Sunday, 1 October 2006

How much money to make you happy?

Who says money can’t buy you happiness? Economists Jonathan Gardner and Andrew Oswald report that winners of a medium-sized prize of between £1000 and £120,000 on Britain’s National Lottery subsequently enjoyed a significant improvement in their psychological well-being compared with others who had only a small win, or no win at all. However, the benefit wasn’t instantaneous, rather it took approximately two years to kick in – probably, the researchers surmised, because it was the act of spending the winnings, rather than the winning itself, that had a positive effect.

Gardner and Oswald made these observations after studying data collected as part of the British Household Panel Survey, a project based on yearly interviews with the same sample of over 10,000 people, conducted since 1991. The researchers had access to the participants’ lottery winnings and to their annual scores on a measure of psychological well-being called the ‘General Health Questionnaire’, which features items like “Have you recently felt under constant strain?” or “Have you recently been feeling unhappy and depressed?”.

One hundred and sixteen participants had had a win of over £1000, and changes in their psychological well-being were compared with 2943 winners of prizes smaller than £1000, and with 9677 people who had no win at all.

There were no well-being differences between groups in the year after a win. But two years after a win, those participants who’d won a medium-sized prize showed a positive change in psychological well-being of 1.22 points compared with two years prior to their win. The small prize winners and non-winners, by contrast, actually showed a drop in psychological well-being of 0.18 points over the same time period, so there was a relative difference between the groups of 1.4 points.

But what do these point differences mean in real life? Gardner and Oswald said earlier research had found being widowed was associated with an average drop in well-being of 5 points on the same measure, leading them to conclude the 1.4 point positive change enjoyed by medium-sized winners was worth writing home about – or in their words: “economically significant and not merely statistically significant”.

Gardner, J. & Oswald, A.J. (2006). Money and mental well-being: A longitudinal study of medium-sized lottery wins. Journal of Health Economics, In Press.

Post written by Christian Jarrett (@psych_writer) for the BPS Research Digest.

Link to related study by Nobel-prize winner Daniel Kahneman.


Anonymous said...

It would be interesting to see:

1) the wealth of these people going into the lottery in the first place; perhaps money can buy happiness if you're in a very tight financial situation, but it doesn't do anything for people who are already reasonably well-off.

2) more information about the losers and small prize winners. I'm especially interested in the fact that their well-being went down. I'm wondering if most of the people in this study are the ones who buy lottery tickets all of the time, and thus those people who did not win might be even worse of psychologically than they would have been had they not played.

3) whether the results differ for one-time lottery players vs people who play all of the time. Then again, I doubt there are that many people who win on the first try so that sort of study would be tough.

Monty Loree said...

I just did a post on that the topic of instant millionaires and how much is too much.
While money may be a novelty at first, it quickly becomes a burden and responsibility.

After you've paid off you debts, bought a few cars and a nice house, the rest of it becomes work.

You've got to learn taxes, investing, estate planning etc.

Are most people interested in that.. Not really IMO.

Maddy said...

I heard a similar argument on the radio [NPR] a while back. Makes perfect sense to me.
Now I'll just go and balance my cheque book [translation = check book] and see if I still adhere to that theory.

Anonymous said...

but you may lose your wealth if you fall prey to these

Anonymous said...

Money can't make anybody happy. And it doesn't matter what financial situation you have had before. Also you shouldn't see money as the aim of your life. The wealth does our lives more comfortable but only Love makes us happy!

Opra said...

I agree that money can't make us happy. However there are people for whom money is happiness. I feel pity for such people. Probably they don't know what real happiness means.

Karen said...

Unfortunately too many things depend on money nowadays. It happens so that we can't live without it and material values become important for us. Life itself makes us be dependent on money.

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