Is it all relative? How about happiness?

The other day I posted about the relationship between money, ambition, and happiness. I mentioned that comparing your income to others will likely lead to unhappiness. Let me give that dead horse a good whooping yet again:

This study uses a three-person gift-exchange game experiment to examine the impact of pay comparisons on effort behavior. We compare effort choices made in a treatment where coworkers’ wages are secret with effort choices made in two ‘public wages’ treatments. The two ‘public wages’ treatments differ in whether co-workers’ wages are chosen by an employer, or are fixed exogenously by the experimenter. We find that pay comparison information has an overall detrimental impact on effort choices: employees respond less favorably to the wage offers made by the employer when they receive information about the wage paid to the co-worker as compared to the case where co-workers’ wages are secret. These effects are particularly pronounced in the treatment where the level of the co-worker’s wage is fixed exogenously.

Source: “The Impact Of Pay Comparisons On Effort Behavior” from The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham, Discussion Papers # 2010-03.

There’s a cold war era joke about the prevalent attitude in Soviet Russia: A farmer frees a genie from a lamp. The genie says I’ll grant you a wish. The farmer says, “I have two cows. My neighbor has four cows…” The genie cuts him off, “I get it. So you want me to grant you three cows.” The farmer replies, “No, I want you to kill three of his.

I think it was this episode of the always-excellent Radiolab that touched on the idea that we’re not naturally good at abstract math and that as babies we’re much better at relative evaluations of numbers.

From an evo-psych perspective this makes a lot of sense. For the first few thousand years of humanity, being able to deal with big numbers just wasn’t a terribly practical skill. Now comparing what you had to what someone else had in the social sphere was very useful…We’re naturally good at it and it provokes strong emotions; often negative ones, unless you’re the one on top.

But how long can you stay on top for?

This paper studies the effect of providing relative performance feedback information on individual performance and on individual affective response, when agents are rewarded according to their absolute performance. In a laboratory set-up, agents perform a real effort task and when receiving feedback, they are asked to rate their happiness, arousal and feeling of dominance. Control subjects learn only their absolute performance, while the treated subjects additionally learn the average performance in the session. Performance is 17 percent higher when relative performance feedback is provided. Furthermore, although feedback increases the performance independent of the content (i.e., performing above or below the average), the content is determinant for the affective response. When subjects are treated, the inequality in the happiness and the feeling of dominance between those subjects performing above and below the average increases by 8 and 6 percentage points, respectively.

Source: “The Provision of Relative Performance Feedback Information: An Experimental Analysis of Performance and Happiness” from Department of Economics and Business, Universitat Pompeu Fabra, Economics Working Papers # 1216.

We’re naturally competitive. There will always be winners and losers. That isn’t going away. But does everything have to be a competition? No. So if you want to be happy, I’d suggest limiting the areas in which you compete. Otherwise you’re very likely to be unhappy and you’ll definitely be tired.

How do you win a nuclear war? Don’t play.

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