Psychology of happiness 2: If Money Doesn’t Make You Happy Then You Probably Aren’t Spending It Right

Continuing the research notes from the previous post, here is a summary If Money Doesn’t Make You Happy Then You Probably Aren’t Spending It Right by Elizabeth W. Dunn et al. The author re-published this research in the book Happy Money.

My main qualm about the paper is, that it does not differentiate between the remembering vs. experiencing self distinction, so the advises are a tangle of both.


  • you want to:
    1. extend anticipation before
    2. diminish adaptation during
      • by making events smaller but more frequent
      • by introducing some uncertainty
    3. Prefer experiences to material goods
      • more reminiscence after
      • less externalities/secondary costs
    4. Make everything social
      • spend prosocially
      • share experiences


(1) Buy more experiences and fewer material goods

  • Advantages:
    • more anticipation before event, less adaptation during, more reminiscing after
      • reasons:
        • material goods more prone to focalism: you actually don’t think about them very often and therefore don’t get that much utils/hedons
        • material goods usually have more secondary effects, externalities, upkeep costs
      • experiences DO suffer from focalism too: how often do you reminiscence about your vacations – not much, but more than about your fancy hardwood floor
    • negative experiences are easier to forget (or turn to humor)
    • experiences are more often social
  • note: remember the trade-off between remembering / experiencing self

(2) Use their money to benefit others rather than themselves

  • prosocial spending

(3) Buy many small pleasures rather than fewer large ones

  • less adaptation and diminishing marginal utility
  • due duration neglect, higher frequency > longer duration
  • splitting facilitates anticipation
  • Example: massage chair
    • customers got either 180s massage or 2x 80s
    • the split experience was rated higher
  • Exploiting uncertainty
    • having surprises / some uncertainty about the reward increases anticipation (you think about it more due to uncertainty)
    • also diminishes adaptation because you don’t know what’s next what’s

(4) Eschew extended warranties and other forms of overpriced insurance

  • exploit loss aversion and endowment effect

(5) Delay consumption

  • pay upfront to remove sting, delay consumption for anticipation

(6) Consider how peripheral features of their purchases may affect their day-to-day lives

  • especially material goods have upkeep costs, secondary effects & externalities

(7) Beware of comparison shopping

  • it focuses you of easily comparable features
  • e.g. picking a flat: lots of parameters on the web comparison, but you don’t e.g. how is the community, atmosphere etc.

(8) Follow the Herd Instead Of Your Head

  • general ranking is usually a good estimate of your enjoyment, no need to over think it

Psychology of happiness 1: Notes on Kahneman’s work

Below are my research notes based on:

  1. Chapter 5 of Thinking, Fast and Slow, by Daniel Kahneman
  2. Living, and thinking about it: Two perspectives on life, by Daniel Kahneman & Jason Riis
  3. Experienced Utility and Objective Happiness: A Moment-Based Approach, by Daniel Kahneman

For a quick overview see also Kahneman’s TED talk.

Experiencing vs. Remembering Self

  • Remembering Self
    • “Overall how would satisfied are you with your life?”
      • connected to decision utility (“wantability”, one used in economics)
      • focus of most of the well-being, life satisfaction literature
      • also called: (overall) life satisfaction
      • domain of System 2
        • but hampered by:
          1. Peak/end effect
          2. focusing illusion
          3. can be affected by recent emotional effects
            • e.g. availability heuristic, current affect, recency bias
          4. Culture can play a role in different effect (France vs. US)
  • Experiencing Self
    • “How happy/satisfied do you feel right know at this moment?”
    • connected to “hedonic” utility (how “good” you feel)
    • measured by: real-time sampling, or detailed day reconstruction
    • also called: “U-index” (fraction of time spend in negative emotional state)
    • Example of sampling results – U-index was:
      • 29% for the morning commute,
      • 27% for work,
      • 24% for child care,
      • 18% for housework,
      • 12% for socializing,
      • 12% for TV watching,
      • 5% for sex.
  • Trade-of between selves
    • Kahneman’s initial vs. current position:
      • initial: experiencing self is more relevant, “live in the moment”
      • current: need to take care of both of them
    • what changed his mind:
      • Coherent definition of well-being needs to take into account our goals (preferences) which in turn do have impact on life-satisfaction
    • Effect of Goals
      • ask students how much they value money
      • follow-up in 20 years
      • those who value more, earn more (even housewives!)
      • those who earn more & value more are more satisfied than those that earn less & value more

Remembering vs. experiential well-being – impact on policies

  • policies especially medicine and welfare:
    • E.g. investment that should be made in the treatment of e.g. blindness:
    • Should the investments be determined by how much people fear these conditions?
      • => Focusing illusion (Seeing)
    • Should investments be guided by the suffering that patients actually experience?
      • => Ignores preferences (there is not much difference in experiential happiness between blind and seeing)
    • Or should they follow the intensity of the patients’ desire to be relieved from their condition?
      • => Focusing illusion (Blind)
  • Should a policy make people experientially better of even if it is “remembered” as worse
  • Should a policy make people miserable so that they remember it as more positive
    • concrete example: colonoscopy experiment / cold water experiment
  • Remembering-self has a stronger saying in deliberate decision making (picking holidays, or treatment procedure), but not always (hyperbolic discounting)

Patient A suffers less (experiencing self), but rates the procedure worse than Patient B. If given choice to repeat the procedure, the option B is preferred – i.e. more suffering. Should a policymaker comply? I was always saying, life is like a colonoscopy.

Happiness Puzzles

  • Marriage Satisfaction
    • this is effect on remembering: around marriage you are likely to recall it and include it in the overall eval
    • effect on experiential well-being: neutral, it just redistributes (less positive time with friends, more chores, but more positive time with partner)


    Show this to your husband/wife for an awkward conversation.

  • Genetics
    • on both the remembering and experiential self has a major effect
  • France vs. US
    • france reports well-being on the level of unemployed americans
    • experiential well-being turns out to be: about same level
    • “Culture” has a large effect on the reporting
  • Income
    • experiential well-being plateaus at ~75k annual family income
    • remembering-self well-being continues to grow
    • Summary plot from Kahneman & Deaton 2010:


  • Holidays
    • you plan holidays for remembering self, not experiencing self
    • e.g.:
      • spend 10 days in Baltic seeing billion things
      • spend 30 mins / year fondly remembering and 30 mins / year reviewing photos (I’m supper generous here)
      • for that you “tortured” your experiencing self
        • of course it is not only about pure hedons, point is that remembering self if strongly overweighted in decision making
    • Thought Experiment
      • money/time is not an issue, you can go for 10 days wherever and do whatever
      • afterwards your memory will be wiped and photos deleted
      • will you plan a different kind of holiday?

Peak/end effect

  • best predictor for remembering self: average between the peak and the end satisfaction / pain
  • duration has next to no impact
  • “horrible noise at the end of record destroyed the whole experience”

Focusing illusion = focalism

  • “Nothing in life is as important as you think it is when you are thinking about it.”
  • E.g. buying a fancy car
    • How happy will it make me? very!
    • When does it make me happy? When I think about it
    • How often will you think about it? Actually not much!
  • famous experiment:
    • California vs. Ohio Weather
    • quadriplegic (ask people how happy they think they are 1/2 years after, people will overestimate their unhappiness because they focus on thinking about their disability)

Affective forecasting and miswanting

Affective forecasting
predicting emotional effects of future events or things

  • we are terrible at it (focalism, impact bias etc.)


wanting out of biased reason, due to failure of affective forecasting

Hedonic vs. Aspirational adaptation

  • Example
    • you were poor, ate crappy food, enjoyment ranked 5/10 (remembering self)
    • you get rich, you eat great food, time passes, you rank food again 5/10 (remembering self)
  • Hedonic treadmill / adaptation
    • you get used to the recent standard and revert to your set point
    • it means: you actually enjoy (experiencing self) less the better food
  • Aspirational adaptation
    • instead: we have aspirational set-point: somewhere between the base happiness and best-hope outcome
    • with time this baseline adjust higher, but not necessarily the overall enjoyment
      • I.e. experienced self-would rank the food 9/10 (i.e. no real hedonic adaptation), but the remembering self says 5/10 due to aspirational adaptation
  • Summary
    • it is likely that both occur
    • hedonic adaptation is important, but can be established only by sampling experiencing self not remembering self
    • conditions do matter to the experiencing self
      • better food IS better even if you have it every day
      • better city IS better even after longer time
    • but for remembering self the difference becomes invisible

How to grow stem cells for a technologically advanced society

This is a first installment of the Sgt. Pepper’s Lonely Hearts Journal Club, where we will monologue about interesting papers.

This week’s pick is:

Alexandre V. Borovik – Calling a spade a spade: Mathematics in the new pattern of division of labour


The paper looks at the socio-economic roots of the crisis of mathematical education. As the economy of developed countries is turning more and more technology- and knowledge-intensive, the demand on mathematical ability becomes bimodal: most of the population doesn’t require even the most rudimentary arithmetical skills, while a very small cognitive/technological elite requires ever-specializing knowledge. This deep knowledge hard to acquire both because of length of training and scarcity of quality teachers.

The dire state of mathematical (and science) education is then both caused by the market economics (it is a very expensive and highly uncertain investment for pupils, demand is low in terms of number of employments) and in the long-term it feeds back into the system as scarcity of deep expertise.


The paper is chock-full of good quotes. Here is a selection, paper is worth reading in entirety.

Position of mathematical education and the source of its crisis

concentrate on mathematics education, as an important and well documented area of interaction of mathematics with the rest of human culture.

[…] forces that drive these changes come from the tension between the ever deepening specialisation of labour and ever increasing length of specialised learning required for jobs at the increasingly sharp cutting edge of technology.

As an example of long-term infeasibility of over-specialization:

There are more mobile phones in the world now than toothbrushes.[…] However, practical necessity forces us to teach a rudimentary MP3/MP4 technol-ogy, in cookbook form, to electronic engineering students; its mathematical content is diluted or even completely erased.

This leads to an interesting contrast between high- and low-skilled labour:

In the clothing industry nowadays, cutters are replaced by laser cutting machines. But a shirt remains essentially the same shirt as two centuries ago; given modern materials, a cutter and a seamstress of yesteryear would still be able to produce a shirt meeting modern standards […]

What a 19th or 20th century cutter would definitely not be able to do is to develop mathematical algorithms which, after being converted into computer code, control a laser cutting machine. Design and optimisation of these algorithms require a much higher level of mathematical skills and are mostly beyond the grasp of the majority of our mathematics graduates.

The driver for this change:

It is this tension between the ever-increasing degree of
specialisation and the ever-increasing length of specialised
education that lies at the heart of the matter.

Disappearance of middle-level skill level from the point of view of economy:

Despite popular perception, the middle is gradually disappearing to create an ‘hourglass economy’.

[…] consequent declining need, among most of the population, regarded as employees or workers, for the kinds of skills (language skills, mathe-matical skills, problem-solving skills etc.) which used to be common in the working class […]

Dumbing-down is a rational—from the capitalist point of view—reaction to these labour-process developments. No executive committee of the ruling class spends cash on a production process (the production of students-with-a-diploma) that, from its point of view, is providing luxury quality.

And from the from the point of view of the students:

Certain levels of mathematics education are not supported by immediate economic demand and serve only as an intermediate or preparatory step for further study. From an individual’s point of view, the economic return on investment in mathematical competence is both delayed and less certain.

The outcome (emphasis mine):

As a result, the West is losing the ability to produce competitively educated workers for mathematically intensive industries.

Any chance to remedy the status? The path through standard education is hard:

The job market is changing fast and improving education is a slow and difficult process.

Mathematics education has a 15 years long production cycle, which makes supply-side stimuli meaningless.

Many people have high hopes for computerization of mathematical education. Borovik is rightfully skeptical:

[…] when a certain previously “manual” mathematical proce-
dure is replaced by software, the design and coding of this software requires a much higher level of mathematical skills than is needed for the procedure which has been replaced—but from a much smaller group of workers.

Another possible path is deep education via homeschooling, “math circles” (clubs) or via “Zunft system” – highly specialized, deep mentorship in an almost family setting. The problem with those solutions is that they do not scale to sufficient number of pupils as the number and time of high-quality mentors is very limited.

Borovik provides several examples of tensions and problems in the current education system (memorization, meaningless repetitive tasks, discussion around long division, the impact of smartphones and universal mathematics-solver software).

The ultimate aim would be to provide “deep mathematics education” – a concept developed by Maria Droujkova:

When I use the word “deep” as applied to mathematics education, I approach it from that natural math angle. It means deep agency and autonomy of all participants, leading to deep personal and communal meaning and significance; as a corollary, deep individualization of every person’s path; and deep psychological and technological tools to support these paths.

This is important because:

The potential for further intellectual metamorphoses is the
most precious gift of “deep mathematics education”.


I lived through sufficiently many changes in technology to become convinced that mathematically educated people are stem cells of a technologically advanced society, they are re-educable, they have a capacity for metamorphosis.

Finally, this presents the Democratic nations a trilemma:

(A) Avoid limiting children’s future choices of profession, teach rich mathematics to every child—and invest serious money into thorough professional education and development of teachers.

(B) Teach proper mathematics, and from an early age, but only to a selected minority of children. This is a much cheaper option, and it still meets the requirements of industry, defence and security sectors, etc.

(C) Do not teach proper mathematics at all and depend on other countries for the supply of technology and military protection.