Social Preferences and Happiness in the Short Run and Long Run

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Social Preferences and Happiness in the Short Run
and Long Run

• James Konow
• presentation to
• Symposium on Economics of Happiness
• University of Southern California

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Social Preferences and Happiness

• Background Behavioral economics, in particular,
  social preferences including distributive
  justice, altruism, cooperation, trust and
  reciprocity
• Question What relationship, if any, exists
  between social preferences and happiness (or
  subjective well-being)?
• Projects examine subjective well-being (SWB) and
  its relationship to need, equity, altruism and
  materialism
• Two experimental studies on generosity and
  happiness
• The Hedonistic Paradox Is Homo Economicus
  Happier?
• Focuses on the relationship between generosity
  and long run (i.e., average or stable) happiness
  and the causes of that relationship
• Mixed Feelings Theories and Evidence of Warm
  Glow and Altruism
• Examines generosity and short run (or transient)
  happiness

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The Hedonistic ParadoxIs Homo Economicus
Happier?Konow and Earley

• Two principal questions
• Are more generous individuals happier, on
  average, than less generous people?
• If, so, in what specific ways are they happier,
  i.e., in what dimensions of subjective
  well-being?
• What is the causal relationship between
  generosity and happiness?
• Does generosity cause happiness, or does
  happiness cause generosity, or are both caused by
  some tertiary factor?
• In light of the results, the focus is mostly on
  long run happiness

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Experimental Design

• Both this and the other study employ a similar
  design
• Variation on the Dictator Game
• All subjects complete a questionnaire that
  includes multiple measures of different
  dimensions of SWB and of material well-being
• One subject, called the dictator, is endowed
  with a fixed sum of money, viz., 10
• The dictator may share his/her endowment with an
  anonymous counterpart, called the recipient,
  who is in another room
• Recipients have no recourse and must simply
  accept whatever dictators give (even nothing)
• All subjects complete a brief questionnaire that
  repeats certain questions on short run affect (or
  feelings)

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Results

• Giving is related to
• Higher overall happiness
• Higher positive affect
• Lower negative affect
• Higher peak happiness
• Higher psychological well-being
• Giving is not significantly related to
• Mood (short run feelings)
• Satisfaction with life
• Nevertheless, some types of SWB are sensitive to
• the measure used and are sometimes only weakly
• significant overall happiness, affect and
• psychological well-being

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Hypotheses about Findings

• Generosity hypothesis Generosity causes
  happiness, i.e., people give for the subsequent
  improvement in mood.
• Happiness hypothesis Happiness causes
  generosity, i.e., people who are in a better mood
  just before the allocation will be more generous.
• Money hypothesis Money (i.e., greater material
  well-being) causes both higher long run happiness
  and greater generosity.
• Conclusions
• Every prediction of the preceding three
  hypotheses is contradicted by the evidence.

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Eudaimonic Hypothesis

• Greater long run happiness is caused, in part, by
  a personality trait that has been called
  psychological well-being or, in Maslows terms,
  self-actualization.
• Self-actualizing individuals are more intrinsic,
  e.g., generous towards others, rather than
  extrinsic, e.g., concerned with material rewards.
• Self-actualization is a stock variable that can
  change gradually it grows with repeated
  intrinsic acts.
• Intrinsic behavior can be costly in terms of
  short run happiness, but it is like an investment
  that contributes to a higher stock of
  self-actualization in the long run.
• Higher long run (average) happiness is an
  unintended by-product of a greater stock of
  self-actualization.

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Results

• All the predictions of self-actualization are
  borne out.
• More self-actualizing individuals register
• Higher overall happiness
• Higher peak happiness
• Higher long run positive affect
• Lower long run negative affect
• Other results
• Greater material well-being is not associated
  with higher long run happiness
• Greater generosity is not associated with higher
  short run happiness
• More self-actualizing individuals are more likely
  to give in a dictator experiment
• The correlation between happiness and generosity
  is positive but possibly weak since neither
  directly causes the other, rather
  self-actualization is causally related to both

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Mixed Feelings Theories and Evidence of Warm
Glow and Altruism

• Two main questions
• What is the motive for generosity?
• What is the relationship between generosity and
  short run feelings?
• One theory of altruism is warm glow people give
  for the good feeling it produces
• Here I focus on the latter question and how it is
  related to the purpose of the giving
• In particular, I identify the changes in short
  run affect (SRAD) of dictators by comparing a
  measure of short run affect just after the
  allocation decision with one just before decision
  (subtract later measure from earlier one to form
  a difference)

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Design

• Four dictator treatments (a through d) differ in
  ways that affect the social preference they
  trigger (e.g., equity, need), which, in turn,
  determines what subjects consider to be the
  right gift to recipients
• Compare the changes in affect of more generous
  dictators
• in each treatment with those of two other groups
• Less generous dictators in each of the respective
  treatments
• Control treatment Dictators are paired with
  unendowed student recipients but are prevented
  from transferring any of their endowment the
  endowments and procedures are common knowledge

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Predictions

• The paper introduces a theory of altruism called
  conditional altruism
• Conditional altruism predicts the following
• Altruism is conditioned on a set of distributive
  principles that imply that the right gift is
  lowest in Treatment a, and progressively higher
  in Treatments b, then c and highest in d
• The highest SRAD is obtained, on average, when
  the dictator gives what he believes to be the
  right amount according to the relevant
  distributive principle
• When the right amount is low, smaller gifts
  produce the higher SRAD, whereas when the right
  amount is high, larger gifts produce higher SRAD
• Thus, the picture is of mixed feelings greater
  generosity can have a favorable or unfavorable
  effect on feelings

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Results

• When the right amount is lowest in Treatment a,
  small gifts produce the highest SRAD
• When the right amount is highest in Treatment d,
  large gifts produce the highest SRAD
• SRAD is highest in the Control treatment SRAD at
  best matches this level in the other treatments
  when dictators give the right amount
• Further conjecture
• Giving more or less than what the dictator
  believes is the right amount produces lower SRAD
• Dictator beliefs about the right amount center
  around two values
• right amount according to impartial individuals,
  and
• gifts of 0-1 due to self-serving beliefs
• Nonlinear regressions on partitioned subsets of
  gifts seem consistent with this conjecture

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Conclusions

• Acting on social preferences can affect both long
  run and short run happiness
• In the short run, such behavior can at best match
  the happiness of a control group that is
  prevented from sharing giving more or less than
  the right amount results in lower short run
  happiness
• In the long run, the relationship between
  generosity and happiness is more complex acts of
  generosity contribute to a type of personality
  (self-actualizing) that enjoys, on average,
  greater happiness in the long run
• The evidence from these studies is suggestive it
  should not be taken as conclusive, but rather as
  an impetus to explore whether the results can be
  replicated and whether these conjectures are
  robust