Lite of the mind (a light-hearted look at all things Chicago)

Economics of happiness

By Jake Grubman, ’11

With the economy in constant flux, we can all use some pointers on how to stretch good news as far as it will go. Christopher K. Hsee, the Theodore O. Yntema professor of behavioral science and marketing at Chicago Booth, shares his guidelines: "Hsee's Happiness Heuristics." Compiling research from psychologists and economists (including colleague Richard Thaler), Hsee provides tips on how to make the people around you—employees, significant others, friends, relatives—happy.

Separate gains. Combine losses.
It’s been a great day, and you’ve got two pieces of good news for your spouse: you got a promotion, and you won a free trip to Hawaii. Tell your spouse the two pieces of news on separate days, so that one great day turns into two. If the news is bad, however—you’ve crashed your car and lost money in the stock market—tell your spouse both downers at the same time. Hsee’s caveat is that the bad news can only be so bad: “Everybody has a breaking point.”

Announce good news early. Announce bad news late.
You have an important client, and, knowing she loves eating out, you invite her to dinner at the fanciest restaurant in Chicago. Do it months in advance, Hsee says. “A lot of happiness comes not just from the thing or the contact per se, but from anticipation.” An early invite prolongs the client’s happiness. If the news is bad, don’t allow much time to dwell on it. Nobody enjoys a trip to the dentist, so don’t tell your child about his visit weeks in advance. Just put him in the car, and the drilling is done before he knows it.

Unpredictable gains are better than stable gains. Stable losses are better than unpredictable losses.
You give an employee either a raise or a bonus. Practicality says a raise is better, but a bonus actually makes the employee happier. The logic behind this principle is adaptation, Hsee explains. When you get a raise, “you feel happy, but after a while you get used to it.” An employee doesn’t adapt to a bonus—it’s unexpected and more exciting. Conversely, make losses stable. Let’s say you have a big apartment just blocks from work, but the bad economy forces you to relocate to a place that’s either smaller or farther away. Sacrificing size is better, Hsee says, because it’s easier to adjust to a smaller living space than the “painful” daily commute.

Choice is bad for good options, good for bad options.
Choice may seem like a perk, but if the options are all positive, having to make a decision may decrease happiness. If you’re treating your parents to a trip and you know they would enjoy the beaches of Hawaii, then buy the tickets; giving them a choice of vacation spots could lead to second-guessing and stress. If both options are negative, though, choice helps: “Even if you can’t give them a real choice, you can give them an illusion of choice,” says Hsee. At his hypothetical business school, students might not be excited about a mandatory business-ethics course, but he has devised a new strategy: divide the course into two sections and give them two different names, like Business Ethics and Corporate Morality. The syllabus remains the same, but the students are happier because they have a say in the process.

Wanted is better than needed. Memorable is better than usable.
Cash may be the most economically practical gift, but it doesn’t create the most happiness. People are happiest with something they want but have no justification to buy. If a friend loves old vinyl records but would never purchase expensive ones for himself, then give him a classic Hendrix album instead of cash. A good gift, Hsee says, is one that the recipient can’t eat up, use up, give away, or throw away, at least for a while. Best to give a personalized, lasting gift.