Biases in Predicting One’s Happiness

We aren’t always good at knowing what will make us happy. In particular, we suffer from:

Impact Bias: We overestimate the duration and intensity of the pleasant or unpleasant feelings associated with outcomes.1

Reference:

1.	1 Wilson, Timothy & Gilbert, Daniel (2005). “Affective Forecasting: Knowing What to Want”, Current Directions in Psychological Science 14, 131-134.

Patients overestimate the negative effects of having medical conditions2; lovers overestimate the negative impact of the dissolution of their relationship; academics overestimate the negative impact of being denied tenure; and voters overestimate the negative impact of having their candidate lose the election.3

Reference:

2.

2 2 Boyd, Norman, Heather Sutherland, Karen Heasman, David Tritchler, & Bernard Cummings (1990). “Whose Utilities for Decision Analysis?”, Medical Decision Making 10, 58-67; Sackett, Daniel & Torrance, Geoerge (1978). “The utility of different health states as perceived by the general public”, Journal of Chronic Diseases 31, 697-704.

Reference:

3.	3 Gilbert, Daniel, Elizabeth Pinel, Timothy Wilson, Stephen Blumberg, & Thalia Wheatley. (1998). “Immune neglect: A source of durability bias in affective forecasting”, Journal of Personality and Social Psychology 75, 617–638.

Notably, one study4 found that a representative sample of Americans “vastly underestimated the happiness of people earning lower levels of household income (US$55,000 and below)” as shown here:

Reference:

4.	4 Aknin, Lara, Michael Norton, & Elizabeth Dunn (2009). “From wealth to well-being? Money matters, but less than people think”, The Journal of Positive Psychology 4, 523-527.

Figure 1. Actual versus predicted happiness as a correlate of household income in the USA.

Two types of error explain why we make the Impact Bias5:

Reference:

5.	5 Wilson, Timothy & Gilbert, Daniel (2005). “Affective Forecasting: Knowing What to Want”, Current Directions in Psychological Science 14, 131-134.

1. Focusing Illusion: We see the outcome that we are thinking about as mattering more to our happiness simply because we are focusing on it at the time; forget to take due account of the many other things that contribute to personal wellbeing but which are unaffected by the outcome.

2. Overlooking Adaptation: People typically adjust to both bad and good things, but we often fail to take such psychological mechanisms into account in our affective forecasts.6

   Reference:

   6.	6 Gilbert, Daniel, Elizabeth Pinel, Timothy Wilson, Stephen Blumberg, & Thalia Wheatley. (1998). “Immune neglect: A source of durability bias in affective forecasting”, Journal of Personality and Social Psychology 75, 617–638.

Between them, these biases suggest that we will systematically overestimate the effects of giving on our level of happiness. We overlook the many sources of happiness that would be unaffected by this reduction, such as one’s personal relationships and one’s hobbies; and we overlook our ability to adjust one’s expenditure to match one’s financial circumstances. But what really is the effect of a lower income on one’s happiness?

Next: The effect of lower income