Happy happy joy joy

Via the wondrous fark.com comes ‘How Rich People Spend Their Time‘ from the Washington Post – it’s about an article in Science written by a battery of psychologist/economist types, including Daniel Kahneman. Very relevant to the question of what motivates people; my first instinct was to assume that it might reveal what people with the time to do what they want do with their time, if you see what I mean, and while the actual intention of the article is somewhat different it’s still full of fun.

The original article is behind the Science subscriber wall, but via the wonders of institutional access, I can get access to metaphysical nuggets like this:

Schkade and Kahneman noted that, “Nothing in life is quite as important as you think it is while you are thinking about it.”

Perhaps some intriguing fact about human nature; perhaps not. The article goes on to talk about some well-known results in the burgeoning ‘happiness’ literature, like the importance of relative rather than absolute income, and adaption to circumstances. I think a great article about this stuff, for the terminally interested, is Richard Layard’s ‘Happiness and Public Policy’.

But the thing that hooked me on this particular Science article is the following piece of weird:

“In a representative, nationwide sample, people with greater income tend to devote relatively more of their time to work, compulsory nonwork activities (such as shopping and childcare), and active leisure (such as exercise) and less of their time to passive leisure activities (such as watching TV).”

Let me get this straight: richer people work more and buy more stuff, and poor schmucks watch a lot of TV? Stop those presses. The point of the article is well-made (from the the title, ‘would you be happier if you were richer’, right on down), and that is to say that people with higher incomes aren’t necessarily engaging in relatively more ‘fun’; however, there are a bunch of unasked questions. Does ‘TV’=’fun’? Is this really evidence that the rich are wasting their time, or are there other reasons why they endure work to get money?

The happiness literature is desperate to find an answer to the question of whether money buys happiness; an eerie similarity to the oft-(mis?)perceived economists’ equation of money with happiness when modeling people, and surely as deserving of the same retort: we know people care about more than money. The obvious question is, well, obvious. What does motivate people?

Looking at brains

A related question to what people want is what makes people happy. The answers aren’t necessarily the same, but in thinking about one, especially as a modeler, it helps to think about the other.

I saw Andrew Caplin talk a couple of months ago about this paper, in the growing neuroeconomics field. My layperson’s understanding of neuroeconomics is that it looks at the brain to try and figure out what’s going on while we make choices. It seems to be concerned at least as much with “what makes people happy” (or at least what makes their brain light up on the machines) as it is with what people actually choose, a point that separates it somewhat from other economic fields that take preferences as given and observe only choices. The argument, presumably, is that knowing more about what motivates people might shed more light on their choices.

Caplin described a paper titled, excellently, “Responses of monkey dopamine neurons to reward and conditioned stimuli during successive steps of learning a delayed response task” (link) which described a Pavlovian experiment on monkeys. First the monkeys were given food, which set off a dopamine response in their brains, supposedly a sign of pleasure. Then the researchers started to ring a bell before giving the food, and the dopamine response shifted from the food to the bell. Finally, they rang the bell and withheld the food, and the dopamine measure showed pleasure at the bell and disappointment at the time when the food was expected.

The upshot is that this physical measure of pleasure in the brain seems to show that news was just as important as the tangible outcome: the monkeys don’t just care about the food. People, too, clearly care about more than just money, goods or tangible outcomes: perhaps I am happy to see a good weather forecast for tomorrow even though I didn’t actually get anything.

It’s related to the great loss and rediscovery of preferences in economics. At some point (to grossly oversimplify the history) the profession settled on making abstract simplifications of people’s motivations. Then a while went by and someone said “people don’t conform to your economic theory, they must be irrational!”, when of course the more obvious explanation is that people’s motivations are more complex than the simplification. If people care only about money, then according to some theory I should see this. If I see that instead, I have not disproved the theory independently from the assumption on preferences.

The potentially exciting thing about neuroeconomics is that, even allowing for inexactness, it might tell us more about the actual hedonic motivators of people. Ambitious, yes, but not unimaginable. Of course, to an economist who wasn’t under the mistaken impression that simplified preferences are supposed to be realistic, it might just amount to saying “your simplification is a simplification”, which is slightly less exciting news. Or not news at all.

In fact, one interpretation of the monkey result might be that new information – or expectations – matters to people’s decisions. Macroeconomists – Nobel memorial winners, Phelps and Friedman – incorporated expectations into their models forty years ago. If anything, what we’re seeing is individual-level (or at least individual monkey-level) evidence that, yes, expectations are important. That might be another way of saying that evidence from experimental/behavioral/neuroeconomics like this is fun, but it doesn’t materially change what economists are up to: if more complexity makes our modeling more accurate, we often end up doing it.