Does spending money on others promote happiness?

Some new evidence that spending money on others promotes happiness was recently published in ‘Science’ (Elizabeth Dunn, Lara Aknin and Michael Norton, ‘Spending money on others promotes happiness’, Science, 21 March, 2008).

Three studies were reported. The first involved asking a sample of 632 Americans to rate their general happiness and to report their annual income as well as how much they spent each month on bills and expenses, gifts to themselves, gifts to others and charitable donations. A regression analysis of the results suggested that income level and spending money on others had a similar positive effect on happiness, but personal spending was unrelated to happiness.

This study does not reveal anything about the direction of causation. The results could just mean that happy people tend to be more generous. I know that when I am feeling grumpy I am not in a mood to be generous. The other two studies provide a better indication of the direction of causation.

The second study involved asking people their happiness prior to and after receiving a bonus from the company they worked for. The results suggest that those who spent more of the bonus on others experienced greater happiness after receiving it. Unfortunately there were only 16 people in the survey, so some caution is needed in interpreting the results.

The third study was an experiment in which 46 people were asked to rate their happiness one morning and then given an envelope containing either $5 or $20 to spend that day. Some were asked to spend the money on themselves and the others were asked to spend the money on a gift for someone else or a charitable donation. At the end of the day they were all asked to rate their happiness again. The participants who were instructed to spend money on others were significantly happier than those instructed to spend the money on themselves.

If we can assume these findings are reliable, what should we make of them? Elizabeth Dunn, the lead author, is reported as having said that it would be wrong to glean from this research that you should try to get a high-paying job so you can make tons of money and spend it on others so that you'll be happy (see here). Why not? Even if a person of moderate means gets the same boost in happiness by giving away a few dollars a week as a billionaire gets from giving in away the same proportion of her income, the billionaire can have the additional satisfaction of helping a far larger number of people.
Will Wilkinson asks: “how long before someone tries to use this study to argue that taxes make us happy?” (See here.) I imagine it will not take long. It seems to me, however, that the findings might support the opposite conclusion (as Gil, a person leaving a comment on Will’s blog, has already suggested). To the extent that taxes substitute for voluntary giving they might reduce the happiness of donors since they no longer have any choice in the matter. If you were to give some cash to a needy person it is conceivable that this could make you feel happier. If the same person held a gun to your head and told you to hand over the same amount of cash then I think it would be reasonable to predict that this would make you feel very unhappy.