Tag Archives: Daniel Kahneman

Happiness-Money Connection: Halo Effect of Happy Mood? Part 1

Daniel Kahneman

Daniel Kahneman

“(More) Money can’t buy (more) happiness” has been demonstrated in a research study published in the Proceedings of the National Academy of Sciences by Nobel Prize winner and psychologist Daniel Kahneman, with Angus Deaton.

They analyzed more than 450,000 responses to the Gallup-Healthways Well-Being Index, a daily survey of 1,000 US residents conducted by the Gallup Organization, and distinguished two elements of “subjective well-being” or happiness:

  • Emotional well-being – Frequency and intensity of joy, stress, sadness, anger, and affection,leading to pleasant or unpleasant quality of life, measured by Cantril’s Self-Anchoring Scale of yesterday’s emotional experiences
  • Life evaluation – Subjective assessment of one’s life.

They found that as emotional well-being rises with income up to about $75,000 in 2010 US dollars, then does not continue increasing with higher income levels.
In addition, daily emotions were predicted by health status, care giving, loneliness, and smoking.

Life evaluation increased as income and education increased, and the study confirmed that low income exacerbates the emotional pain associated with divorce, ill health, and being alone.

Michael Norton

Michael Norton

In fact, Michael Norton of Harvard Business School found that volunteers’ happiness increased with more money only when they spent money on others.

Replicated in Canada, Uganda, Rwanda, and other countries, his research found that happiness increases when people:

  • Select experiences over things
  • Spend money on others, regardless of the amount of money spent

 He concluded that money can buy happiness when it’s spent on other people and experiences in Happy Money: The Science of Smarter Spending … a worthwhile reminder in this season of gift-giving.
Norton’s TED talk

British researchers investigated longitudinal connections between happiness and money, and found that people who express more positive emotions as teenagers have more positive life outcomes as adults, including higher education and income.

Jan-Emmanuel De Neve of University College London and Andrew Oswald of

Jan-Emmanuel De Neve

Jan-Emmanuel De Neve

University of Warwick  analyzed Carolina Population Center’s National Longitudinal Study of Adolescent Health (“Add Health”) profiles of more than 10,000 Americans at ages 16, 18 and 22 and  their annual incomes at age 29.

De Neve and Oswald controlled for education level, IQ, height and self-esteem, all known to contribute to financial success.

Reported in Proceedings of the National Academy of Sciences, they found that those who express more positive emotions in their teen years, reported greater life satisfaction and optimism as young adults, were more likely to earn a university degree, secure employment, advance to higher-level roles, and have higher incomes by age 29.

The survey assessed life satisfaction on a 5-point scale, and found that an increase of 1-point at age 22 made translated to a $2,000 difference in later income measured in in 2012 US dollars, and the later income difference between the happiest and unhappiest participants was $8,000 by the same measure.

Andrew Oswald

Andrew Oswald

DeNeve and Oswald validated the finding by comparing about 3,000 sibling pairs who shared the same parents and socioeconomic status.
They found that the happier siblings also had more positive emotions and life evaluation than less-happy participants.

One explanation of these findings is that observers generalize positive impressions of people who display more positive emotions in a “halo effect”, so these happier individuals are seen as more likeable, competent and attractive, and are offered more opportunities for education, employment, and social relationships.

These findings suggest the importance of increasing the “Emotional Intelligence” competencies of emotional self-regulation.
See The Happiness-Money Connection: Halo Effect of Happy Mood?Part 2 for research-based recommendations on developing happiness and well-being.

-*How do you view the connection between happiness and money?

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Biases in Unconscious Automatic Mental Processing, and “Work-Arounds”

Leonard Mlodinow

Leonard Mlodinow

Leonard Mlodinow’s Subliminal: How Your Unconscious Mind Rules Your Behavior reviews evidence of automatic, out-of-awareness brain processing that handles emotional experience and routine task execution, in the same vein as  best sellers by Nobel laureate Daniel Kahneman (Thinking, Fast and Slow) and writer Malcolm Gladwell (Blink: The Power of Thinking Without Thinking).

Daniel Kahneman

Daniel Kahneman

All three authors outline the potential costs of rapid mental processing: error and bias in perception and decision-making, which are less present during mindful analytic problem-solving.

Mlodinow, a Physics Professor at CalTech, has collaborated with Stephen Hawking on two books, and like Kahneman and Gladwell, is a talented storyteller who explains implications of laboratory-based research on cognition and brain functioning.

Carol Tavris

Carol Tavris

Psychologist Carol Tavris discusses the cost of similar biases in cognitive processing in Mistakes Were Made (But Not by Me): Why We Justify Foolish Beliefs, Bad Decisions, 

Numerous studies of erroneous eyewitness testimony demonstrate that memory is constructed of fragmentary elements “stitched” together to form a cohesive narrative.
This contrasts the notion that memory is a “snapshot” replica of an event.

Opportunities for cognitive error are apparent in this Constructivist view of perception and cognition.

Most authors suggest “mindful” practices to counteract inherent biases in cognitive short-cuts, consciously focusing in present perceptions and experiences.

Mlodinow’s previous book, The Drunkard’s Walk: How Randomness Rules Our Lives, demystifies the use of statistics in everyday life, and prepares readers with considered questions to avoid mis-judgments based on seemingly convincing quantitative data.

He demonstrates the prevalence of chance influences in life outcomes, and the pervasive illusion that people have control over many more outcomes than they actually do.

Mlodinow reminds readers that “success” and “failure” contain random influences, and “success” is more dependent on persistence and maintaining an optimistic outlook than raw ability.

-*What practices have helped you mitigate potential cognitive bias associated with rapid mental processing and cognitive “short-cuts”?

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Cooperative Instinct, Reflective Self-Interest

David Rand

Harvard scientists, led by postdoctoral researcher David Rand found that volunteers who were asked to contribute to the greater good at their own expense at first tended toward generous and cooperative behavior, but upon reflection, they chose self-interest.
Evolutionary biologist Martin Nowak and psychology professor Joshua Greene collaborated with Rand in the study published in Nature .

Martin Nowak

Rand, Nowak, and Greene gave money to volunteers for use in games where they could earn more, depending on choices about cooperating with others.

The team found that people acted most generously when they made immediate decisions about how much to contribute, or were asked to report a time when their intuitions and emotions guided them to a good decision.

When volunteers took more time to consider decisions, or were asked to remember a time they benefitted because rational thinking or when an emotional response led them to an adverse decision, they contributed less to the common pool of money.

Joshua Greene

In one situation, four participants were given 40 cents each and told that they could contribute as much money as desired to the common pool, which would be doubled and then divided equally among the four people.

People decided most quickly on their contribution strategy were more willing to contribute than those who considered the choice for more than 10 seconds.

When researchers forced some volunteers to decide a strategy rapidly and others to wait at least 10 seconds before deciding, they again observed that those who decided most quickly contributed most.

Daniel Kahneman, a Nobel laureate and author of the book, Thinking, Fast and Slow, which examines the two cognitive systems and the role they play in decision-making.

The researchers suggest that people’s intuitive responses are associated with what they have learned to benefit them, through experiences in various situations.

They asked participants if their everyday interactions with others were typically cooperative or uncooperative.
Those who reported having mainly cooperative interactions made quick decisions to contribute more and gave less when they had more time to ponder the scenario.
In contrast, those who reported uncooperative interactions in daily life gave the same amount when they made fast vs more deliberate decisions.

These studies could suggest policies or incentives to encourage desired behavior.
One complication that researchers consider is that a monetary reward or a fine is introduced, people may begin to ignore their first response and weigh the costs and benefits.
This delay can lead to people acting more in self-interest, and less for the common good.

An example of this paradox is seen in a study of Israeli day care programs.
Monetary fines were levied when parents picked up their children late, and the number of parents who arrived late increased rather than decreased.

This finding is consistent with punishment’s lower efficacy in motivating behavior.

-*In which work situations do you favor cooperation with colleagues?
-*When do you find that “enlightened self-interest” is the more prudent approach at work?

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