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What We Know about Happiness

Miles Kimball

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What I Know about Happiness

• “Utility and Happiness,”

by Miles Kimball and Robert Willis (Not your usual paper about happiness. We

may be wrong, but we are definitely different.)

• “Unhappiness After Hurricane Katrina”

by Miles Kimball, Helen Levy, Fumio Ohtake and Yoshiro Tsutsui

• Conversations with Norbert Schwarz

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Why Happiness Matters for Economics

1. Preference for Happiness: Many people value happiness, as evidenced by the fact that they will sacrifice other things for the sake of happiness.

2. News and Happiness: Short-run spikes and dips in happiness

– signal what people consider good and bad news,

– which in turn signals what they care about.

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Two Definitions of “Happiness”

•The Greatest Good for an Individual

•Feeling Happy

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Who Judges the Greatest Good for an Individual?

• An Authority Figure or the Speaker

–“True Happiness” used as a cudgel

• Economics Defers to the Individual

–Utility

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Utilitarianism (Jeremy Bentham, John Stuart Mill)• “The greatest good of the greatest number”

Solving social problems is important because it is a miserable experience to be poor, sick or downtrodden.

It is also important to make things better, wherever we can, even if they are already good.

• Utilitarianism is part of the philosophical foundation of economics.

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Measuring Utility: The Modern Tradition of Economics

• Look at an individual’s choices (preferences).

• What an individual chooses indicates what she wants, cares about and values.

• This works well when the individual is – Well informed– Thoughtful– Not at war with self

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Measuring Happiness, in the Narrow Sense of Feeling Happy

• On a scale from one to seven, where one is “extremely unhappy” and seven is “extremely happy,” how do you feel right now?

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Greater Happiness in the Narrow Sense is Not Always a Good Thing• Mania: too much happiness

• Too much sacrificed for the sake of feeling happier– Example: changing one’s political beliefs in

order to be happier.

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Distinguishing utility and happiness as a matter of logic.

• Utility = The extent to which people get what they want, where what they want is indicated by their choices.

• Happiness = How positive people’s feelings are at a given time.

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Evidence that Utility≠Happiness

1. People who knowingly, thoughtfully and without regret choose not to maximize long-run happiness indicate that utility≠happiness for them.

2. People make choices eagerly that they never regret, but which have no long-run effect on how happy they feel.

– Moving to a new city– Buying a nice car

3. People thoughtfully make choices that they never regret, which lower their long-run felt happiness.

– Commuting further to a higher-paying job.– Longer working hours to put one’s child through college. – Having a baby?– Doing one’s duty.

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The Nature of Happiness

(What Makes Us Feel Happy)

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Key Facts about What Makes Us Feel Happy

#1: Easterlin Paradox

#2: Hedonic Adaptation

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The Easterlin Paradox

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The Evidence of Choices: Migration Flows Indicate that Income is Valuable to People

• Per capita GDP in Mexico is not far from what it was in the U.S. in the 1950’s.

• Large numbers of Mexicans choose to migrate to the U.S.

• Among the many costs of migration, their social rank often drops drastically when they migrate to the U.S. Despite this, they come.

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Fact #1

•In the long run, people can become better off without feeling happier.

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Hedonic Adaptation: “This, too, shall pass.”

1. After time has passed, things that surely had a big effect on happiness right after the event have surprisingly little effect on happiness. (Not just money.)

• incarceration • loss of the use of limbs• serious burns • death of a spouse • winning the lottery2. The dynamics of national happiness after news

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Fact #2 about Happiness

• Happiness depends more on changes than on the absolute level of one’s circumstances.

• Analogy: We have no altimeter in our brains, but we can tell whether we are going up or down.

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The Elation Theory of Happiness

Experienced happiness is the sum of two components:

• elation: short-run happiness that depends on recent news about lifetime utility

• baseline mood: long-run happiness that depends on one’s daily actions

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Elation and Hedonic Adaptation

• Because it is based on recent news, elation fades,

– News doesn’t stay news for very long.– The initial burst of elation dissipates once

the full import of news is emotionally and cognitively processed.

– This can help explain why, in the long run, becoming better off may not lead to greater happiness.

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The Evolutionary Psychology of Elation and Dismay

• Functionally, elation and dismay may motivate cognitive processing—much like curiosity.– Elation: after good news, it pays to

• think what you did right, so you can do it again • think how to take advantage of the new opportunities

– Dismay: after bad news, it pays to • think what you did wrong, so you can avoid doing it again • think how to mitigate the harm of the bad news

– Curiosity: after news that is neither clearly good nor bad, it pays to learn more for the sake of option value

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The Evolutionary Psychology of Hedonic Adaptation

• Analogy: Adjustments in the pupil of the eye protect the eye and enhance sensitivity.

• Protect: Being too happy or too sad has physical costs. Hedonic adaptation protects from these costs.

• Enhance Sensitivity: “Hedonic adaptation may also increase our sensitivity to, and motivation to make, local changes in our objective circumstances….” (Frederick and Loewenstein)

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Speculations on The Evolutionary Psychology of Baseline Mood

• High social rank makes it safe to look more for opportunities than for dangers.– Thus, it makes sense to stimulate the same

machinery turned on by the receipt of good news.

• Optimists and pessimists need each other.

• Quirks in the system? – Pinker’s cheesecake

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Raising Baseline Mood: How to Raise Happiness in the Long Run

1. Prozac and Talk Therapy2. Taking Care of Oneself• Sleep• Exercise• Eating well3. Enjoyable Activities• Spending time with friends• An engrossing hobby

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How to Raise Happiness in the Long Run (cont.)

4. Positive attitudes

• Gratitude

• Forgiveness

• Acceptance of one’s situation

5. Raising one’s social rank

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The Problem with Happiness from Social Rank

• The usual strategies for raising social rank are a zero sum game—anything that works for one person makes everyone else worse off by lowering their social rank

• However, we can – Choose the right pond– Help the unfortunate– Treat one another with dignity

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Why are Utility and Happiness Confused?

• Because they are dramatic, elation and dismay may dominate people’s perception of happiness.

• Everyone wants good news. That is, everyone wants what spikes in happiness signal.

• Not everyone values the emotional spikes per se, as distinct from what they signal.

• Not everyone will sacrifice other goods for the long-run happiness that remains even when there is no good or bad news.

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A Non-Judgmental View of the Effect of Materialism on Happiness• Materialism lowers happiness (weak, but

interesting evidence).

• Tradeoff between happiness and other goods.

• Materialism means higher preferences for other goods compared to happiness.

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Why Doesn’t Rising Income Lead to Greater Happiness?

1. Lack of Understanding of Happiness?2. More internal conflicts from greater income?

– obesity– drug use

3. Negative externalities from others’ freedom?– breakdown of community– divorce

4. Resources spent on increased lifespan?5. Raising one’s happiness takes time.

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Why Happiness Matters for Economics

• Preference for Happiness: People value happiness, as evidenced by the fact that they will sacrifice other things for the sake of happiness.

• News and Happiness: Short-run spikes and dips in happiness

– signal what people consider good and bad news,

– which in turn signals what they care about.

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Unhappiness After Hurricane Katrina

Miles KimballHelen Levy

Fumio OhtakeYoshiro Tsutsui

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The Happiness Measure on the Michigan Surveys of Consumers“Now think about the past week and the feelings you have

experienced. Please tell me if each of the following was true for you much of the time this past week:

1. Much of the time during the past week, you felt you were happy. (Would you say yes or no)?

2. (Much of the time during the past week,) you felt sad. (Would you say yes or no?)

3. (Much of the time during the past week,) you enjoyed life. (Would you say yes or no?)

4. (Much of the time during the past week,) you felt depressed. (Would you say yes or no?)”

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Implications of the October Dip in Happiness

• It is difficult to explain this dip in happiness on the grounds that lifetime utility is seriously effected in terms of self-interest.

• If this dip in happiness is due to altruism, the happiness data told us something we might not otherwise have known: Americans cared quite a bit about those hurt by the earthquake in Pakistan—more than one would suspect from the donation data. – Katrina and Rita: >$2.65 Billion– South Asian Tsunami: >$1.55 Billion

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Possible Explanations

• Response of Happiness to News about Lifetime Utility

– Altruism– Self-Interest

• Direct Effect of Graphic Images of Suffering

– Definition: Even if an individual watched video clips of a long-ago disaster, their happiness would still go down.

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What does it mean to say that lifetime utility has fallen

permanently?

• Revealed Preference is the measure of lifetime utility.

• If there were a lever to magically undo the damage of Katrina, we would pull it.– True for the harm to others.– True for the harm to self, narrowly construed.– True even if the past cannot be changed but

only the harm from now on reversed.

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Serious Harm to Self-Interest?

The Index of Consumer Sentiment

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Arguments Against the “Graphic Images” Explanation

• Heavy news coverage of Katrina continued for 4 weeks, but happiness returned to normal after two weeks.

• This can’t reflect simple desensitization to graphic images, since heavy coverage of the suffering associated with the Iraq War had been going on for years, yet happiness fell after Katrina.

• Thus, the meaning—or at least the details—of the images seems to matter.

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Implications of the Greater Dip in Happiness in the Katrina Region

• The greater effect on the South Central region helps demonstrate that the dip in happiness is due to Katrina rather than to an extraneous circumstance.

• To the extent there was saturation coverage throughout the U.S., the “graphic images” explanation cannot explain the stronger negative effect on happiness in the South Central region.

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Relationship to the Orthodoxy of Other Happiness Researchers

• People value happiness (and will sacrifice other goods for it)

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• People should be maximizing happiness (economists often interpret this as saying

that happiness is the true utility function).

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Implications for Policy

• Happiness is valuable: should be fostered.• Happiness data are a reminder of tangible

and intangible externalities in the utility function—especially social rank externalities.

• Economic growth is of enormous value, despite the Easterlin Paradox.

• Happiness data is not enough to diagnose optimization mistakes.

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Conclusion: Integrating Happiness into Mainstream Economics

• Happiness needs to be integrated in a way that respects the canons of Economics.

• Two key dimensions for integrating happiness into economics:– First, the short-run responses of

happiness to news provide important information about preferences.

– Second, long-run happiness is important in its own right.

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Empirical Projects

• Tracking spikes and dips in happiness in response to news. – National (Katrina, Koizumi)– Individual (Kimball-Silverman)

• Distinguishing anticipated from unanticipated happiness.

• Testing whether happiness predicts good outcomes.

• Testing if preference for happiness is a source of loss-aversion.

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The Personal News Question

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Happiness by Personal News Scales

Personal News and Happiness(U.S.)

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Happiness by Personal News Scales

Personal News and Happiness(Japan)

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Neurobiological Evidence that Expectations Matter for Affect

• “These studies measured the firing of dopamine neurons in the animal’s ventral striatum, which is known to play a powerful role in motivation and action.

• In their paradigm, a tone was sounded, and two seconds later a juice reward was squirted into the monkey’s mouth.

• Initially, the neurons did not fire until the juice was delivered.

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Neurobiological Evidence that Expectations Matter for Affect

• Once the animal learned that the tone forecasted the arrival of juice two seconds later, however, the same neurons fired at the sound of the tone, but did not fire when the juice reward arrived.

• These neurons were not responding to reward, or its absence … they were responding to deviations from expectations.

• When the juice was expected from the tone, but was not delivered, the neurons fired at a very low rate, as if expressing disappointment.” (p.26)