Lecture 4/Money Flashcards
What is the role of material wealth in well-being?
Long-held assumption was that the economic growth of nations would lead to increased happiness for those nations’ citizens. This is why public policy of most nations is guided by GDP. Easterlin paradox: 1974, hugely important finding, Easterlin noted that although wealthier countries are happier in general than poorer countries - within a country, there is little correlation after a point. Moreover, as countries get wealthier, their inhabitants don’t get happier (after a point).
Kahneman and Deaton (2010) How much is ideal in the USA?
400,000 respondents in Gallup pool. Household income, life evaluation (ladder), and several indicators of emotional well being - overall positive affect, not feeling blue, and stress free. Life evaluation varies with income, but the emotional wellbeing indicators stopped varying with income over a certain level (75K). Ladder doesn’t level off.
Why is there a threshold?
Hierarchy of needs ideas, enough to fulfill some luxuries and consumption beyond doesn’t bring greater fulfillment.
Why not a strong correlation?
1) social comparison - we are status oriented, and we are economically segregated, and relative wealth may have more of an impact on happiness than actual wealth. Ball and Chernova (2007), 20,000 respondents in 18 countries - looked at changes in absolute income versus relative income (relative to other countrymen) - changes in relative had 2x to 10x the impact on happiness as changes in absolute income (with purchasing power adjusted in each country). Lutmer (2005) predicted happiness from individual income as well as the income from neighbors in the same microcensus tract (PUMA). Equally large effect with neighbor’s income decreasing happiness almost as much as being unemployed. Wealth going up and neighbors’ wealth going up cancel each other out. Guven and Sorensen replication: perceived relative income matters more than actual income or neighbors’ actual comparison income. More happy if you think you’re wealthier. Exposure to wealthy lifestyles on TV: our brains think people on TV are our neighbors, perceived relative income goes down.
Why not a strong correlation 2?
Hedonic treadmill: we adapt to good things. We live like royalty of the past (true across income spectrum, especially for upper class). Hot and cold water, indoor plumbing, cleanliness, temperature control, luxurious food choices, entertainment on demand, and lots of stuff. We don’t feel rich though. Quoidbach et al: wealthy individuals score lower on a savoring index which measures how much you enjoy things. Recall the lottery winners have lower enjoyment of daily pleasures. Savoring has 2x a relationship with happiness as wealth. Even just thinking about wealth reduces savoring. Randomly assigned participants to money primes, gave them chocolate and videotaped them eating it, those primed with money ate faster and enjoyed it less.
Why not strong correlation 3?
Wealth in society correlated negatively with meaning in life. Diener et al 2014 - wealthy countries have higher suicide rates, lower religiosity, and lower reports of their lives being meaningful. GDP across countries - more GDP associated with less meaning. Wealthy societies track success, encourage wealth pursuits instead of more meaningful pursuits
Why not strong correlation 4?
Increased wealth may be focused with more materialistic or money focused mindsets. Less prosocial and less social behavior. People work alone more, sit further away. Doesn’t always replicate in cross cultural samples. What is replicated: money-priming vs time. If you’re thinking about wealth, you don’t think about how time is limited. If you’re thinking about time, this flips the effect. Thinking about time makes you want to connect to people. People who embrace simple living seem to be happier, although there is a confound with values. What happens when we think about money? We become more independent, less social, less helpful (Vohs et al 2006). Individual differences on how money-focused someone is has found that those who are more money focused as opposed to family or global focus are less happy, vital, self-actualizing. People who say they want to be happy are less connected and less happy, valuing family more means higher in self-actualization, lower in anxiety.
Why not strong correlation 4.5?
What about all our stuff? Even if we aren’t money-focused, does living in a consumer culture harm well-being? Focus on acquistion rather than on well-being aspects. Bauer et al 2012 consumer cues: cued through viewing luxury goods vs nature, calling consumers vs citizens, priming with consumer words vs control words, being called consumers vs individuals. More materialistic aspirations, depressed affect anxious affect fewer time on social activities, higher self-enhancement, competitiveness less high investment socializing more low investment socializing, fewer feelings of responsibility less trust in people less viewing them as partners. This still happens in Americans even though we are already in a consumer society.
More costs to things
Consumer process itself is harmful. Choice paralysis, choice stress, choice dissatisfaction. Too much choice makes people miserable. Also less likely to choose anything. Speed dating: more matches when 6 dates than 12 dates. 401K for every ten mutual funds you offer, the number of people who put their money in a traditional account goes up by seven. After a certain number of choices, brains overloaded, you won’t invest because it’s too hard. If 20 choices, you get more demanding in what you want. Barry Schwartz and gap jeans - Choices increases regret and anticipated regret. There are opportunity costs, an escalation of expectations, regret reduces satisfaction as well.
Ways to choose
Optimize personal meaning: seeking out high-meaning positive feelings like love and interest over low ones like pleasure and comfort. Considering, a priori, the meaning of what choices we really value and then naming and articulating them for ourselves - think about what you want and then just get that, ignore all of the other features. Just choose what’s good enough: maximizers - exhaustively seek the best, compare decisions with others, expend more time and energy, unhappier with outcomes. Satisficers - good enough, don’t obsess over other options, accept good enough, can move on after deciding, happier with outcomes. China - a bit more regret regardless than US and UK, but overall slope to more regret with maximizers.
Why satisficing is better
Maximizers are not happier. Satisficers don’t exhaust themselves, fewer comparisons means less regret (you don’t know what you miss). People are natural maximizers, easy to induce maximizing. Ma and Roese 2014 - choosing who has the best vocal quality or good enough to listen to (maximizing vs satisficing prime). Best ones were less happy with present at end of study (could research gifts online before picking) - skittles gift tin, thank you chocolate, cheddar cheese, cheese block gift set, strawberry preserve mini jar. Maximizers - more regret, less satisfied, and searched for more products.
Other costs of a wealthy society
Loneliness consumption loop - Pieters (2013) loneliness drives material consumption, but material consumption often in turn makes us lonelier. Affluenza: need for consumption makes us stressed and competitive, takes us away from social relationships. - kids may face more pressure, less support than middle class counterparts.
Ted Talk
prosocial money use makes us happier, Uganda - life-saving operation way you spend money is as important as how you spend. Charity happier. Prosocial teams sell more stuff, huge investment. Dodgeball teams do better. Extremity matters less than spend on self vs other.
Principles for spending that enhance well-being
Principle 1 - prosocial spending makes you happy, It even activates the reward centers of the brain when we give to charity. We’re wrong when we try to guess - think self spending will make us happier. Principle 2 - buy experiences, not things - we adapt to experiential purchases more slowly, can’t compare experiences to each other as easily, experiences are often shared with others, you tell people about them. 83% people revisit experiences more in memory than things. Principle 3 - buy many small pleasures rather than big things - more hedonic enjoyment, more variability so less adaptation, temporal discontinuity (even a few secs) lets us process pleasure again. Those with break enjoyed massage twice as much as those without a break. Principle 4 - buy now, enjoy later, can divorce pleasure of object from the pain of paying for it. Can enjoy it later without worrying about the price. Anticipation is often as pleasurable as consumption. Less hedonic adaptation (more variability), so anticipation adds to the enjoyment of the pleasure. Anticipation is better with uncertainty added - which thing will I get? Kurtz et al 2006 - random assignment to get gifts in two days or immediately. Either told them they would get which one or both or uncertain. Everyone who anticipated was happier, but uncertain ones were happiest. The uncertain ones who got one gift later were happier than those who got both right then. Principle 5 - beware comparison shopping because more choices mean more regret, and you focus on aspects that don’t add hedonic value (confusing but not adding value to look at other aspects) Prior recommendation to focus on what matters to you - then find it and focus on as few comparisons as possible. Principle 6 - look for no return you will be happier if you think you can’t return it. Gilbert and Ebert 2002 poster study - we think we’ll be happy if we can return it, but not true. Rationalize it.
