“What are the applied implications of our findings? In the work area we suggest that a balance between hours of work, social time and leisure will produce the highest well-being, whereas even work that is enjoyable will produce less well-being if carried out for too many hours. Conversely, it would be an error to assume that people would be happiest if all their time were spent in pleasurable leisure activities. … At the policy level an implication is that too many work hours, without sufficient free time or vacation, will prove less rewarding for most people” (Diener, Weiting Ng and Will Tov, 2008, ‘Balance in life and declining marginal utility of diverse resources’, Applied Research Quality Life).
This quote is from the conclusions of an article which assesses how average happiness levels differ with differing amounts of time spent in various ways (free time, with family and friends, and commuting) as well as with income levels. The findings seem to confirm the predictions of standard economic thinking in this area i.e. as our consumption of any good (including non-market goods such as leisure) rises the marginal utility of adding an additional unit of the good tends to decline.
What does the article tell us about marginal utility? The part of the study that seems most informative uses data from the Gallup World Poll, a representative sample of people almost covering about 95 percent of the world. As its main measure of happiness the study uses affect balance, which measures relative experience of positive feelings (enjoyment, and smiling and laughing) and negative feelings (depression, anger, sadness and worry) for the previous day.
The results suggest that the marginal utility of “free time” and “time with family and friends” is quite high for the first few hours of each activity (in the time category zero to four hours) and then declines to around zero. The marginal utility of additional income rises steeply for incomes up to around $US 40, 000 and then increases moderately, if at all. (The ladder of life indicator shows a similar pattern, but with the marginal utility of income remaining positive at high income levels).
How much additional income would a person need to earn to compensate for the loss of utility associated with the sacrifice of an hour of free time or an hour with family or friends. My rough calculation suggests that the hourly rate of pay required would be around $28 for a person with an income of around $20, 000 per year. (The loss in utility for sacrifice of an hour of leisure equals 0.075. Income on the preceding day would have needed to rise by $28 in order to raise utility by 0.075.)
For people with higher incomes, the hourly wage rate needed to compensate for the loss of an hour of leisure time would be very much higher. At first sight it might appear that with incomes in excess of around $60,000 the hourly rate of pay required to compensate for sacrifice of an hour of leisure would be huge. We need to remember, however, that some of the people earning this additional income might be saving it to spend at times of their lives when their earning capacity is diminished and the marginal utility of additional income is much higher. There are also some people who enjoy their work so much that they would not require any compensation for sacrificing an hour of free time. More research is required before we will have a good understanding of why people make the choices they make between income and leisure.
The quote at the beginning of this article suggests that the choice that individuals make between income and leisure is a government policy issue. Why should it be? The weight of evidence suggests that when governments attempt to regulate how people live their lives they tend to make people more miserable rather than happier. As I see it, the main benefit of research of this kind is that the findings may help individuals to improve their own well-being and that of their families by enabling them to make better choices.
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I recognize that you are not promoting this, but the very idea that a government functionary can possibly know what makes any individual more or less happy than the individual himself or herself reeks of pompous arrogance. Yet that is the only policy application of this study.
The attempt to measure overall happiness is an attempt to quantify an unquantifiable characteristic. Marginal utility is not knowable or measurable. It is relative for each individual and not objective. It is an ordinal prioritizing of choices using all of the knowledge of that person. Using presumed positive and negative feelings measured by bodily reactions is accounting for a tiny part of the overall picture, and likely distorts reality to a significant degree.
Every individual has his or her own goals, circumstances, needs and assumptions about the future. Fleeting happiness of the moment cannot possibly be a determinant of a worthwhile, joy filled and fulfilling life overall.
Many people will put up with unpleasant situations now in return for some benefit that they may expect sometime in the distant future. That future could be early retirement, a special vacation, a college education, paying off the mortgage, or an infinite number of other possibilities.
Working long hours, even if current pleasure is not maximized, is proof positive that the individual doing the working values the benefits expected from the work more than the unpleasantness of the work. If that was not so, he or she would be doing something else.
You may be right that the happiness research may make some people happier if they follow its prescriptions. As a general rule, however, I think it is a serious error to think that people are too stupid to be able to weigh current costs against future benefits. They may think differently than we do, they may view activities and rewards in a different priority than we do. Only they, however, know the things that they do about their own life, their own priorities, their own skills, their own hopes and dreams.
It is not for someone else, whether a researcher, outside onlooker or government bureaucrat, to impose their own priorities on them.
The choices that an individual makes are only better if the new knowledge encourages further introspection as to what is really important for that person. If the person applies the findings of the study without further thought, he or she may actually end up less happy in the end, because longer term goals are not met.
Using the study results may be a real benefit only if it dispels some mistaken belief that distorted the decision making process for that person. In that case, the individual can make a new set of priorities, base on an updated understanding of reality.
Dan
Thanks for your thoughtful comment. I’m sorry for the delay in responding. I have been away from my computer for a couple of weeks.
I agree with nearly all of your comment, so I will just focus on the area of disagreement.
While I agree with you that individual choice is inherently subjective I don’t think this means that happiness is inherently unquantifiable. I think that you and I could construct reasonably accurate indexes of how our own individual happiness varies over time (if we thought this was worth doing).
There is a much bigger conceptual problem with interpersonal comparisons of utility, but humans do communicate with each other about their happiness and the words they use seem to have common meaning. So I don’t agree that attempts to measure the average level of happiness of a group of people involves an attempt to quantify the unquantifiable.
At the same time, I acknowledge that there are huge measurement problems in attempting to quantify average happiness and a great deal of confusion about the meaning of existing measures of subjective well-being.
It seems to me that exsiting subjective well-being measures are not entirely meaningless but many people, includng some economists, tend to misinterpret them.