Hedonomics: On Subtle Yet Significant Determinants of Happiness

Abstract

“happiness” has different meanings, and that in this chapter we focus on only one type of happiness - valenced (positive or negative) hedonic experiences with external stimuli

Way to pursue happiness

improve the objective levels

improve the arrangement of and choices among external outcomes without substantively altering their objective levels - hedonomic approach

This paper review second approach

Formulas” for improving happiness have always been of interest not only to academics , but also to policy makers and individuals

but the impact of wealth on happiness has its boundaries

→ So increase more happiness from improving the arrangement of and choices among external outcomes without substantively increasing the objective levels of the external resources.

determinants of happiness from four aspects

pattern of consumption

procedure of consumption

(mis)match between the choice phase and the consumption phase

type of consumption

Keywords: Hedonomics, happiness architecture, judgement and decision making, consumption

1. Pattern of Consumption

A fixed amount of consumption resources can be divided into several chunks and consumed sequentially on separate occasions

number of chunks

size of each chunk in the sequence

changes in the sizes of chunks

These three characteristics can influence happiness.

Segregation of Gains ← subjective utility derived from gains follows a concave curve, with diminishing marginal utility

Segregating a Fixed Amount of Consumption Resources into Several Small Chunks Can Lead to Greater Happiness Prospect Theory’s value function

Effect of Segregation

introducing non-consumption periods into the consumption sequence → people have more time to recover from satiation or hedonic adaption (refer “ Adding Delays” and “ Adding Interruptions andSlowing Down”)

lengthening the overall consumption duration

→ can take advantage of the steep gain of happiness from “zero consumption” to “some consumption” and increase happiness

segregating gains is one of the four hedonic editing rules Thaler (1985) formally propose

Improving Sequence: Arranging of Different Sizes in an Ascending Order

People prefer get better than get worse

people even prefer decoupling of payment, willing to incur losses (payment) before gains (consumption)

employees who experienced a positive wage change were happier and more satisfied with their job, regardless of theabsolute amount of salary

this preference runs against the economically rational solution based on calculating the present value of a flow of future values via discounting (deflate)

→ expediting future gains (increase present utility) and postponing future losses (decrease present dis-utility) can maximize the present value of the consumption flow

- Nevertheless, this economically optimal arrangement is sub-optimal for happiness

Accelerated Increase (Velocity of Positive Change): Arranging of Different Size Chunk in an Accelerated Increasing Pattern

people sensitive to the velocity of the change (refer “Improving Sequence")

→ increase in value(even value does not correspond to any external rewards and it is spurious) faster and faster will generate greater happiness than constant rate

2. Procedure of Consumption

he characteristics of the procedure -consumed in different ways make difference in happiness

delays

interruptions

speed

curiosity towards the experience

Adding Delays: Delaying Single Consumption

pleasure from their moment-to-moment experiences with the consumption phase stimuli

→ imagining positive experiences prior to the occurrence, people can get anticipated utility or savoring value

But usually do not choose because of impulsive desires - if

Caution - because it runs against a few other accounts

waiting period is usually unpleasant → negative experience during waiting is likely to be transferred to the target consumption, and hence reduce overall satisfaction

From an economic perspective, waiting decreases the present value of the consumption experience

Imagined experience sometimes can substitute for real experience, the anticipation period may lead to adaptation and thus decrease pleasure from the actual consumption

suggest families should book vacations in advance and online shoppers should not select expedited shipping

Adding Interruptions to a Flow of Consumption and Slowing Down Consumption - single stimulus repeatedly

Adding interruptions (i.e., introducing “breaks” into the course of consumption) can boost happiness because it gives people time to naturally recover from satiation - even when the interruption itself is somewhat negative (can help “restore” intensity of the positive experience)

- But people usually do not foresee the benefit of adding interruptions, and do not choose to break up positive experiences

people will benefit from consuming more slowly when repeatedly experiencing similar stimuli, since a slower pace means more and longer inter-consumption intervals

- But people do not seem to anticipate how fast they may get satiated from repeated consumption, so consume too rapidly when they have control over the consumption pace

Inducing Curiosity: Adding a Curiosity-Induction Period Before Consumption

Curiosity conceptualized as the desire to “close an information gap,” and is a form of “cognitively induced deprivation.”

the deprivation of one’s cognitive state can also result in a natural resolution, meaning that the desire to resolve curiosity can be a goal in and of itself, beyond getting practical benefits such as information and entertainment

people can get positive hedonic value through curiosity resolution

curiosity-induction stage (need to added) → target consumption period → increase happiness

- prompted to think about is gist- curiosity-inducing condition (benefit of inducing curiosity)

Pandora Effect - curiosity leads people to opt for expectedly negative outcom

3. Circumstance Difference Between the Choice and Consumption Phase

Because people possess malleable (context-dependent and time-dependent) preferences, if the circumstance under which people choose a consumption option mismatches with the circumstance under which they consume the option. Circumstances are like these

visceral state (hot or cold)

evaluation mode (joint or separate)

timing of choice(simultaneous or sequential)

focus(wide or narrow)

Hot Versus Cold Visceral States: People’s Visceral States

hot - ex. tired,hungry, sexually aroused, or intellectually curious

cold - ex. rested, satiated, or intellectually satisfied

Individuals in one state cannot predict their preferences in the opposite state (empathy gap)

→ so choosing too early may make a mismatch

To optimize choice and increase consumption happiness, one should engage in more deliberative projection of future states, or reduce the temporal interval between the choice and consumption phase

projection bias - tend to project their current state to estimate their future state

Joint Versus Separate Evaluation: That in the Consumption Phase

All decisions and judgments are made in one mode or combination of two mode

joint evaluation mode - options are juxtaposed together and evaluated comparatively

Separate evaluation mode - each option is presented in isolation and evaluated in an absolute sense without comparison to alternatives

easy-to-evaluate attributes receive more attention - weight in SE

difficult-to-evaluate attributes - weight in JE

These two modes can systematically shift people’s attention to different attributes

People Are Usually in a Joint Evaluation Mode in the Choice Phase but in a Separate Evaluation Mode in the Consumption Phase

To alleviate the impact of such a mismatch, one should try to adopt the single evaluation mode in the choice phase, evaluating options one by one and forming holistic impressions of each of them - and then consider evaluation mode at consuming

“evaluability” - that is, the extent to which people can evaluate the value of the attribute when it is presented alone (differ from individuals)

Simultaneous Choices Versus Sequential Consumption

People Usually Consume Options Sequentially - choices may be made simultaneously

three psychological mechanisms of mismatch

contract the interval between future consumption occasions, and thus overestimate consume reward

people possess the heuristic that a choice portfolio should incorporate variety and simultaneous choice facilitates the construction of a choice portfolio

people are uncertain about their future preferences, selecting more variety is a safer choice

deliberately reduce variety when making simultaneous choices, applying a choose-my-favorite rule, or make choices in a sequential manner

impact of this mismatch can be mitigated if in the consumption stage, the interval between consumption episodes is short, to the extent that the perceived interval and objective interval match

“diversification bias” that they over-diversify their consumption portfolio when making combined choices for multiple future

Narrow Versus Wide Focus

Focal Event - Choice Phase (focalism bias)

Focal Event & Contextual Events - Consumption phase

focalism bias make people tend to overestimate both the intensity and the duration of the focal stimuli’s impact (impact bias)

one may widen the span of focus in the choice phase by actively considering other factors that may contribute to future happiness

4. Type of Consumption

Different types of consumption produce different intensity and durability of happiness

material consumption - consumption that satisfies one’s learned preference

experiential consumption - consumption that satisfies one’s inherent preference

Second one make bigger happiness

Experiential Versus Material Consumption: Experiential Consumption Generates Greater and More Durable Happiness Than Material Consumption of Equivalent Monetary Value

material consumption - spending money with the primary intention of acquiring a material possession

experiential consumption - spending money with the primary intention of acquiring a life experience

happiness declined more slowly in the experience purchase condition than in the material purchase condition - more resistant to hedonic adaptation

Three psychological underpinnings between two

experiential consumption is more important to one’s identity than material consumption “we are what we do, not what we have.”

people are less likely to engage in potentially invidious comparison comparison is easy in material experience - experiential consumption has more variation

experiential consumption has greater value in enhancing social relationships better for after talking

alternative-wise comparison - social comparison exist

Inherent Versus Learned Preferences: Consumption That Satisfies Inherent Preference Produces Longer-Lasting Happiness than Consumption That Satisfies Learned Preferences

IP (Inherent preference) - persist regardless of time and contexts - no need social comparison - has absolute value - strong durability since it has reference scale

LP (Learned preference) - malleable and vary with time and context - requires social comparison and is relative - weak durability since it use external reference points

Whether a preference is an inherent preference (IP) or a learned preference (LP) falls on a continuum, but for ease of exposition

Conclusion

We present a representative, but not comprehensive, list of determinants of happiness, mainly drawing upon research on judgment and decision making.

They offer implications for “choice architects” - government, companies, and individual consumers- to design better consumption pattern and procedure, to offer proper timing of choice and consumption, to produce and stimulate the right type of consumption experiences, and ultimately, to improve daily happiness without significantly increasing the possession or consumption of external materials