MKTG960-301
PhD Seminar
October 12, 2011
Today’s Agenda
Measuring Happiness
 Easterlin Paradox
 Kahneman & Deaton’ s Partial Solution
 Affective forecasting errors

Happiness
Brickman et al. (1978)
Very
much
5
4.5
4
3.5
3
2.5
2
1.5
Not at
all
1
Winners
Controls
Victims
Genetic Components?

Twin study: Compared happiness ratings
of fraternal and identical twin pairs (many
scales including depression, etc)
Happiness of fraternal pairs unrelated
 Happiness of identical pairs associated
(approximately 50% of variation)

Measuring Happiness
as Economic Well-being
Economists use financial indicators

Macro-level measures: GDP
 Micro-level measures: lifetime income

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)
Measuring Happiness
as Overall Well-being
or Life Satisfaction

Psychologists initially measured happiness using
questions about global life satisfaction

Cantril Self-Anchored Life Evaluation Ladder

“How happy are you with your life in general?”

Global life satisfaction (Average= 6.75 on a 0-10 scale)
Self-Reports
Global Measures of Happiness
20%
46%
27%
4%
2%
1%
0%
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?
3
Predictions
2
1
0.64
0.57
0.01
0
-1
-2
-3
Californians Midwesterners
Actual
Measuring Happiness
as Experienced Sampling or
Moment-to-moment ratings
Measuring Happiness
with the day reconstruction
method
Activity
Time spent (hours)
Intimate relations
0.23
Socializing after work
1.14
Relaxing
2.17
Dinner
0.81
Lunch
0.57
Exercise
0.22
Praying/worship`
0.45
Socializing at work
1.12
Watching TV
2.19
Phone at home
0.93
Napping
0.89
Cooking
1.15
Shopping
0.41
Computer (non-work)
0.51
Housework
1.12
Childcare
1.10
Evening commute
0.61
Working
6.80
Morning commute
0.47
Net affect
4.83
4.15
3.96
3.94
3.91
3.85
3.78
3.78
3.65
3.52
3.35
3.27
3.23
3.22
2.99
2.99
2.77
2.68
2.09
Unh Index
0.04
0.07
0.08
0.07
0.08
0.09
0.11
0.10
0.10
0.13
0.13
0.14
0.16
0.17
0.16
0.20
0.21
0.21
0.29
Measuring Happiness
with Brain Scans

was more.
But what about money?
What do people say makes them happy?
% “Very important or essential”
90
Be very well off financially
80
70
60
50
40
Develop a meaningful philosophy of life
30
20
10
0
1965
1970
1975
1980
1985
1990
1995
2000
2005
Percentage of Americans who say
they are “very happy” (Gallup, 2003)
70%
60%
50%
40%
30%
20%
10%
0%
<$30,000
$30k-$50k
$50k-$75k
>$75,000
Australian Living Standards Survey, 1991-1992
(percent reporting high life satisfaction)
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1
2
3
4
5
6
7
8
Household Income Deciles
9
10
$24,000
100%
Personal income
(in 1995 $)
90%
$20,000
80%
70%
$16,000
60%
50%
$12,000
40%
Very happy (%)
$8,000
30%
20%
$4,000
10%
$0
1957
0%
1966
1975
1984
1993
2002
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 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).

Kahneman and Deaton find a linear
relationship between life satisfaction
and the log of income.
Concave psychophysical functions
1. Bernoulli’s hypothesis that utility
is the log of wealth
2. Fechner’s Law that sensation is a
logarithmic function of physical
value
Emotional Well Being, Stress, and Life evaluation (SWB)
Positive affect Blue affect
Stress
High income
0.03
−0.06
−0.03
Insured
0.40
0.92
1.19
Old
0.79
0.93
6.28
Graduate
0.03
0.01
−1.93
Religious
1.16
−0.02
1.21
Female
0.16
−0.60
−1.89
Married
0.66
0.45
0.66
Weekend
1.13
0.72
4.83
Children
0.08
−0.37
−2.47
Caregiver
−0.49
−1.02
−2.99
Obese
−0.38
−0.14
−0.42
Divorced
−0.38
−0.27
−0.88
Health
−1.36
−1.22
−3.15
Headache
−4.45
−3.41
−9.82
Alone
−7.13
−2.10
−3.73
Smoker
−1.01
−0.84
−2.85
SWB
0.64
0.59
0.50
0.48
0.35
0.29
0.32
0.01
−0.11
−0.25
−0.31
−0.32
−0.48
−0.78
−0.75
−0.70
1
0.9
0.8
SWB
Pos Affect
0.7
Not Blue
Stree Free
0.6
0.5
0.4
10k
20k
40k
80k
160k
Affective Forecasting Errors and
Happiness
Focusing Illusion –people overestimate the
extent to which the target event matters
 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

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Money and happiness