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Norbert Schwarz
  Norbert Schwarz

Money Can't Buy Happiness

7/10/2006 --

People with greater income tend to devote more time to work, community and activities such as shopping and child care.

ANN ARBOR, Mich.—The more money you earn, the more time you are likely to spend working, commuting and doing other compulsory activities that bring little pleasure, according to new research by a Ross School of Business marketing professor.

Norbert Schwarz and colleagues Daniel Kahneman and Alan Krueger of Princeton University, David Schkade of the University of California at San Diego and Arthur Stone of Stony Brook University analyzed the link between money and happiness in an article that appeared in the June 30 issue of Science. They present new evidence showing that what they call "the focusing illusion" affects how people respond when asked how happy or how satisfied they are with their lives.

"When people consider the impact of any single factor on their well-being—not only income—they are prone to exaggerate its importance," said Schwarz, who also is a professor of psychology and a senior research scientist at the Institute for Social Research at the University of Michigan.

Previous studies have shown, for example, that if people are asked about their marriage or their health before they are asked how happy they are with their life, their answer to the second question is linked more closely with the first question than if the question order is reversed.

"People do not know how happy or satisfied they are with their life in the way they know their height or telephone number," Schwarz said. "The answers to global life satisfaction questions are constructed only when asked, and are therefore susceptible to the focusing of attention on different aspects of life."

To test the power of the focusing illusion, Schwarz and colleagues asked a sample of working women to estimate the percentage of time they were in a bad mood the day before. Respondents also were asked to predict the percentage of time people with various life circumstances, including no health insurance and close work supervision, along with high- and low-income, typically spend in a bad mood. These predictions were compared to the actual reports of mood provided by respondents with the relevant circumstances.

Respondents overestimated the prevalence of bad mood in general, and grossly exaggerated its prevalence among people with undesirable circumstances. For example, while those with household incomes of less than $20,000 a year reported that they spent 32 percent of the previous day in a bad mood, other respondents predicted that people at that income level would spend 58 percent of their day in a bad mood.

The researchers reviewed several possible reasons why income has a weak effect on happiness, including their own explanation—as income rises, people's time use does not appear to shift toward activities associated with improved affect.

Citing evidence from a nationwide survey of a representative sample of people they conducted recently, Schwarz and colleagues noted that people with greater income tend to devote relatively more time to work, compulsory non-work activities (such as shopping and child care) and active leisure (such as exercise) and less time to passive leisure (such as watching television and just relaxing).

"When someone reflects on how more income would change subjective well-being, they are probably tempted to think about spending more time in leisurely pursuits such as watching a large-screen plasma TV or playing golf," Schwarz said. "But in reality, people should think of spending a lot more time working and commuting and a lot less time engaged in passive leisure and other enjoyable activities."

For more information, contact:
Bernie DeGroat
Phone: (734) 936-1015 or 647-1847