Happy Money

Elizabeth  Dunn; Michael  Norton

Book | 2013

Happy Money: The Science of Smarter Spending

by Elizabeth Dunn and Michael Norton

Abstract

If you think money can't buy happiness, you're not spending it right. Two rising stars in behavioral science explain how money can buy happiness—if you follow five core principles of smarter spending. Happy Money offers a tour of new research on the science of spending. Most people recognize that they need professional advice on how to earn, save, and invest their money. When it comes to spending that money, most people just follow their intuitions. But scientific research shows that those intuitions are often wrong.
Happy Money explains why you can get more happiness for your money by following five principles, from choosing experiences over stuff to spending money on others. And the five principles can be used not only by individuals, but by companies seeking to create happier employees and provide "happier products" to their customers. Dunn and Norton show how companies from Google to Pepsi to Charmin have put these ideas into action. Along the way, the authors describe new research that reveals luxury cars often provide no more pleasure than economy models, that commercials can enhance the enjoyment of watching television, and that residents of many cities frequently miss out on inexpensive pleasures in their hometowns. By the end of this book, readers will ask themselves one simple question whenever they reach for their wallets: Am I getting the biggest happiness bang for my buck?

Keywords: Happiness; Spending;

Format: Print

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Citation:

Dunn, Elizabeth, and Michael Norton. Happy Money: The Science of Smarter Spending. Simon & Schuster, 2013.

From “Chick Beer” to “Dryer sheets for Men,” identity-based labeling is frequently deployed to appeal to people who hold the targeted identity. However, five studies demonstrate that identity appeals can backfire, alienating the very individuals they aim to attract. We begin by demonstrating backlash against identity appeals in the field during the 2016 presidential election (Study 1) and in the lab (Study 2). This (in)effectiveness of identity appeals is driven by categorization threat—feeling unwillingly reduced to a single identity—which is induced when a) the identity deployed is that of a typically marginalized group (Studies 3-4) and b) the appeal evokes a stereotype about that identity (Study 5). Ironically, identity appeals often drive identity-holders away from options they would have preferred in the absence of that appeal.

Working Paper | HBS Working Paper Series | 2019

The Revision Bias

Ximena Garcia-Rada, Leslie John, Ed O’Brien and Michael I. Norton

Things change. Things also get changed—often. Why? The obvious reason is that revising things makes them better. In the current research, we document a less obvious reason: Revising things makes people think they are better, absent objective improvement. We refer to this phenomenon as the revision bias. Nine studies document this effect and provide insight into its psychological underpinnings. In Study 1, MBA students perceived their revised resumes to be of higher quality the more they differed from their original versions, but this perception was not justified: observers judged originals (inaccurately) labeled as revisions to be superior to revisions (inaccurately) labeled as originals. Study 2 pinpoints the direction of the effect: Revisions are appealing, as opposed to originals being unappealing. Moreover, the revision bias holds in a variety of settings in which the revision is devoid of objective improvement—when revisions are trivial (Study 3A), incidental (Study 3B), non-existent (Study 3C), and even objectively worse than the original (Study 3D). Study 4 directly tests the self-fulfilling nature of the revision bias, testing whether mere revision framing leads people to become less critical of the experience—in this study, less sensitive to possible bugs while playing an otherwise identical “revised” video game—and whether this mediates the effect of revision framing on positive evaluations. Studies 5A and 5B offer further support by testing whether the revision bias is accentuated when people engage in a holistic processing style, whether measured as an individual difference (Study 5A) or experimentally induced (Study 5B).

Keywords: Change; heuristics and biases; framing; sequences; judgment; Change; Perception;

Citation:

Garcia-Rada, Ximena, Leslie John, Ed O’Brien, and Michael I. Norton. "The Revision Bias." Harvard Business School Working Paper, No. 19-087, February 2019. View Details

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The development and maintenance of interpersonal relationships require investments of both money and time—resources that are often limited in supply, but in great demand. Indeed, consumers are regularly asked to dedicate their money and time to social engagements, and need to manage these resources efficiently. Therefore, consumers often choose to cite insufficient time or money as an excuse for rejecting social invitations. But how does using the excuse of financial versus time scarcity influence interpersonal relationships? Across eight experiments, we demonstrate that using financial scarcity as an excuse (e.g., “I don’t have money”) increases perceptions of interpersonal closeness and helping behavior compared to using time scarcity as an excuse (e.g., “I don’t have time”). This effect is explained by the fact that time is perceived as a more personally controllable resource than money, resulting in consumers who cite financial (vs. temporal) constraints as being perceived as more trustworthy. However, excuse-givers do not correctly predict this difference in interpersonal outcomes. These findings advance our theoretical understanding of how excuses revolving around resource constraints affect interpersonal perceptions and behaviors and provides practical insights for consumers desiring to minimize social repercussions when turning down social invitations.

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Happy Money: The Science of Smarter Spending

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