In a famous thought experiment, you are asked if you would be willing to be hooked up to an experience machine that ensured happiness for the rest of your life, without any awareness that the experience is not real. (Surely an influence for the Matrix?) Philosopher Robert Nozick suggested that if you would refuse, this meant that pleasure or happiness is not your only purpose in life.
Economists, the practical souls that they are (don’t laugh) are concerned with putting scarce resources to their best use. Which ultimately comes down to how to maximise people’s welfare. You can dodge the question of what “welfare” really is for a while (many economist have), but ultimately, you really do need to have some way of measuring people’s preferences. A specific problem is whether you can rely on what people say will make them happy.
Economists at the NBER have recently published a working paper looking at whether what people say will make them happy matches up to the choices that they actually make. They asked people two types of questions: one based on asking people which choice would make them happiest, and one based on asking which one they would actually choose. For example, they were presented with two jobs – one of which paid more money but required longer hours. People were asked which job would make them happier, and also which job they would actually choose.
Happily, in many cases – around 80% depending on exactly how the question was asked – people gave consistent answers – they would choose the option that made them happiest. But a significant number gave inconsistent answers – and these answers had a predictable pattern to them.
When people made choices, they were more concerned with income and money – but when they answered questions about happiness, they suggested that other factors were more important, such as friends, and doing the right thing.
The authors also looked at the types of people most likely to give inconsistent answers: people who are more conscientious are more likely to give consistent answers, and people who are neurotic are less likely to.
So what’s the best way of deciding what’s the interests of society? What people say they want, or what they do?
The paper is here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1696401
*Goldfrapp, “Happiness”, 2008