The key to happiness is spending money on others, not ourselves.

In an engaging and interactive dialogue, three of the leading researchers in the study of well-being gathered in Vancouver last night to share evidence that spending money on others will inevitably lead to more happiness then spending money on ourselves.

Elizabeth Dunn, Bill Harbaugh and John Helliwell came together at SFU Harbour Centre for “Money, Generosity and Happiness” where the running theme was that while we may very often believe that we can “buy” happiness we’re better off “investing” in the well-being of others.

Dunn, an assistant professor in the Department of Psychology at the University of British Columbia, shared her experiment in which she gave university students money – $5 or $20 – and in one group, she asked them to spend that money on themselves and in the other group she asked them to spend the money on someone else.

She then asked the students to estimate their levels of happiness. What she found was that the students who had spent the money on others showed much higher levels of happiness than those who had spent it on themselves. Further, she found that those who had only spent $5 on someone else showed similar levels of happiness to those who had spent $20, suggesting that the amount of money spent on the well-being of others can be small and still produce positive effects.

Dunn, who undertook a similar study in Uganda, suggested that these findings may transcend cultural and geographic boundaries as she found similar results in the East African country.

If Dunn was attempting to explain why we should be generous, Harbaugh attempted to explain why many of us are generous, claiming that selfish modes of generosity might be more common and useful than altruistic ones.

“The problem with pure altruism (the idea that we give with no selfish motive) is that it is diluted so quickly,” said Harbaugh.

Pure altruism, he argues, is diluted by the number of people who benefit from our generosity. For example, if one gives money to a low-income individual, he or she benefits by seeing the level of well-being in the other person increase. However, many other people, who gave nothing, also get to see the level of well-being in that low-income individual person increase. This “free ride”, Harbaugh argues makes pure altruistic giving very inefficient in terms of happiness to the giver.

However, as Harbaugh pointed out, 68% of Americans give to some charitable cause, with the average person giving over 2% of their income. So why are these people still giving?

Harbaugh argues that a more efficient type of generosity is what he calls “warm glow” giving. In this model people give because they get a sense of satisfaction from personally improving the well-being of others.

While he points out that this form of giving is inherently selfish, Harbaugh’s research suggests it is much more effective in producing charitable giving when compared to purely altruistic giving.

To close the evening, John Helliwell not only lead a rendition of If You’re Happy and You Know It but he also shared his insights on where we get the most happiness in life.

Helliwell says that “the social trumps material” when it comes to happiness and that social connections can lead to more happiness. He also suggested that social norms are paramount in peoples lives when it comes to things like generosity, happiness and even honesty.

He provided an example of a group of students who were given a test and then told to mark them themselves, with the expectation that most people would mark themselves slightly more favorably then they should. However, before marking the exam, the students were either told to list the last ten books they had read or the Ten Commandments.

The research found that those students who had been asked to list the Ten Commandments were far less inclined to mark themselves favorably when compared to those who had been asked to list the ten books they had read last. This work suggests that even small reminders of social norms can be useful in producing positive behaviour.

For more of John Helliwell’s work and that of Elizabeth Dunn and Bill Harbaugh, stay tuned for the full podcast and video highlights.