Can money buy happiness? : Michael Norton at TEDxCambridge 2011

Summary

Michael Norton argues that money can contribute to happiness, but how it is spent may matter more than how much is spent. Across experiments and settings, spending money on other people was associated with greater happiness than spending the same amount on oneself. In workplace and sports-team experiments, prosocial spending was also associated with better group performance.

Evidence and Examples

• Lottery winners: Norton cites a CNN article describing winners who spent their winnings, went into debt, and experienced strained relationships as friends and acquaintances asked them for money. He uses this as an example of how money may encourage self-focused or socially isolating behavior.
• University of British Columbia experiment: Participants received $5 or $20 and were asked to spend it by 5 p.m. either on themselves or someone else. Those who spent the money on others reported feeling happier later that day. Spending on themselves produced no comparable change. The amount mattered less than whether the spending benefited someone else.
• Cross-cultural comparison: Similar patterns appeared in examples from Canada and Uganda, although the reasons and circumstances for giving varied. Norton argues that small, ordinary acts of generosity can be beneficial; the specific purchase or size of the gift is not the main point.
• International data: Gallup survey data showed a positive relationship between charitable donations and reported happiness in almost every country represented. The Central African Republic was the negatively correlated exception on the map, while Rwanda was among the positively correlated countries. This is a correlation, not proof that charitable giving caused the difference.
• Workplace experiment in Belgium: Sales teams given €15 to spend on a teammate—including one team that pooled the money for a group activity—sold more than teams given money to spend on themselves. Norton presents this as evidence that prosocial spending can improve team performance.
• Dodgeball teams: Teams given money to spend on one another reportedly improved their winning performance, while teams spending on themselves stayed around their previous winning percentages.

Practical Takeaway

Norton recommends considering whether some discretionary spending could benefit others, rather than focusing only on what to buy for oneself. He gives DonorsChoose.org, which funds classroom projects in low-income schools, as an example and encourages attendees to donate beyond the voucher provided at the event.

These findings concern reported happiness and group performance. They do not establish a general financial or investment return.

Finance-Specific Details

• Amounts and timing: $5 and $20 in the UBC study; a spending deadline of 5 p.m.; and €15 per team in the Belgian workplace experiment.
• Assets, securities, sectors, or tickers: None discussed.
• Financial cautions and disclaimers: No formal “not financial advice” disclaimer. The talk does not provide investment guidance or quantify financial returns from charitable spending.

Presenter and Sources Mentioned

Michael Norton; CNN lottery-winner article; University of British Columbia experiment; Gallup survey data; Belgian sales teams; dodgeball teams; DonorsChoose.org.