Notes on Happiness and Utility
Happiness and Utility
Economists view happiness in terms of utility when making decisions. There are three types of utility:
Predicted Utility: What you anticipate will make you happy before an experience.
Experience Utility: How you feel while you are actually doing something.
Memory Utility: How you remember the experience afterward.
These utilities can be the same or different, and they influence future choices. For example, when choosing classes, students predict enjoyment based on sources like friends or "Rate My Professor," experience the class in real-time, and later remember how much they enjoyed it, influencing future class selections.
The Role of Money in Happiness
A significant factor in college student happiness is money. While it is often said that money can't buy happiness, it certainly plays a role. Eben Pagan, from Altadena, won a billion dollars in the Powerball lottery at age 30. Although he seemed happy initially, the question arises whether wealth truly equates to sustained happiness.
Data on Income and Happiness
Op-eds suggest income has little to do with happiness and that winning the lottery doesn't ensure long-term happiness. However, data on experiential utility, measuring moment-to-moment happiness, shows interesting trends. From 1972 to 2026, GDP per capita (a measure of average wealth) increased significantly, but self-reported happiness remained stagnant or slightly declined. This suggests that economic growth doesn't automatically translate to increased happiness.
Life Satisfaction vs. Experiential Happiness
Life satisfaction differs from immediate happiness. It involves evaluating one's life as a whole. A study across many countries showed a positive correlation between GDP per capita and life satisfaction, indicating that richer countries tend to have more satisfied populations. However, there are counter-examples where less rich countries report higher life satisfaction than the U.S.
Wealth Inequality and Its Impact
Increasing wealth inequality can affect average happiness. While the quality of life may improve, inflation and rising costs can offset gains. For example, a increase in consumer spending doesn't necessarily mean people are happier if they are spending more on basic necessities such as groceries. Financial satisfaction and self-reported health, broken down by income thirds (lower, middle, and upper), show that the lower third experiences decreased financial satisfaction despite improvements in their quality of life. This is potentially due to social comparison, where individuals compare themselves to wealthier peers.
Factors Affecting Life Satisfaction
Even life satisfaction decreases among the middle and lower thirds, while it increases slightly for the upper third. In India, the percentage of people reporting they are "thriving" has decreased despite economic growth. GDP per capita measures are adjusted for purchasing power parity (PPP), accounting for how much people can buy. Commuting type negatively correlated with one's personal life.
Understanding Personal Happiness
On average, personal life matters the most to individuals, significantly influencing their overall happiness, with school and financials following as secondary factors. However, it's important to note that financials do not have a direct impact on moment-to-moment happiness. This suggests that while financial stability and success play a role in overall life satisfaction, they do not necessarily contribute to immediate feelings of joy or contentment.
Understanding the factors that correlate with personal life can provide further insights into what truly matters for individual happiness. For instance, spending time at clubs has been observed to have a negative correlation with a person's perceived happiness. Similarly, watching TV and movies is also negatively correlated with a person
Factors Correlated with Personal Life
Spending time at clubs is negatively correlated, while watching TV and movies is also negatively correlated with a person's perceived happiness. While it may seem there is not significance between them, this is what the data shows.
Experiential Sampling
The method of experiential sampling involves contacting individuals multiple times to capture real-time emotions and moods. Participants are asked about their current feelings (happiness, sadness, mood) and combined with questionnaire data (income, marital status, job type) to make predictions. This allows for a more objective measurement of happiness.
Predictions vs. Reality
People generally predict that the rich are in a bad mood less often than the poor, assuming that wealth equates to happiness and stability. Similarly, there is often a prediction that married women over 40 are in a bad mood less often than single women, potentially assuming greater social support, companionship, and financial stability through marriage. However, actual data sometimes reveals different outcomes, highlighting the complexities of human emotion and adaptation.
For example, studies indicate that married women might, in fact, report spending slightly more time in a bad mood compared to predictions. This could be attributed to the various stressors and responsibilities that come with marriage, such as managing a household, raising children, and navigating interpersonal relationships. While marriage is often associated with increased well-being, it also presents unique challenges that can impact mood.
This discrepancy between prediction and reality underscores the concept of adaptation. People have a remarkable capacity to adapt to their circumstances, whether positive or negative. Over time, the initial joy of a new marriage or the relief of financial security can diminish as these conditions become the new normal. Consequently, factors that were once sources of happiness may no longer have the same impact on daily mood. This adaptation can lead to individuals experiencing bad moods regardless of their external circumstances, such as wealth or marital status.
The Impact of Context
Contextual factors, such as comparing bronze versus silver medalists, affect utility. Bronze medalists can be happier than silver medalists because silver medalists often focus on what could have been (winning gold), whereas bronze medalists are happy to have medaled at all. This illustrates the concept of counterfactuals, where happiness is influenced by comparing reality to alternative possibilities.
Focalism
Focalism is the tendency to focus on one aspect of an experience while ignoring other relevant factors. For example, lottery winners are not necessarily happier a year later because they adapt to their new wealth. A major life change is marriage which peaks before you get married. The change of satisfaction is decreased a couple of years later. Something like an HIV diagnosis has a dependency to adapt based on the mindset.
Adaptation
Adaptation occurs when people get used to changes, reducing their impact over time. Whether it's a new car or a change in marital status, the novelty wears off as it becomes commonplace. Experiential purchases (e.g., travel) tend to provide longer-lasting happiness than material purchases because they don't become as normalized.
Justification
Difficult initiations lead to self-justification. An event (such as undergoing a tough initiation) makes one justify the event because of how "tough" it was. The memories we hold can be biased, depending on how the end of the experience went. For example, in medical procedures, patients with shorter duration (but intensity) preferred it over the lengthier counterpart.