What Focusing Illusion?

An article in yesterday's Wall Street Journal (sub. req.) discusses the emerging, more nuanced, happiness research orthodoxy on money and happiness: money doesn't make people happier, though people with more money say they're happier. We say we're happier when we have more money, because, upon reflection, it seems satisfying to be higher-status. But having more money doesn't actually make you feel better when you're not reflecting on it.

What happens when high-income earners aren't contemplating their position in the financial pecking order? Consider a June 30 article in Science magazine by Daniel Kahneman, Alan Krueger, Norbert Schwarz, Arthur Stone and Prof. Schkade.

The five professors analyzed data for 374 workers who were asked every 25 minutes during the workday about the intensity of various feelings. Those with higher incomes didn't report being any happier, but they were more likely to say they were anxious or angry.

The five professors also studied government data detailing how folks divvy up their waking hours. They found that people with higher incomes tend to spend more time working, commuting and engaging in obligatory nonwork activities, such as maintaining their homes. All of these are associated with lower happiness.

“People who are richer aren't having a better time,” Prof. Schkade concludes. “But if you ask them about their lives, they report being a little more satisfied” than those who are less affluent.

It seems to me that what they mostly showed is that it is not easy to make money, which is not surprising. It is also not surprising that people who went through the trouble of making money are generally glad they did. For the life of me, I can't get much out of this study other than that working to make more money can be stressful and the astoundingly obvious fact that a backrub, or whatever, won't feel better just because the terms of your labor contract provide a higher than average salary.

Kahneman, et al., however, insist on attributing the higher than average SWB  for wealthy people to a “focusing illusion,” which makes no sense. That life satisfaction judgments do not track the temporal integration of Kahneman's “moment utilities” is not evidence that there is some kind of illusion. It is just evidence that satisfaction judgments are value laden, and people value things other than utility.

Suppose there is a big marathon going on. There is a guy running the marathon, and there is a guy sitting in a bar drinking beer and watching it on TV. You sample their experience over the course of the event. It turns out that the guy running the marathon is experiencing high levels of stress, near-exhaustion, searing pain, etc. The guy drinking beer feels pretty good. It's air conditioned, and he's got a bit of a buzz on. Now, the marathoner wins the race. You ask him how he feels about his life that day: “Fantastic! It's the best day of my life!” And you ask the guy who spent three hours drinking beer: “OK, I guess. I really should have been doing yardwork. Good race, though.” The runner does not only not subtract the pain of the race from the pleasure of winning, the pain, and his triumph over it, increases his sense of satisfaction. Because, naturally, his satisfaction judgment is based on values other than pleasure and pain, such as self-command, perserverence, drive, and winning. Is he undergoing a “focusing illusion”? Asburd. The problem is Kahneman's value theory.

Author: Will Wilkinson

Vice President for Research at the Niskanen Center