Do We Get Used to Stuff, But Not Friends?

There’s an interesting, but rather strangely house-size obsessed article (the author has written a book on building your own house) on happiness in last week’s Washington Post to which Robin (and my Cato boss, David Boaz) alerted me. The author interviews economist Luis Rayo, who has written a fascinating theoretical paper [pdf] with Gary Becker formally modeling, among other things, the way an idealized process of natural selection would fit organisms with a strong desire for good feelings while also ensuring that the good feelings don’t last very long. In an analogical nutshell: satiation just can’t last long; we’ve got to get hungry all over again to be motivated to get off the couch and look for the next meal. The way I interpret the paper, they nicely show that the process of psychological "adaptation" or "habituation" — the alleged basis of the so-called "hedonic treadmill" — is more a precondition for running at all (like friction) than a way of running in place. Anyway, in the Post article, Rayo points out that not all satisfactions are subject to adaptation.    

More important, [Rayo] went on to say, the psychology literature and surveys clearly show that not all happiness is ephemeral and geared to endlessly moving targets. With nonmaterial things, the target does not move.

"Exercise will absolutely make you feel better. Your social network, family and friends can bring permanent happiness. Longtime relationships can bring long-term satisfaction."

The claim here is… what? Satisfaction from money is hit hard by adaptation, but satisfaction from health and social embeddeness isn’t?

It’s truly hard to know what to make of the claim. Because I’m certain Rayo knows what he’s talking about, I’m sure he didn’t say "nonmaterial things" are not subject to adaptation. I assume the author intends something like "non-pecuniary," since exercise is a material thing, as are our friends and family members (to be pedantic about it). And, of course, money can buy both gym memberships and the leisure to nurture our emotionally sustaining relationships. "Material things" and "things money can buy" are not well-defined categories about which one can make useful psychological generalizations.

Suppose tomorrow a Swiss bank account was opened in my name and one billion dollars was deposited in it — but I didn’t know it. It would be pretty surprising if this had any effect on my feelings or my satisfaction with life. Having money and knowing it does affect "happiness" (as construed by survey research) by providing a sense of security and control; we gain something simply in knowing we could convert our cash to consumption. But money affects happiness mostly through actual consumption. No doubt some patterns of consumption are more subject to adaptation than others. Sadly, happiness research has fixated almost entirely on income levels, and almost not at all on consumption levels, much less on differently composed patterns of consumption at different levels. It is safe to say that we know almost nothing about this.

A number of happiness researchers are souring on the strong adaptation thesis popularized by Brickman and Coates’ famous paper on lottery winners and amputees. Richard Easterlin claims to show that the fairly stable level of average self-reported happiness over the life cycle (rises slowly and slightly from about 18 to 45 and then declines slowly and slightly) is a function of offsetting changes in life-domain satisfaction, and not so much adaptation. So, for example, average satisfaction with health declines sharply from middle age. But satisfaction with finances rises sharply. Strangely, Easterlin takes declining health satisfaction as evidence that we do not adapt fully to changes in health, but he does not take sharply rising financial satisfaction as evidence that we do not adapt fully to gains in financial resources. Here is what he says about the latter:

While people’s incomes typically rise during their prime working years, and then level off and decline, satisfaction with their financial situation is, on average, fairly constant until almost age 40, after which it begins to rise, with the largest increase in late life. What must be happening is that conceptions of material needs are being readjusted as actual life circumstances change. Relative to income these needs are lowest in late life, and financial satisfaction correspondingly greatest.

It strikes me that there is an obvious hypothesis Easterlin neglects. Financial satisfaction shoots up right about the time in the life-cycle when income plummets — retirement from the work force. You can see the perversity here in looking primarily at income as a proxy for material well-being. On average old people have relatively small incomes, because they are retired, and relatively huge stores of wealth, because of compound interest. And wealth increases non-linearly due to compound interest, with the biggest gains coming later in life. Forty-something is about when expenses on children fall sharply and the compounding effects of interest starts to get good. And retirement provides the leisure time to enjoy the consumption of accumulated wealth. I conjecture that experience helps us figure out what we really like, and so old people are more likely to consume in patterns that are truly enjoyable.

Click here for an image of the charts from Easterlin’s paper. Financial satisfaction is the only thing keeping us from being miserable in old age! The lasting satisfactions from friends and family all plummet! Now, it seems to me pretty arbitrary to interpret the permanent negative effect of declining health satisfaction as disconfirming the adaptation-setpoint hypothesis but to interpret the permanent positive effect of increasing financial satisfaction in terms of some kind of complicated story about shifting conceptions of material needs. Both explanations should have the same form: Declining health makes us less happy, and we don’t get used to it. Increasing wealth, and the increased leisure and consumption it enables, make us more happy, and we don’t get used to it either.

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  • sa

    very nice post.

  • http://profile.typekey.com/robinhanson/ Robin Hanson

    Since Will is reading a lot on happiness, I asked him if he knew of evidence to support Rayo’s claim; “Does our happiness really not adjust to the number and quality of our friends, as it adjusts to income?” Rayo’s claim reminded me of Robert Frank’s claim that gains from a fancy BBQ are relative, while gains from medicine are not. Does anyone know of any empirical support for these oft-made claims?

  • Luis Rayo

    Dear Will,

    Great piece! As you correctly point out, the quotes from the Washington Post on nonmaterial domains are vast simplifications of the issue. A truly excellent paper that deals with differing adaptation to different dimensions of life, by Shane Frederick and George Loewenstein, can be found in the volume “Well Being: The Foundations of Hedonic Psychology” compiled by Kahneman, Diener, and Schwarz.

    A lovely example is noise. For several types of noise, the exact opposite to adaptation occurs: we can get sensitized over time (i.e., more irritated). Same applies to an annoying colleague!

    One must also distinguish baseline happiness from day-to-day hedonic fluctuations. Exercise and good friends can, no doubt, help with our baseline level — which is not to say that they will instantly buy everlasting bliss.

    Cheers,

    Luis

  • conchis

    “Now, it seems to me pretty arbitrary to interpret the permanent negative effect of declining health satisfaction as disconfirming the adaptation-setpoint hypothesis but to interpret the permanent positive effect of increasing financial satisfaction in terms of some kind of complicated story about shifting conceptions of material needs. Both explanations should have the same form: Declining health makes us less happy, and we don’t get used to it. Increasing wealth, and the increased leisure and consumption it enables, make us more happy, and we don’t get used to it either.”

    I wonder whether you’re conflating two senses of adaptation here. (It’s possible those you’re critiquing do to. I can’t quite tell.) One says that life-satisfaction adapts to domain (health/finance) satisfactions; the other says that satisfaction in particuar domains adapts to objective circumstances in those domains. It’s the second that’s the standard interpretation. But whether health satisfaction and/or financial satisfaction has a constant effect on life satisfaction is only relevant to the first. (And in any event, I’d have expected Easterlin to hold those effects constant by construction to be able to estimate their contributions to overall life-satisfaction at all. I could be wrong about that though.)

    The truth of your claim that we don’t adapt to our financial circumstances is entirely contingent on whether the actual patterns of consumption and wealth amongst the elderly back you up. They may do, but at this stage it’s just as much an arbitrary hypothesis as the alternative. (Of course, the same goes for claims about adaptation to health – they depend entirely on the pattern of “objective” inputs into health satisfaction. The contribution of health satisfaction to life-satisfaction is irrelevant.)

    “But money affects happiness mostly through actual consumption.”

    I had assumed this too, but it seems to be disconfirmed by the life-satisfaction data I’ve worked on. In the stuff that I’ve looked at income and consumption had approximately equal effects, and wealth also seems to have a strongish effect independently of spending it. None of this is entirely surprising, except if you’ve been taught to think like an economist for too long.

  • Matthew

    All of this assumes that satisfaction and pleasure can be objectively measured — an assumption I find exceedingly doubtful.

  • conchis

    Matthew, actually, much of it depends only on the weaker assumption that it can be inter-temporally intra-subjectively measured. There are still some potential problems with that (on which John Quiggin has a post over at CT today), but I don’t think they’re always insurmountable.

  • Matthew

    Conchis,

    I guess if what you are interested in is opinion polls, then this kind of research is useful. I do not even believe in the concept that they are measuring (“happiness” as an entity that can be measured). I believe the research is “interesting” from a sociological perspective, but ultimately amounts to measuring the length of shadows at different times of day. . .

  • conchis

    Matthew, I think it’s becoming pretty clear that “happiness” as a concept can, or at least will at some point in the not too distant future be able to be measured in a pretty objective sense, through brain scans etc. The real question is whether what is being measured is something we really care about (as opposed to, say, the degree to which people are satisfied with their lives).

  • http://cob.jmu.edu/rosserjb Barkley Rosser

    Two points.

    One is that there are clearly degrees of reliability of these different comparisons. So, the most reliable are probably panel data sets, a specific set of people whose answers one can track over time. “Are you happier now than yesterday”? Next would be over time within a country. Least realiable are those made across countries. There are admittedly problems with the first of these, but they are nothing compared to the lists of problems with this last sort of comparison (mea culpa, I admit to having actually cited such studies in papers of mine, albeit always with appropriate caveats).

    The other point is that one needs to keep in mind the difference between “happiness” and “satisfaction.” I am not sure which was measured in this study of housing that WaPo pubbed, but there are some notable differences. Thus, economic status comes out as much more important in terms of reported “satisfaction” than in reported, moment-to-moment “happiness.” From moment to moment, how “happy” you are has very little to do with your income or status, but how “satisfied” you claim to be with your life very much does so, with the old result being that this is very much a relative to other people outcome. A very old wisecrack applies here: the most satisfied man is he who makes more than his wife’s sister’s husband.

  • http://www.acceleratingfuture.com/michael/blog Michael Anissimov

    Why “Cato boss”? Why not just “boss”? Didn’t Eliezer just post on how it’s best to avoid mentioning contemporary politics?

    Otherwise, great post.

  • http://vaindesires.blogspot.com Matthew Pianalto

    The point about “consumption levels” is interesting, by which I assume you mean not just levels of consumption, but more importantly, WHAT people are spending their money on (bling, fine wine, porn, or plane tickets to Tibet). You say that “almost nothing” is known about this, but I would be interested if you happen to know of any relevant studies.

  • http://profile.typekey.com/sentience/ Eliezer Yudkowsky

    Saying “Cato boss” counts as an important disclosure of potential conflict-of-interest. It’s not at all the same as taking a potshot.