Everything is Relative – Part 2

In the previous issue, Nådiga Lundtan #124, I wrote about change and the difference between absolute and relative gains. If you measure your well-being in comparison to your neighbor, rather than looking at your own progress in isolation, you are looking at relative gains. This point of view can be extended to society, companies and governments. One could make the claim that individuals are the constituents that make up these organizations. Psychology and history have shown us that individuals are prone to biases and other human misjudgments. Thus, organizations or groups of people will also be fallible to human errors. That is one reason why change may not be properly visualized in society; people compare their group, country or society to a competitor or peer and thus loses track of the absolute gains in society’s development. This causes distress and paints a narrative that is unjustifiably gloomy. In fact, we are much better off as a whole than ever before.

So what causes this? People’s tendency to look at relative gains might be biological. The reliance on frames and reference points may be a solution to the biological constraint that is the limited sensitivity of our subjective utility scale or, in a less academic language, that our ability to experience pleasure and pain is not infinitely sensitive. This is the reason for the declining marginal utility, which students of economics are well aware of. The concept states that the billionth unit we receive will not be as pleasurable — it will not give us as much utility — as the hundredth or thousandth unit.

This forces us to adjust our focus to higher highs. If we did not, and we reached the maximum of our utility scale, what would motivate us to continue to work harder? Nothing could ever make us happier. But, if we get used to current levels of well-being and see that our (possibly new) peers are better off, we will strive for more, believing that it is going to make us happier. This comes with the peculiar requirement that we accustom ourselves to the new highs, while not anticipating ourselves getting used to it. Research shows that people do adjust themselves to new conditions with significant speed and that they also forget that they did so. Thus, we might be on a hedonic treadmill with the end constantly a little bit too far away.

Also affecting our perceived happiness is what psychologists call the focusing illusion. One example of this bias is found in one study where Californians and Midwesterners attributed their own overall well-being as being similar. Still, both groups rated Californians as being the group with highest life satisfaction. Why? Climate. Both groups thought that living in the Californian climate would greatly improve their life satisfaction. However, both groups neglected to take other happenings into account and solely focus on climate as the sole factor for a good life, hence the focusing illusion.

Imagine that you are on a showing, looking to buy a new apartment. It is only natural to imagine yourself throwing good dinner parties, but focusing on this makes you a subject to the illusion above; most of the time in your new home will not be spent around the dinner table with friends on a good Saturday evening. This bias might cause our decisions to be based on factors just because we were focusing on a particular thing at the time.

This is also seen in earlier happiness studies. A person’s response to a researcher’s question, ”How happy are you?” are heavily dependent on what preceded the question. Did the researcher invoke a happy mindset on the subject before the ”happiness question”? If so, the persons are more likely to report a higher level of happiness than if their minds were filled with everyday worries. Again, the focusing illusion.

So now we know about the difficulties of measuring happiness. Because of its relative nature and our limited working memory, we also know about the difficulty of appreciating change.

With all this in mind, how do we get an objective measure on happiness? The jury is out. But look at life in the 1950’s or 1960’s. By most objective measures, we are better off.

For now, let us take comfort in society’s progress over the last decades and let us look forward, be it absolutely or relatively.

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