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Would you choose a healthy environment over financial security? Would you choose a healthy environment over financial security?
Jesse Winter
Jesse Winter

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One of Heffetz’s main areas of interest is the economics of happiness. “When you ask a person to rate their happiness by giving you a number from 1 to 10, what does that number really mean?”
Jesse Winter
Jesse Winter

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There’s a large amount of literature about how people don’t know what makes them happy.
Jesse Winter
Jesse Winter

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Heffetz collaborated with other researchers to construct an index of all the factors that contribute to well-being—happiness is only one of them. In one study Heffetz and coresearchers found that family well-being topped the list of aspects of well-being.
Jesse Winter
Jesse Winter

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The findings of Heffetz and his collaborators have important implications for policymakers trying to track the overall well-being of a country or population. Money might allow people to get other things they want, and they’re willing to make the trade-off.
Jesse Winter
Jesse Winter

Life Choices and Happiness

by Jackie Swift

Ori Heffetz, Economics/Johnson Graduate School of Management, wants to know how you make decisions. If you were offered a new job with more pay but less leisure time than your current job, would you take it? Would you choose a healthy environment over financial security? Would you be willing to move to a city far from family and friends in order to have a greater sense of purpose to your life? These are the sorts of choices we are confronted by all the time, says Heffetz, and understanding how and why we make the choices we do is the focus of his research.

One of Heffetz’s main areas of interest is the economics of happiness—that elusive state of being that has played a starring role recently in all kinds of large-scale surveys seeking to discover everything from how much money brings the most happiness to which country has the happiest citizens. “These types of surveys get a lot of press because everyone’s into happiness,” Heffetz says. “But when you ask a person about their happiness—for instance, when you ask them to rate it by giving you a number from 1 to 10—what does that number really mean?”

The Trade-Offs

To answer that question, over the past few years Heffetz has joined with Daniel Benjamin, Economics, and Miles Kimball (University of Michigan), to conduct three research projects aimed at understanding the links between people’s responses to happiness surveys and the choices and trade-offs they make.

The first project, joint with Alex Rees-Jones, then a Cornell PhD student, looked at the trade-offs people said they were willing to make in hypothetical situations. Participants in the survey were asked to respond to a sequence of scenarios in which different options were pitted against each other—usually money against another factor such as sleep time or geographical closeness to family. For each scenario, they were asked two questions: Which would make them happier and which would they choose?

Perhaps surprisingly, many people chose options they knew would make them less happy. They might choose to take a high-paying job that would allow for less sleep time, for instance, even though they knew that more sleep would make them happier. Why? “Money might allow them to get other things they want,” Heffetz says, “and they’re willing to make the trade-off. There’s a large amount of literature about how people don’t know what makes them happy and if they only did, they would make better decisions. But we showed examples of people who know what will make them happy and choose something else anyway. It could be there are other factors they care about besides happiness.”

In an effort to assign an average importance to each of these various factors that influence life choices and contribute to overall individual wellbeing, Heffetz and his three coresearchers conducted a second study, this time rooted in real consequences. Focusing on the National Resident Matching Program—an algorithm that matches medical students to residency programs—they surveyed students applying for residencies, asking them to fill out a detailed survey about their top four residency program choices. The survey asked the students to rate a number of factors that might influence their ranking, from their anticipated happiness in a particular program, to their spouse’s happiness, their anticipated quality of social life, and the degree of prestige connected to the residency, among others. Then the researchers used statistical methods to determine how much importance, or weight, the average student gave to each of the factors.

“Again we found that people make trade-offs,” Heffetz says. “Happiness is not everything—at least that happiness that people refer to on these types of surveys. To truly measure wellbeing, we may need to construct an index, or a weighted average of all the factors that contribute to wellbeing, and happiness may be just one of them.”

Family, Health, and Security

Heffetz, Benjamin, and Kimball, this time joined by another Cornell PhD student at the time, Nichole Szembrot, decided to explore what would be necessary to construct such an index. They turned to the surveys purporting to rank countries on overall happiness, or wellbeing. Countries as diverse as Denmark, Costa Rica, and Bhutan have all topped one survey or another in recent decades and have been hailed as “the happiest country on Earth.”

The discrepancies in the “winner” countries reflect the multidimensionality of wellbeing, and the lack of comprehensiveness of many surveys. After all, almost every country can be a winner in some aspect of wellbeing. Attempting to be more comprehensive, Heffetz and his coresearchers created a list of more than 130 aspects of wellbeing, which they compiled after looking at important papers in psychology, philosophy, and economics published on the topic over the past 60 years or so. The aspects reflected concerns such as freedoms of all kinds, basic rights, physical and monetary securities, personal relationships, and many others. Such aspects were pitted against each other in a series of questions asking respondents to choose between options.

"We showed examples of people who know what will make them happy and choose something else anyway. It could be there are other factors they care about besides happiness.”

The researchers ended up with close to 50,000 decisions made by 4,600 subjects. With this large data pool, they were able to rank each aspect as to the importance given it by the respondents. The number one aspect was family wellbeing. Other top 10 aspects included health, security (both physical and financial), and values. Respondents’ own happiness, or what was sometimes also referred to as “life satisfaction” in the survey, did not make the top 10, although it was in the top 40.

“Everyone cares about family,” says Heffetz, “but when we looked at demographics, we saw that life satisfaction is much more important to people with higher income. Those who are struggling care much less about life satisfaction. They want to be respected, to have financial security, and to not be excluded.”

Implications for Policymaking

These results have some important implications for policymakers and those trying to track the overall wellbeing of a country or population, says Heffetz. “In recent years, there’s been a lot of people calling for governments to monitor other things beyond Gross Domestic Product (GDP)—to worry about society and social progress. So, if governments want to seriously measure wellbeing, and not just a component of wellbeing, they need to look at all these aspects and think about the trade-offs between them that people are willing to make.”

If countries adopt the same wellbeing-index framework, then comparisons between countries may, one day, have more meaning, Heffetz says, although he cautions that much more work needs to be done. “There are still open questions regarding comparisons across people, for example, that economists are struggling with,” he adds.

Heffetz’ and his coresearchers’ work provides a piece of the puzzle. Their research may help wellbeing to one day join other economic and social indicators—such as GDP, infant mortality, and life expectancy—in providing a snapshot of a society that economists, governments, and others can use to set new policies as well as assess the impact of old ones.