At this point, we have a solid answer to the ancient question “Can money buy happiness?” Much research suggests that indeed it can—when you use it to enjoy positive experiences, especially those shared with friends and loved ones.
And yet, many people can’t seem to resist the impulse to spend their spare dollars on new gadgets, fancier cars or bigger homes—material purchases that do not, in the long run, make us any more satisfied with our lives. Why do we do it?
Newly published research suggests the answer can be found, at least in part, in our tendency to look for bargains. It reports we believe material goods provide better economic value than experiences, which are by definition ephemeral. The desire to make our money go further pushes us in a materialistic direction.
Although people tend to “accurately forecast the well-being they will experience from their purchases,” they also “underestimate the extent to which they will consider life experiences to be a good use of money.”
“People actually do know, and accurately predict, that life experiences will make them happier,” said San Francisco State University psychologist Ryan Howell, who co-authored the study with Paulina Pchelin. “What they really underestimate is how much monetary value they will get out of a life experience.”
“We naturally associate economic value with stuff,” he adds. “I bought this car; it’s worth $8,000. We have a hard time estimating the economic value we would place on our memories.”
The study, published in The Journal of Positive Psychology, provides evidence backing up this idea in a series of experiments. Results of the first three suggest that, although people tend to “accurately forecast the well-being they will experience from their purchases,” they also “underestimate the extent to which they will consider life experiences to be a good use of money,” the researchers write.
A final set of experiments confirmed those results. In one, 98 participants recruited online were presented with four sets of two potential purchases, and asked which they would choose in each pair: a material item or an experiential one.
Half were instructed to “select the purchases you believe will allow you to say, ‘this was the best use of my money.’” The others were told to make the choices that would let them say “this purchase increased my happiness the most.”
“When participants were instructed to maximize economic value, they selected more material items than when they were instructed to maximize their happiness,” the researchers report. “It appears that consumers who are focused on economic factors are inclined to spend money on material items.”
Given the economic system we live under, the impulse to find a bargain is undoubtedly automatic in many if not most of us. However, this research suggests it leads us astray in a vitally important way, causing us to devalue the things that give us the most happiness.