Hedonic adaptation

A fundamental question in economics is whether happiness increases pari passu with improvements in material conditions or whether humans grow accustomed to better conditions over time. We rely on a large-scale experiment to examine what kind of impact the provision of housing to extremely poor populations in Latin America has on subjective measures of well-being over time. The objective is to determine whether poor populations exhibit hedonic adaptation in happiness derived from reducing the shortfall in the satisfaction of their basic needs. Our results are conclusive. We find that subjective perceptions of well-being improve substantially for recipients of better housing but that after, on average, eight months, 60% of that gain disappears.
 

That's the abstract of this paper (free to download).

Hedonic adaptation is a central principle of the human condition, and it's been fascinating to see more and more research on how it works, how it varies under different conditions. Is it really true that money can't buy happiness? Or does that only apply after you reach some baseline of economic well-being? The paper provides a solid overview of the current state of the thinking on the subject.

The hedonic adaptation hypothesis is that there is a psychological process that attenuates the long-term emotional impact of a favorable or unfavorable change in circumstances, such that people’s level of happiness eventually returns to a stable reference level (Frederick and Lowenstein 1999). According to the hedonic adaptation hypothesis, then, variations in happiness and unhappiness are merely short-lived reactions to changes in people’s circumstances. In other words, while people initially have strong reactions to events that change their material level of well-being, they eventually return to a baseline level of life satisfaction that is determined by their inborn temperament (Diener et al., 2006). In psychology, this idea is known as the set point theory and was labeled the hedonic treadmill in the seminal work of Brickman and Campbell (1971). Indeed, in a widely cited paper, Brickman et al. (1978) present evidence that lottery winners report life satisfaction levels that are comparable to those of people who did not win a lottery one year after the event.2
 
Frederick and Lowenstein (1999) hypothesized that people do not adapt to shocks in terms of basic necessities that are related to survival and reproduction. This suggests that hedonic adaptation is manifested the most in people who have achieved a certain level of basic material well-being rather than being a persistent phenomenon that is evenly distributed across all socioeconomic groups. The idea is analogous to the notion of diminishing marginal utility, where the marginal increase in happiness derived from material gain is higher at lower levels of material wealth. The analog in hedonic adaptation is that adaption is more limited at lower levels of material wealth. In essence, then, the idea is that the happiness levels of the poor do not adapt, or do not adapt completely, to shocks in terms of basic necessities.
 
In this paper, we present the first piece of experimental evidence on hedonic adaptation among the poor to improvements in the satisfaction of their basic necessities, specifically shelter. 
 

I'm no expert on the subject, but in my experience this holds true: being rich doesn't guarantee happiness, but being really poor is almost certain to make you unhappy. Even if hedonic adaptation affects the poor, even if those who are well-off are unhappy if their neighbors are more well-off (a common Silicon Valley disease), I still think the greatest human welfare gains to be made in the world come from bringing those in poverty up to some baseline of economic self-sufficiency and good health. Reducing unhappiness is often undervalued in comparison to creating happiness.

So much brainpower devoted to trying to create so many consumer behaviors, but someday someone will figure out how to make philanthropy addictive and habitual, and that will change the world.

The curse of discernment

One of my favorite Schwartzisms is this: If you ever aren't sure if you attended the very best party or bought the very best computer, just settle for "good enough." People who do this are called "satisficers," and they're consistently happier, he's found, than are "maximizers," people who feel that they must choose the very best possible option. Maximizers earn more, Schwartz has found, but they're also less satisfied with their jobs. In fact, they're more likely to be clinically depressed in general.
 
The reason this happens, as Schwartz explained in a paper with his Swarthmore colleague Andrew Ward, is that as life circumstances improve, expectations rise. People begin comparing their experiences to peers who are doing better, or to past experiences they've personally had that were better:
 
As people have contact with items of high quality, they begin to suffer from “the curse of discernment.” The lower quality items that used to be perfectly acceptable are no longer good enough. The hedonic zero point keeps rising, and expectations and aspirations rise with it. As a result, the rising quality of experience is met with rising expectations, and people are just running in place. As long as expectations keep pace with realizations, people may live better, but they won’t feel better about how they live.
 

Olga Khazan in The Atlantic on Barry Schwartz and his recommendations for how to avoid the depression that comes from “the curse of discernment.” Stewart is the author of The Paradox of Choice: Why More is Less, one of the most cited consumer psychology books of recent memory.

The internet has intensified this curse, no one can make a purchase decision without reading a bunch of reviews online, or Googling “what is the best [X]” and trying to sift through a bunch of spammy websites to find some authoritative-sounding article. After all, the internet has democratized information and put it at our fingertips, isn't it our own fault if we don't own the best SLR or printer or kitchen blender, or if we don't go to the best ramen house in Tokyo on our one visit there?

I will try to take this to heart as maximization can be so contextual as to be meaningless. However, having had so much Korean BBQ in Los Angeles' Koreatown, I'm afraid my hedonic zero point for that cuisine has risen so far from my college days that just about every Korean BBQ restaurant in San Francisco I once loved now seems like a monastic compromise.

Happiness is a skill

2014 was the year I got serious about happiness.

It was a strange thing to look at my life and realize how rarely I was happy. I'm making a good living as a writer, which has always been my dream. I have a wonderful family, and we all have our health. It felt like I had hit all the necessary milestones to feel both very adult and very content, but my brain rarely rewarded me with the sort of happiness I craved.

I've often heard that happiness is a skill, not a feeling, and I realized how little time I was spending working on the skill of happiness, while waiting passively for the feeling to reach me. It also seemed like my love of gaming and pop culture was hindering this journey, not helping.

From Steam sales to streaming content there was always so much to do, so many piles of shame, that even free time began to feel overwhelming and stressful as I tried to get through everything I wanted to do in the rare time I had for my "fun" pursuits after the children went to sleep. When Netflix, the Kindle app, a gaming laptop and gaming consoles both new and classic offered nearly endless choices, it's easy to become overwhelmed without playing or consuming anything you used to find enjoyable.

This is how I deal with these feelings, and it's a combination of many small things that led me to be much more content and less skittish about not only gaming in particular, but life in general. You're free to take or reject any bit of this advice, everyone is different and you may already be perfectly content with life, but if even one of these things I've learned helps you, that's a win. Here we go!

Odd to find a random nugget of wisdom on a gaming website, but I find myself nodding along at the notion that happiness is a skill, not a feeling. I suspect many of our emotions are actual human constructs, and not, as we are often led to believe, some intrinsic neurological wiring. The importance of believing happiness is a skill is that it puts the control of your own happiness in your own hands.

Do children make you happy?

From Vox (not the Vox you're thinking of, but another Vox), an article on why it's so complicated to analyze the impact of having children on one's happiness.

It is a commonplace that new parents are overwhelmed by a “tsunami of love” when they first meet their dependent offspring. Older children, though often a source of irritation and worry, are also a source of joy, and there are few parents who can even bear to think of a world without their children. Yet, study after study has shown that those who live with children are less satisfied with their lives than those who do not; Hansen (2012) and Stanca (2012) are recent surveys. How can this be? Should governments publicise such findings, to help disabuse people of the widespread notion that children are good for them? Perhaps along with Larkin’s lines?

Is there something wrong with these empirical analyses? Or is it that, as many economists suspect, happiness measures are unreliable? We argue here that the results are correct, as far as they go. The deeper problem is that comparisons of the wellbeing of parents and non-parents are of no help at all for people trying to decide whether or not to become parents.
 

Worth reading the rest for the complexities of structuring a study to tease out the answers everyone is seeking on this question.

Happiness hacks

Happiness hacks are appealing as they're usually simple ways to wring more happiness out of life without having to really lose out in other ways. Dan Ariely addresses two common situations in this column in the WSJ:

  • Should you pay to park in a garage or spend time driving around looking for a street spot? 
  • How should you split dinner bills?

In Chinese culture, it's common to fight other diners to pick up the tab for dinner, and Ariely gives some psychological grounding for the logic of doing so.

The third approach, my favorite, is to have one person pay for everyone and to alternate the designated payer with each meal. If you go out to eat with a group relatively regularly, it winds up being a much better solution. Why? (A) Getting a free meal is a special feeling. (B) The person paying for everyone does not suffer as much as his or her friends would if they paid individually. And (C) the person buying may even benefit from the joy of giving.

Even before reading this Ariely column, we'd implemented something like this at work, primarily to minimize the psychic pain of transactional hassles like calculating bills, signing credit card bills, making change, etc.. When we were working out of a house in Menlo Park, we'd all go out to lunch together each day. Instead of splitting every bill, one person would always pick up the tab, and Nick, one of our developers, would snap a photo of the receipt and keep a running tally of who owed who. This made meals more pleasant for all of us. An ancillary benefit is that picking up bills accelerates the forming of tighter bonds between the people sharing the meal. Small financial commitments are a simple gateway drug for higher level covenants.

Another simple hack that some restaurants have put into place is pre-paying for meals. HIgh end restaurants like Next Restaurant (and now Grant Achatz's other restaurant Alinea) charge you for the meal when you score your reservation, often months in advance of the meal itself. This is beneficial for the restaurant since a single cancellation can kill a high end restaurant's margin for the night. But it's also good for the diner. The most unpleasant part of a fine dining meal is getting a staggering bill dropped on your lap while you're still trying to digest dessert. By pulling that pain up ahead so far, the meal can end more pleasantly. You get up with whatever they've given you as a takeaway gift, and often you can't even remember what you paid for the meal in the first place. The sacrifice for the diner is a bit of free choice on the food and beverages, but most fine dining restaurants have a fixed tasting menu anyhow, and choosing the wine is more taxing than empowering for most diners.

Riding with Uber offers a bit of this benefit since they have your credit card on file and you don't have to pay or calculate a tip when you get out of the vehicle. During the journey, there is no visible meter running so you can't stress the ever increasing bill you're due to pay ticking upwards in bright red numbers. The downside is that soon after your ride concludes, you get an email with the bill which often is your last memory of the ride. For all but the ultra wealthy, it's not the ideal way to end that transaction.

I would not be surprised to see Uber implement some type of discount for a pre-pay account where consumers might deposit $50 or some other amount at the start of the month and just deduct from it as you use the service during the month. Offering riders a discount for choosing this option makes sense. For one thing, pre-paying probably makes you more likely to choose Uber over a taxi since you want to use up your stored balance, especially if unused balances roll forward each month. More habitual usage then provides a greater volume of usage data for Uber to help drivers predict demand and routes ahead of time. Lastly, prepaid funds can provide some short float to Uber.

Companies in cities where Uber operates could be signed up for a corporate perks program in which the company could deposit a monthly stipend into each employee's Uber account. That would be a great way for Uber to introduce themselves to and acquire lots of new users en masse, in addition to being a great perk in a city like San Francisco, where I can never seem to find a cab when I really need one.