Daniel Kahneman on the Focusing Illusion: Would You Be Happier If You Were Richer? A Focusing Illusion
“When people consider the impact of any single factor on their well-being — not only income — they are prone to exaggerate its importance; we refer to this tendency as the focusing illusion”
Introduction (Via Princeton)
Most people believe that they would be happier if they were richer, but survey evidence on subjective well-being is largely inconsistent with that belief. Subjective well-being is most commonly measured by questions that ask people, “All things considered, how satisfied are you with your life as a whole these days?” or “Taken all together, would you say that you are very happy, pretty happy, or not too happy?” Such questions elicit a global evaluation of one’s life. An alternative method asks people to report their feelings in real time, which yields a measure of experienced happiness. Surveys in many countries conducted over decades indicate that, on average, reported global judgments of life satisfaction or happiness have not changed much over the last four decades, in spite of large increases in real income per capita. While reported life satisfaction and household income are positively correlated in a cross-section of people at a given time, increases in income have been found to have mainly a transitory effect on individuals’ reported life satisfaction. (1-3) Moreover, the correlation between income and subjective well-being is weaker when a measure of experienced happiness is used instead of a global measure. This article reviews recent evidence that helps interpret these observations.
Additional Excerpts (Via Princeton)
When people consider the impact of any single factor on their well-being — not only income — they are prone to exaggerate its importance; we refer to this tendency as the focusing illusion. Income has even less effect on people’s moment-to-moment hedonic experiences than on the judgment they make when asked to report their satisfaction with their life or overall happiness. These findings suggest that the standard survey questions by which subjective wellbeing is measured (mainly by asking respondents for a global judgment about their satisfaction or happiness with their life as a whole) may induce a form of focusing illusion, by drawing people’s attention to their relative standing in the distribution of material well-being. More importantly, the focusing illusion may be a source of error in significant decisions that people make.
Despite the weak relationship between income and global life satisfaction or experienced happiness, many people are highly motivated to increase their income. In some cases, this focusing illusion may lead to a misallocation of time, from accepting lengthy commutes (which are among the worst moments of the day) to sacrificing time spent socializing (which are among the best moments of the day). (28) An emphasis on the role of attention helps to explain both why many people seek high income – because they over predict the increase in happiness due to the focusing illusion and because changes in relative income are associated with strong emotional responses – and why the long-term effects of these changes are relatively small — because attention eventually shifts to less novel aspects of daily life.