. But Danny and Angus Deaton had really good data too. Theirs came from the professional polling company Gallup, who called more than 450,000

people to ask them these questions. So it was a puzzle. Why did Danny find a plateau and Matt didn't? The graphs look totally different. And it's really a big question mark. How could these guys, both of whom have really great data sets, have such different findings? They start trying together to imagine what they might be missing. And eventually, they realize there might be an alternate vision of reality here,

one that actually aligns surprisingly well with both of their studies, if they just look at the data in a slightly new way. And to understand this, we're going to need to get a little bit nerdy about the two different kinds of data that Danny and Matt were working with. You ready? Sally, crack those knuckles. Let us do it. Okay. So, remember, Danny's 2010 study relied on people answering questions about their emotional wellbeing over the course of the previous day. It was essentially three questions. Did you smile or laugh a lot yesterday? Did you feel happiness a lot yesterday? How

about enjoyment? And importantly, these were yes, no questions. So if you are the happiest person in the world, your answers will be yes, yes, and yes. And here is a key fact. In Dani's data, a lot of people were answering yes, yes, yes. On average, in the entire data set, the overall happiness measures were about 85%, meaning just about everyone was at the maximum of the happiness scale on that day they were measured. Okay, so that's a problem.

It's a problem because the happiest person in the world answers yes, yes, yes. But a lot of people who are less happy also answer yes, yes, yes. On average in Danny's data, 85% of people were answering yes, yes, yes. So Danny's happiness measure, it can't really distinguish between the happiest person in the world and someone who's just happy in a more normal run of the mill way. It's like people are maxing out the scale. Yeah, because the only way they can describe their happiness is with these three yes-no questions. But if you gave them a bigger spectrum, they might be able to tell you more about just how happy they feel.

And this is where we get to Matt's study. Remember, he had people report their happiness on a range that went from very good to very bad. You could put the little slider anywhere along that spectrum. And in Matt's data, very few people were putting it at the absolute maximum. It was rare for someone to say, at this moment, I am feeling so good

that I think I'm at the very top of this happiness scale. So there's almost always some room for it to say, at this moment, I am feeling so good that I think I'm at the very top of this happiness scale. So there's almost always some room for it to be higher. And I measure over and over. So even if someone were, I'm just as happy as I could possibly score on this Tuesday in the afternoon, well, Wednesday morning, you're not going to be there. And I'm going to average all of those responses to say, on average, how happy does this person feel in everyday life? So I kind of had a much more sensitive measure of the variation. And that could explain why Danny found a plateau and Matt didn't. Maybe the rich people in Danny's sample were happier. They just had no way to tell him that. All they could say was yes, yes, yes.

But not everyone was saying yes, yes, yes. Something like 15% of people were saying no, yes, yes, or no, no, no. Those were the people who did not smile or laugh a lot yesterday, who didn't feel enjoyment much yesterday. They're basically the sad people, or at least the people who are feeling sad yesterday. So, Danny's data couldn't see the whole range of happiness, but it could see the sadness. In fact, another way to say it is that Danny wasn't actually measuring happiness. He was measuring unhappiness. He had basically given the variable the wrong name. You know, it's an error. It's a mistake.

And he had to sort of gulp and deal with that. They had found this big error. And they could have just stopped right there. Case closed, end of story. But they did not. No, because this wasn't a takedown. It was a collaboration. And now that they understood not. No, because this wasn't a takedown, it was a collaboration. And now that they understood Dani's mistake, they went back to the datasets to search through

them again and see if there was any more insight they could mine. And what they found was so rad. Yeah, okay. So remember, the key realization was that Dani was really talking not about happiness, but about unhappiness. And there were unhappy people in Matt's sample too, people who put the slider low, who said, I feel very bad right now. So we thought, well, maybe we could see that flattening if we looked at the least happy

group. Yeah, if they zoom in on the unhappiest 15 to 20% of people in Matt's sample, people at all income levels who said they felt bad, would they see a different relationship between money and happiness? Was it possible that for that unhappy group, at a certain point, money stopped mattering? In other words, would they find that plateau? And that's what we did. And that's what we found. They found Danny's plateau, hiding in Matt's data. But only for the unhappiest 15 to 20

percent. In that group, people who made the least money reported the least happiness. People who made more said they were happier. But only up to about $100,000 a year. If you account for inflation, that is basically what Dani found all those years ago. Danielle Pletka Oh, it was so beautiful. It just, I remember this feeling of awe and just the pleasure of doing science. You know, there's just a delight that you feel when things come together in a way that you haven't expected. So this result, remember, it doesn't show anything about the causes of any of this,

but it's like maybe money can kind of mitigate unhappiness up to a point. And after that point, maybe you're just a person dealing with one of the many problems that money can't fix. Heartbreak, depression, grief. All right. So mystery solved, plateau identified. But it turned out there was another surprise lurking in Matt's data, Something that none of them had predicted. For the happiest people, those at the top 15%, what you find is that at that point, happiness goes up really fast. For the very happiest group, there is actually an accelerating relationship.

More money correlates with more and more happiness. Again, it's not clear why, but maybe these are people who just like know how to spend money really well on things that make them happy. So, for the unhappy group, there was the plateau. And for the happiest group, there was like the opposite of a plateau. Do you think that they were both sort of right or both sort of wrong? Is the glass half empty or half full? Um, yes is the answer. Barb definitely thinks the collaborative study added to what both of these researchers did on their own.

And that is important. Psychology has been in the midst of what's been called the replication crisis. A lot of the results that one paper found, they don't replicate when another paper looks at the exact same thing. Economics has this problem too. And maybe adversarial collaboration could help people get closer to the truth of the matter. Yeah, you know, in a way, it's easier to tear down someone else's study to be like,

your data is bogus, my data is awesome. And of course, some studies do deserve to be torn to shreds. But in this case, realizing that everyone had actually done a good job, that raised harder and more interesting questions. That meant they learned something that they hadn't expected. They also did confirm that, on average, getting more money does at least correlate with more happiness.

Which is an important thing to know, because we all make decisions about how much to pursue or value money in our lives. And if there is a takeaway from Matt Killingsworth's research, it's about this. How to weigh those trade-offs. If you're at some critical juncture in your life, especially, you know, maybe thinking about someone in college and they're kind of like, well, I could major in art history or I could major in electrical engineering and I'm kind of, you know, 50-50 on both of them, well, there might be some reasons to think about the engineering.

I feel like you're saying but not saying, yeah, you can follow the money. Like if you're 50-50 on art history and electrical engineering to think, well, I'll make a lot more money as an electrical engineer. Maybe I should do that. It might make me happier. Yep. Why are you saying it but not saying it, Matt?

What makes you hesitate to say it? I think there's just a risk of feeling like that should overwhelm your other considerations. And I think, you know, that's just a personal decision people have to grapple with. Yeah, Matt said the effect of money on happiness is pretty small, actually. There are really lots of things that affect our emotional well-being. Social connections and exercise and living in the moment. And none of them really dominates over the others. You just have to find your own balance.

And that's actually what Matt did himself. Before he was a psychology researcher, he studied engineering, worked in tech. Staying on that path would have probably meant more money. But he felt drawn to these big questions about what makes life worth living. And he decided to follow those instead. Today's show was produced by Sean Saldana with help from Sam Yellow Horse Kessler and Emma Peasley.

It was edited by Meg Kramer, Engineering by Seemill Afredo. Fact checking by Sierra Juarez. Alex Goldmark is our executive producer. I'm Nick Fountain. And I'm Sally Helm. This is NPR, thanks for listening. The candidates for November are set. I know Donald Trump's tight.

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