Does Money Make You Unhappy?

David Brooks has an excellent column on the diminishing returns of luxury living:

Often, as we spend more on something, what we gain in privacy and elegance we lose in spontaneous sociability.

I once visited a university that had a large, lavishly financed Hillel House to serve as a Jewish center on campus. But the students told me they preferred the Chabad House nearby, which was run by the orthodox Lubavitchers. At the Chabad house, the sofas were tattered and the rooms cramped, but, the students said, it was more haimish.

Restaurants and bars can exist on either side of the Haimish Line. At some diners and family restaurants, people are more comfortable leaning back, laughing loud, interrupting more and sweeping one another up in a collective euphoria. They talk more to the servers, and even across tables. At nicer restaurants, the food is better, the atmosphere is more refined, but there is a tighter code about what is permissible.

Hotels can exist on either side of the Haimish Line. You’ll find multiple generations at a Comfort Inn breakfast area, and people are likely to exchange pleasantries over the waffle machine. At a four-star hotel’s breakfast dining room, people are quietly answering e-mail on their phones.

Whole neighborhoods can exist on either side of the Haimish Line. Alan Ehrenhalt once wrote a great book called “The Lost City,” about the old densely packed Chicago neighborhoods where kids ran from home to home, where people hung out on their stoops. When the people in those neighborhoods made more money, they moved out to more thinly spaced suburbs with bigger homes where they were much less likely to know their neighbors.

Our poor intuitions about the pursuit of happiness are a genuine paradox. Daniel Kahneman summarizes decades of happiness research this way: "It is only a slight exaggeration to say that happiness is the experience of spending time with people you love and who love you." The problem, of course, is that we don't spend our money in accordance with this psychological principle. Instead, we squander cash on positional goods, saving up for Rolex watches, Louis Vuitton luggage and Prada T-shirts. Consider the U-index, which measures the percentage of time people spent in an unpleasant emotional state while performing various activities. Here are the results from a survey of more than 1000 American women in a Midwestern city:

The women spent 29 percent of their morning commute in an unpleasant state, 27 percent of their workday, 24 percent of time spent caring for children, 18 percent of time spent doing housework, 12 percent of time spent watching television and 5 percent of time during sex.

Two data points here are startling. The first is that spending time with kids appears to be more unpleasant than mopping the floor. (Offspring appear to be the exception to the rule that happiness is spending time with loved ones.) The second is that commuting is the absolute worst thing in the world.*

I'll focus here on commuting, since kids are complicated. The first thing to note is that it's not just survey data that confirms the horror of rush hour. A few years ago, the Swiss economists Bruno Frey and Alois Stutzer outlined a human bias they called "the commuting paradox." They found that, when people are choosing where to live, they consistently underestimated the pain of a long commute. As a result, they mistakenly believed that the McMansion in the suburbs, with its extra bedroom and sprawling lawn, will make them happier, even though it might force them to drive an additional forty-five minutes to work. It turns out, though, that traffic is torture, and the big house isn't worth it. According to the calculations of Frey and Stutzer, a person with a one-hour commute has to earn 40 percent more money to be as satisfied with life as someone who walks to the office.

But here's the paradox of commuting - we've reacted to this pain by making our commutes longer. As Nick Paumgarten observed in a classic New Yorker article:

Roughly one out of every six American workers commutes more than forty-five minutes, each way. People travel between counties the way they used to travel between neighborhoods. The number of commuters who travel ninety minutes or more each way—known to the Census Bureau as “extreme commuters”—has reached 3.5 million, almost double the number in 1990.

I'm genuinely puzzled by our failure to spend money properly. In general, human intuition improves with experience - it gets better as we put in those 10,000 hours of practice, so to speak. And yet, this doesn't appear to be true when it comes to our intuitions about the pursuit of happiness. After all, we've all got extensive experience with pleasure. We know exactly what we enjoy. Nevertheless, this abundance of experience doesn't lead to better purchases over time. Either psychologists can't measure happiness or human beings with disposable income are very confused.

One last thought about the Haimish line and our flawed first-world intuitions about money and pleasure. There's some suggestive evidence that, once we acquire wealth and start to enjoy the best things in life – we can stay at expensive hotels and eat exquisite sushi and buy the nicest gadgets – we actually decrease our ability to enjoy the mundane joys of everyday life. The problem with this tendency is that most of our joys will always be mundane – we can’t sleep at the Ritz every night. Although we try to treat ourselves, we end up spoiling ourselves. First-class ruins coach.

This is known as the “experience-stretching hypothesis” and it was tested in a neat study by psychologists at the University of Liege. The psychologists gathered 351 adult employees of the University, from custodial staff to senior administrators, for an online survey. The scientists primed the subjects by showing them a stack of Euro bills before asking them a bunch of questions which attempted to capture their “savoring ability.” Interestingly, the scientists found that people in the wealth condition – they’d been primed with all those Euros – had significantly lower savoring scores and were less likely to be delighted by the simple pleasures of ”sunny days, cold beers, and chocolate bars.” Furthermore, subjects who made more money in real life – the scientists asked all subjects for their monthly income – scored significantly lower on the savoring test. A subsequent experiment duplicated this effect among Canadian students, who spent less time savoring a chocolate bar after being shown a picture of Canadian dollars. The psychologists end on a bleak note:

Taken together, our findings provide evidence for the provocative notion that having access to the best things in life may actually undermine one’s ability to reap enjoyment from life’s small pleasures. Our research demonstrates that a simple reminder of wealth produces the same deleterious effects as actual wealth on an individual’s ability to savor, suggesting that perceived access to pleasurable experiences may be sufficient to impair everyday savoring. In other words, one need not actually visit the pyramids of Egypt or spend a week at the legendary Banff spas in Canada for one’s savoring ability to be impaired—simply knowing that these peak experiences are readily available may increase one’s tendency to take the small pleasures of daily life for granted.

*Why is traffic so unpleasant? One reason is that it's a painful ritual we never get used to - the flow of traffic is inherently unpredictable. As a result, we don't habituate to the suffering of rush hour. (Ironically, if traffic was always bad, and not just usually bad, it would be easier to deal with. So the commutes that really kill us are those rare days when the highways are clear.) As the Harvard psychologist Daniel Gilbert notes, "Driving in traffic is a different kind of hell every day."