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Zack Lynch is author of The Neuro Revolution: How Brain Science Is Changing Our World (St. Martin's Press, July 2009).
He is the founder and executive director of the Neurotechnology Industry Organization (NIO) and co-founder of NeuroInsights. He serves on the advisory boards of the McGovern Institute for Brain Research at MIT, the Center for Neuroeconomic Studies, Science Progress, and SocialText, a social software company. Please send newsworthy items or feedback - to Zack Lynch.
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September 10, 2003

Forecasting Happiness

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Posted by Zack Lynch

Do people really know what will make them happy?  Not really, according Danny Kanheman, who shared the 2002 Nobel prize in Economics with Vernon Smith.

While we know a Rolling Stones concert beats a trip to the dentist, we almost always overestimate the intensity and the duration of our emotional reactions -- our affect --  to future events.  Although we might believe a new BMW will make life much better, it will likely be less exciting than anticipated and it will not excite us for as long as we thought.

Over the past few years, a group of experimental economists have begun to question the decision-making process that shapes our sense of well-being: how do we predict what will make us happy or unhappy -- and then how do we feel after the actual experience? For example, how do we suppose we'll feel if our favorite college basketball team wins or loses, and then how do we really feel a few days after the game?

Here are a few excerpts from "The Futile Pursuit of Happiness" which is a conversation with the leading figures in "affective forecasting". I highly recommend it.

Daniel Gilbert, Professor os psychology at Harvard, calls the gap between what we predict and what we ultimately experience the ''impact bias'' -- ''impact'' meaning the errors we make in estimating both the intensity and duration of our emotions and ''bias'' our tendency to err. The phrase characterizes how we experience the dimming excitement over not just a BMW but also over any object or event that we presume will make us happy. Would a 20 percent raise or winning the lottery result in a contented life?  You may predict it will, but almost surely it won't turn out that way. And a new plasma television? Worse, Gilbert has noted that these mistakes of expectation can lead directly to mistakes in choosing what we think will give us pleasure. He calls this ''miswanting.''

George Loewenstein then explains: ''Happiness is a signal that our brains use to motivate us to do certain things. And in the same way that our eye adapts to different levels of illumination, we're designed to kind of go back to the happiness set point. Our brains are not trying to be happy. Our brains are trying to regulate us.'' 

Then he goes on to describe the "empathy gap", the difference between how we behave in "hot'' states (those of anxiety, courage, fear, drug craving, sexual excitation and the like) and ''cold'' states of rational calm. This empathy gap in thought and behavior -- we cannot seem to predict how we will behave in a hot state when we are in a cold state...''These kinds of states have the ability to change us so profoundly that we're more different from ourselves in different states than we are from another person.''

Tim Wilson says: ''We don't realize how quickly we will adapt to a pleasurable event and make it the backdrop of our lives. When any event occurs to us, we make it ordinary. And through becoming ordinary, we lose our pleasure.''

Kahneman, who did some of the first experiments in the area in the early 1990's, affective forecasting could greatly influence retirement planning, for example, where mistakes in prediction (how much we save, how much we spend how we choose a community we think we'll enjoy can prove irreversible. He sees a role for affective forecasting in consumer spending, where a ''cooling off'' period might remedy buyer's remorse. Most important, he sees vital applications in health care, especially when it comes to informed consent.

To Loewenstein... a life without forecasting errors would most likely be a better, happier life. ''If you had a deep understanding of the impact bias and you acted on it, which is not always that easy to do, you would tend to invest your resources in the things that would make you happy,'' he says. This might mean taking more time with friends instead of more time for making money. He also adds that a better understanding of the empathy gap -- those hot and cold states we all find ourselves in on frequent occasions -- could save people from making regrettable decisions in moments of courage or craving.

''You know, the Stones said, 'You can't always get what you want,' '' Gilbert adds. ''I don't think that's the problem. The problem is you can't always know what you want.'' 

The implications of this research are profound.  Indeed, neuroceuticals are the tools that will help ordinary people reduce their "empathy gap" and gain control over their "impact bias".

Update 080804: Marginal Revolution on Economics and Happiness

Comments (4) | Category: Neurofinance


1. jim Mcfly on January 26, 2004 9:03 AM writes...

I laugh at you and the knowldge you seem to believe. Read some Plato...

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2. Chewy Esophagus on February 2, 2004 2:43 AM writes...

The human motive is not compatible with infinity. Your futile attempt to create meaning is laughable.

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3. karen on April 2, 2004 3:49 AM writes...

est-il possible de prévoir dans l'imagination des sécances de vie, réalisable dans la réalité?
peut-on obtenir ce qu'on veut?

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4. John Membrane on September 21, 2004 4:41 AM writes...

We share the same fate as the dinasours. Your pathetic attempts for meaning makes me want to eat my shit.

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