Utility theory Notes for October 17

Main points

Kahneman and Thaler claim to have found “four areas in which errors of hedonic forecasting and choice have been documented” (p. 223). That is, errors concerning the forecaster’s felt happiness.

And the people did yawn. Generally speaking, that is, we found these obvious.

Not me!

Kids these days. Where’s your sense of healthy skepticism? Your know-it-all doubts about someone else’s carefully planned experiments? Where’s your attitude?

Sigh. Well, if someone must be immature, it might as well be me.

Everyone who has ever gone grocery shopping before dinner knows the hungry shopper problem. But some of the alleged errors didn’t strike me that way.

Most importantly, I do not believe they showed that duration neglect involves an error. If people prefer a longer colonoscopy that ends less unpleasantly to a shorter one with a more unpleasant ending, well, that is what makes them happier, no?

Professor Brown said that they were just trying to show that Bentham and Edgeworth’s claim that the hedonic value of an experience consists of summing up momentary pleasures and pains felt during the event is wrong. And she’s probably right; she’s right about all the other stuff, after all.

Still, they did describe this as an error of hedonic forecasting and they did describe the subjects in the relevant experiments as violating “an elementary principle of rational evaluation”. So if Prof. B. is right, they’re guilty of writing in a misleading way. Misleading to me, that is.

The more I think about it, the more confused I get about this section of the paper. Where are the mistaken forecasts in these cases? Is it that people forecasted that they would prefer the option with the least amount of pain or unpleasantness when, in fact, they preferred the one with more pain? But I thought that people’s behavior reflected their experiences. Those who had the longer colonoscopies that ended less unpleasantly came back more often than those who had the shorter colonoscopies. That is, this appears to be a case in which people genuinely learn what makes them happiest, even if it is counter-intuitive. So I’m confused about what their point about duration neglect was supposed to be.** I added this paragraph on October 23.

I also had some doubts about the studies of adaptation. I’m sure there is a focusing effect if you ask someone in Chicago in February if he would be happier if he were in Southern California. The weather would play an outsized role in the answer. But it has to matter even when we aren’t paying a lot of attention to it. So when you ask the Californians how they think they’re doing, I wonder if they won’t neglect the weather in their answer, even though it really might play a role in how they feel.

I, at least, refuse to believe that sunshine in February doesn’t make a difference in one’s happiness. And I’m going to be similarly cranky about the claim that money is not correlated with happiness.†† I think I share this person’s attitude. Just thought I should let you know.

The future beckons

So you’re not as thrilled with psych experiments as I am. Well, that’s OK, today’s class will pay off for you down the line.

We have a paper on “libertarian paternalism” based on this research coming up soon.

And further down the road, adaptation will be relevant when we talk about comparing the outcomes of different health care options. The ability of the handicapped to adapt might mean that we give lower priority to expensive care that might alleviate their condition than we otherwise would. Since it isn’t so bad to be handicapped, we should devote our resources to conditions that leave people worse off, such as ‘dead.’ On that note, since life with a handicap isn’t as bad as we might have thought, the value of a life saving procedure for a handicapped person goes up too: it would preserve more happiness than we would have otherwise thought and so has a greater chance of winning out against other kinds of care.

This all assumes that we’re comparing different options by measuring their results according to the amount of felt happiness they produce.

And if you think that all of this is unaccountably weird and that it’s just bad to be handicapped whether you adapt to it or not, we’ve got an author for you. That’s the point of Martha Nussbaum’s paper advocating an objective standard of well-being.

This page was written by Eleanor Brown and Michael Green for Freedom, Markets, and Well-Being, PPE 160, Fall 2007.
Freedom, Markets, and Well-Being