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96 Abroadened understanding of satisfaction challenges the traditional economic theory that assumes that individuals maximize their well-being based on decisions that correctly predict basic well-being derived from consumption and from other key decisions, such as the allocation of time between work and leisure activities. In reality, human behavior does not adhere to such simple propositions.1 The motivations that intervene in decisions are diverse and include momentary impulses, commitments, or simple routines that give rise to decisions that do not necessarily lead to achieving maximum satisfaction. A paradoxical conclusion of satisfaction studies is that the explicit pursuit of happiness can be counterproductive, because it affects individual aspirations and because people make systematic misjudgments about what produces happiness. In general, people fail to predict future utility or welfare effectively; thus they overestimate the effect of extrinsic attributes (particularly, the value of consumer goods) and underestimate the benefits of intrinsic attributes (friends, family, hobbies). In analyzing the factors that influence levels of satisfaction, it is apparent that beyond income and what can be obtained with it, other aspects of life have a greater impact on maintaining them. Satisfaction beyond Income eduardo lora, juan camilo chaparro, and maría victoria rodríguez 4 1. The challenges that the “science of happiness” presents to economic theory are surveyed by Frey and Stutzer (2002); many of them were identified in the 1970s by the Leyden school (see van Praag, 1985) and by Brickman and Campbell (1971). satisfaction beyond income 97 2. In this chapter, the term Latin America (and its derivations) includes the Caribbean. 3. The complete text of the question appears in box 2-1 (general domain of self-perception). Since satisfaction depends on income, as well as other factors, the following mental experiment is pertinent: If a person undergoes a sudden critical change in some aspect of life, how much would his or her income have to be increased to maintain the same level of satisfaction? Although this concerns a completely hypothetical experiment, it is enlightening; it shows that greater income can hardly substitute for many of the most important facets of life, such as friendships or health. For example, for a Latin American,2 the average “value” of friendship is nearly seven times his or her income, which gives support to the popular view, as many people have stated, that a good friendship is priceless. The previous chapter analyzed how various domains of individual satisfaction relate to income. With a different focus, this chapter concentrates on life satisfaction in general to explore how it is affected by diverse factors, beyond income, and how the different dimensions of people’s lives are reflected synthetically in their level of satisfaction. Life satisfaction in the Gallup World Polls—which are the source of information for this chapter—is measured according to the life satisfaction “ladder” question, which asks respondents, “On what step of the ladder do you feel you are currently” with “the highest step [10] representing the best possible life for you and the lowest step [0] representing the worst for you.”3 This method is only one out of many methods used to investigate life satisfaction and to measure its subjective utility (see box 4-1). Individual Factors and Life Satisfaction In surveys that use the “ladder” scale from 0 to 10 to determine a respondent’s level of life satisfaction, the answers are concentrated mainly at the midpoint, but this does not mean the gradation lacks importance. Simply comparing the way in which answers are distributed in wealthy countries to their distribution in poor countries makes it clear that wealthier countries have a greater level of life satisfaction (as analyzed in chapter 3). Using this scale, a little more than 80 percent of the people surveyed in the poorest countries rate the quality of their current life between a 0 and a 5, whereas in the richest countries barely 25 percent of respondents give scores in this range (see figure 4-1). This would suggest that in order to understand life satisfaction , one must explain the differences between countries. Nonetheless, this route does not stretch very far; beyond the per capita income of the countries and the growth rate in past years, no other “national” variable makes a significant contribution to explaining the differences. Even if it did, it would not lead too far, since only a fraction (37 percent, to be exact) of the differences in levels of life satisfaction between some individuals and others is due to diversity...

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