PhD Seminar October 12, 2011 MKTG PhD Seminar October 12, 2011

Measuring Happiness Measuring Happiness Easterlin Paradox Easterlin Paradox Kahneman & Deaton s Partial Solution Kahneman & Deaton s Partial Solution Affective forecasting errors Affective forecasting errors Todays Agenda

Happiness Very much Not at all Brickman et al. (1978)

Twin study: Compared happiness ratings of fraternal and identical twin pairs (many scales including depression, etc) Twin study: Compared happiness ratings of fraternal and identical twin pairs (many scales including depression, etc) Happiness of fraternal pairs unrelated Happiness of fraternal pairs unrelated Happiness of identical pairs associated (approximately 50% of variation) Happiness of identical pairs associated (approximately 50% of variation) Genetic Components?

Economists use financial indicators Economists use financial indicators Macro-level measures: GDP Macro-level measures: GDP Micro-level measures: lifetime income Micro-level measures: lifetime income Measuring Happiness as Economic Well-being

Gross National Happiness (GNH) was developed in an attempt to define an indicator that measures quality of life or social progress in more holistic and psychological terms than gross domestic product (GDP)

Psychologists initially measured happiness using questions about global life satisfaction Psychologists initially measured happiness using questions about global life satisfaction Cantril Self-Anchored Life Evaluation Ladder Cantril Self-Anchored Life Evaluation Ladder How happy are you with your life in general? How happy are you with your life in general? Global life satisfaction (Average= 6.75 on a 0-10 scale) Global life satisfaction (Average= 6.75 on a 0-10 scale) Measuring Happiness as Overall Well-being or Life Satisfaction

20%46%27%4%2%1%0% Self-Reports Global Measures of Happiness

Diener, E., Emmons, R., Larsen, J., & Griffin, S. (1985). Below are five statements with which you may agree or disagree. 1 = strongly disagree 2 = disagree 3 = slightly disagree 4 = neither agree nor disagree 5 = slightly agree 6 = agree 7 = strongly agree 1. In most ways my life is close to my ideal. 2. The conditions of my life are excellent. 3. I am satisfied with my life. 4. So far I have gotten the important things I want in life. 5. If I could live my life over, I would change almost nothing.

How much greater happier are Californians than Midwesterners? Californians Midwesterners Actual Predictions

Measuring Happiness as Experienced Sampling or Moment-to-moment ratings

Measuring Happiness with the day reconstruction method

Activity Time spent (hours) Net affect Unh Index Intimate relations Socializing after work Relaxing Dinner Lunch Exercise Praying/worship` Socializing at work Watching TV Phone at home Napping Cooking Shopping Computer (non-work) Housework Childcare Evening commute Working Morning commute

Measuring Happiness with Brain Scans

was more. was more.

But what about money?

Develop a meaningful philosophy of life Be very well off financially % Very important or essential What do people say makes them happy?

Percentage of Americans who say they are very happy (Gallup, 2003)

Australian Living Standards Survey, (percent reporting high life satisfaction)

Personal income (in 1995 $) Very happy (%)

Life satisfaction around the world

Easterlin Paradox: Happiness is related to relative income, not absolute income. Not much change in well-being as nations become wealthier Easterlin Paradox: Happiness is related to relative income, not absolute income. Not much change in well-being as nations become wealthier

Easterlin found that within a given country people with higher incomes are more likely to report being happy. However, in international comparisons the average reported level of happiness does not vary much with national income per person, at least for countries with income sufficient to meet basic needs.

Not everyone agrees with Easterlin. Stevenson and Wolfers believe there is a robust relationship between well-being and income (or more precisely the log of income).

Concave psychophysical functions 1. Bernoullis hypothesis that utility is the log of wealth 1. Bernoullis hypothesis that utility is the log of wealth 2. Fechners Law that sensation is a logarithmic function of physical value Kahneman and Deaton find a linear relationship between life satisfaction and the log of income.

Emotional Well Being, Stress, and Life evaluation (SWB) Positive affect Blue affect Stress SWB High income Insured Old Graduate Religious Female Married Weekend Children Caregiver Obese Divorced Health Headache Alone Smoker

Focusing Illusion –people overestimate the extent to which the target event matters Focusing Illusion –people overestimate the extent to which the target event matters Duration neglect and the failure to predict adaptation Duration neglect and the failure to predict adaptation Projection bias – people making predictions about themselves in another state (i.e., sexually aroused) have difficulty imagining how they will feel in the other state Projection bias – people making predictions about themselves in another state (i.e., sexually aroused) have difficulty imagining how they will feel in the other state Affective Forecasting Errors and Happiness