Do individuals try to maximize general satisfaction?

Do individuals try to maximize general satisfaction?

Paul Frijters *

Faculty of Economics and Econometrics, Tinbergen Institute Amsterdam, University of Amsterdam,

Roetersstraat 11, 1018 Amsterdam, Netherlands

Received 4 December 1998; received in revised form 10 September 1999; accepted 1 December 1999

Abstract

The hypothesis that individuals try to maximize their life-satisfaction is analyzed. The

approach was to derive empirically testable predictions as to the relationships between in-

tentions, actions, importance weights, and satisfaction levels that would be consistent with the

hypothesis, and to test these predictions on a Russian and a German panel data set. The

respondents investigated were more likely to intend to change those areas they are unsatis®ed

with in this period, were more likely to actually have changed those areas they were unsatis®ed

with in the last period, and tended to ®nd the areas of their lives they were dissatis®ed with less

important. The relationships were not very strong though and were more reliable for the

German data set than for the Russian data set. The ®ndings therefore give only limited

support to the hypothesis examined. Ó 2000 Elsevier Science B.V. All rights reserved.

PsycINFO classi®cation: 2340; 3120

JEL classi®cation: D00; D63; I30

Keywords: Satisfaction; Memory and anticipation; Choice behaviour; Panel data analysis

Journal of Economic Psychology 21 (2000) 281±304www.elsevier.com/locate/joep

* Present address: Faculty of Economics, Free University Amsterdam, De Boelelaan 1105, 1081 HV

Amsterdam, The Netherlands. Tel.: +31-20-4446155; fax: +31-20-4446005; web.: http://www.econ.vu.nl/

medewerkers/pfrijters.

E-mail address: [email protected] (P. Frijters).

0167-4870/00/$ - see front matter Ó 2000 Elsevier Science B.V. All rights reserved.

PII: S 0 1 6 7 - 4 8 7 0 ( 0 0 ) 0 0 0 0 5 - 2

1. Introduction

In this paper, we investigate whether the choice behavior of individuals isconsistent with the idea that they try to maximize self-reported levels ofgeneral satisfaction. Our purpose is to assess the possible usefulness of sat-isfaction questions for economics in general and policy questions in partic-ular. If individuals try to maximize self-reported satisfaction levels, then asatisfaction level corresponds to the economic notion of an ordinal utilitylevel. Moreover, as satisfaction levels also have normative connotations inthe classical utilitarian sense, they may be used to make normative statementsabout policies.

In this section, we use the psychological literature on satisfaction levels tobuild a descriptive model which explains how individuals answer satisfactionquestions. We then derive two predictions as to the verbal and choice be-havior that would be consistent with the idea that individuals try to maximizetheir general satisfaction level.

In Section 2, the predictions are tested on large Russian and German paneldata sets with parametric and semi-parametric techniques. The main theo-retical prediction is that individuals will want to make changes in those areasof their lives that they are unsatis®ed with. This will be investigated with thehelp of partial satisfaction levels, which are the levels of satisfaction thatindividuals enjoy in speci®c areas of their lives. We investigate whether a lowlevel of satisfaction in a particular area of life is correlated with the plan tochange current conditions in that area, for several partial satisfactions ofindividuals, namely satisfaction with marriage, satisfaction with the currentjob, and satisfaction with current housing conditions.

We then study panel data sets to see whether low satisfaction in a speci®carea of life in a previous period has led to changes in those areas of life in thisperiod. Finally, we investigate whether individuals tend to ®nd those areas oflife important which gave them a lot of satisfaction in the past, since one ofthe easiest ways for an individual to be satis®ed in general is to concentrateon those areas with which he is satis®ed.

Although the results give some support to the predictions, it turns outthat there is a lot of variation at the individual level: most decisions andintentions are not fully explained by satisfaction levels and the other indi-vidual characteristics measured. Our preliminary conclusion is thereforethat there may be some truth in the hypothesis that self-reported satisfac-tion is the maximand of individual behavior, but it cannot be a�rmed withany con®dence.

282 P. Frijters / Journal of Economic Psychology 21 (2000) 281±304

1.1. Current ®ndings

In the psychological literature there are several theories as to the meaningof self-reported satisfaction levels. 1 Rather than discussing them all one byone, the interpretation used by Kahneman (1998) is followed because it isintuitively attractive and lends itself well for hypothesis building.

Like other vertebrates, humans have speci®c brain centers which contin-uously evaluate current experiences so as to allow them to make decisionsabout the continuation of current activities and to decide on their response toexperiences (see Shizgal, 1998). These ``instant evaluations'', which in thehuman case are self-reported on a good/bad scale 2 are termed ``momentarysatisfaction levels'' (MSLs). In the conception used by Kahneman, whichgoes back to at least Bentham (1798) and Edgeworth (1881), self-reportedlevels of satisfaction are an aggregate of these MSLs. In its simplest form,satisfaction with life, also termed general satisfaction, is a weighted averageof the MSLs over the period T1 to T2:

GSi �Z T2

T1

mit�MSLi; t�MSLitf gdt

and Z T2

T1

mit�MSLi; t�dt � 1;

where GSi denotes the satisfaction with life as a whole as reported by indi-vidual i, and m�� denotes a memory function which weights each momentarysatisfaction level of the individual at time t, denoted by MSLit. The memoryfunction depends on t and on the whole stream of MSLs, which is denoted byMSLi: The idea that general satisfaction is a weighted average of momentarysatisfactions is re¯ected by the condition that the memory weights mit add upto one. This way of arriving at a self-reported general satisfaction level isillustrated in Fig. 1, where we have taken m�� to be a constant and henceshow the case where all MSLs have equal weights.

1 See e.g., Veenhoven (1996), Diener, Suh and Oichi (1997), Van Praag and Frijters (1999) and the

chapters in Kahneman, Diener and Schwarz (1998) for overviews.2 Di�erent studies use di�erent wordings (good/bad, negative/positive, favorable/unfavorable, etc.)

Individuals seem to interpret these words in roughly the same way.

P. Frijters / Journal of Economic Psychology 21 (2000) 281±304 283

General satisfaction equals the average level of momentary satisfactionsfrom T1 to T2 and equals the shaded area as time weights are equal to 1 in thisexample. In principle, the method allows for the idea that individuals includeall the MSLs they ever had and anticipations of MSLs in the future into theirgeneral satisfaction level. This way of conceptualizing satisfaction levels alsoallows for an interpretation of partial satisfaction levels. A partial satisfac-tion level is also a weighted average of MSLs but each partial satisfaction hasits own weight function: the moments an individual counts as relevant for aparticular domain have a higher memory weight than the moments an in-dividual does not deem relevant for that domain. Some moments may berelevant for many domains and individuals may have other ideas about theboundaries of domains.

Three issues are elaborated, keeping in mind that we want to use theframework to assess whether individuals use satisfaction levels to makechoices: how do individual circumstances a�ect MSLs, how do individualsconstruct the memory weights mit, and how do individuals evaluate possiblefuture events? Below, some empirical results on each of these questions willbe presented and discussed. In each case, the literature will be used to for-mulate falsi®able hypotheses as to the behavior which would be consistentwith the idea that individuals try to maximize their general satisfaction levels.

It has been found that the level of momentary satisfaction individualsderive from an experience depends on a reference position, which in turndepends on previous and anticipated experiences. Put simply, the ``higher''the reference position, i.e., the higher the level of anticipations, of an indi-vidual, the higher the outcome must be in order to achieve a certain mo-mentary satisfaction level. Because the reference position adapts with new

Fig. 1. General satisfaction as the integral of a ¯ow of MSLs. m�MSL; t� � 0 iff t < 1; t > 2.


experiences, this ®nding is known best under the name adaptation theory. 3

The expectations an individual has of future experiences will depend on theability of an individual to obtain favorable experiences. This in turn is de-termined by external constraints and individual abilities. In the terminologyof the goal persuit literature (e.g. Gollwitzer, 1993; Heckhausen & Schultz,1995), an individual will be dissatis®ed when outcomes are beneath what hebelieves to be within his ``primary control'': for example, an individual'sexpectation of his future income depends on the availability of work and onthe ability of the individual to ®nd work and perform complicated tasks. Ifthe realized experiences are better than expected, the individual will not ex-pect to be able to improve on these circumstances. If the realized experiencesare worse than expected, an individual will hope to improve them bychanging his circumstances. This leads to the hypothesis that individuals willintend to change the areas of their lives with which they are unsatis®ed in thisperiod and will have changed those areas of their lives they were unsatis®ed within the last period. We split this hypothesis in two parts in the results section.First, we consider whether the intentions of the individual are related to lowsatisfaction levels with respect to the area involved. Secondly, we look atwhether we can explain some actual choices made by individuals by lookingat the satisfaction values in the previous period.

The memory weight mit of an MSL has been found to depend on its relativeposition in a stream of MSLs (Kahneman, Fredrickson, Schreiber &Redelmeier, 1993). If the MSL of a speci®c moment is particularly pleasantor unpleasant relative to what has preceded or followed in a certain timeperiod, the MSL of that moment will have a disproportionately large in¯u-ence on self-reported satisfaction levels. Extreme experiences are rememberedbetter and, because remembering is a form of consumption, have a largein¯uence on subsequent MSLs. It has also been found to be the case that thelast MSLs in a period are of particular importance for self-reported levels ofsatisfaction. This ®nding has been termed the peak±end rule by Kahneman etal. (1993). To clarify, suppose that in a medical operation without anaes-thetic, the pain (negative momentary satisfaction) experienced ®rst increases,reaches a peak, and then decreases. The evaluation that an individual gives of

3 There is a whole host of theories which consider the idea that the reference position can be formed by

comparisons with the experiences of oneself or of other individuals, such as the prospect theory of

Kahneman and Tversky (1979). Some psychological works on this issue: Helson (1964), Cohen and

Axelrod (1984) and Gilad, Kaish and Loeb (1987); some economic works on this issue: Veblen (1899),

Duesenberry (1949), Van Praag (1971), Kapteyn (1977) and Clark, Georgellis and Sanfey (1998).


this operation can then be well-predicted by the level of pain experienced atthe peak and at the end: the pain at other moments has hardly any percep-tible in¯uence on the evaluation.

An important point to watch out for in empirical analyses is that thesememory weights are very easily manipulated by the researcher (see e.g.Schwarz, 1995, for an extensive discussion of this issue): the MSLs asso-ciated with the experiences an individual is reminded of just before an-swering satisfaction questions, are more important for that reportedsatisfaction level. As a demonstration of this bias, we report the results of asimple OLS-analysis. The data come from a sample of Russians in 1995 andwill be described later in detail. The endogenous variable is the answer tothe question ``how satis®ed are you with the ®nancial situation of yourhousehold on a scale from 1 to 10, where 1 stands for very unsatis®ed and10 for very satis®ed''. The ®rst exogenous variable is the household incomefrom all activities before tax. The second is the log-mean of the IncomeEvaluation Question and roughly equals the ®nancial needs of the family(see Appendix A). Now, the ®nancial satisfaction question happens to havebeen posed twice in the same interview. The ®rst time, it was posed beforethe exogenous variable-questions and the second time it was posed after.Regressing both endogenous variables on the same exogenous variablesyields:

Looking only at the di�erences in the coe�cients, we see from these OLSregressions that the e�ects of the exogenous variables were some 20% greaterwhen the question on ®nancial satisfaction was asked immediately after thesequestions than when the question was asked before. Also, the empirical ®thas increased substantially, witness the large increase in R2. As these par-ticular exogenous variables, income and the ®nancial needs of a family (l),are major elements in the life of the respondent so that he will often be re-minded of them anyway, the e�ect of posing these questions just before the

The importance of the order of questions for ®nancial satisfaction*

Financialsatisfaction 1

t-value Financialsatisfaction 2

t-value

ln (Income) 1.60 8.2 1.90 22.3l )1.39 6.4 )1.62 17.1N 1442 1442R2 0.04 0.26

*Financial satisfaction 1 denotes the endogenous variable posed ®rst.


satisfaction question will probably be a lot less than for questions on oth-erwise less important and less remembered subjects. The 20% bias found heremay be seen as a lower bound.

Not only a questionnaire can trigger memory: individuals have limitedcontrol over what they remember. Selective memory e�ects are known fromthe theory of cognitive dissonance (Festinger, 1957) which shows that indi-viduals are more likely to remember things if they ®t in with their pre-con-ceived ideas. It has also for long been known that individuals use theirmemory to explain events and occurrences in a way bene®cial to their owncircumstances. For example, Pettigrew (1979) showed that successful indi-viduals attributed success in general to personal factors or factors under theircontrol, whereas unsuccessful individuals attributed their lack of success tobad luck or other factors outside their control. Both groups interpreted re-ality in such a way that it promoted their own satisfaction and rememberedthose facts bene®cial to their point of view.

The possibility of a selective memory leads us to expect that individualsincrease the memory weight of more pleasant events in their lives and reducethe memory weight of unpleasant events (repress them). This leads to thehypothesis that the importance of an area of one's life will increase if theindividual was more satis®ed with this area in previous periods. In otherwords, individuals wanting to be satis®ed should only pay attention to thoseareas of their lives that they were satis®ed with in the past. We will test thisprediction in two ways in the results section. Firstly, we will examine surveyquestions about the importance of several sub-areas of life for an individual,where we expect that individuals who are more satis®ed with a particulararea of their lives will tend to ®nd that area more important. Secondly, wewill investigate how the importance of partial satisfactions for general sat-isfactions changes over time. We will then try to explain the weight ofseveral sub-areas of life for general satisfaction using the answers con-cerning partial satisfactions in the previous period. The thought behind thisis that individuals cannot change the importance of an area instantly andthat they therefore slowly increase the importance of areas with which theyare most satis®ed and slowly decrease the importance of areas that they areless satis®ed with. If this adaptation takes some time, we should see a sig-ni®cant effect of a partial satisfaction in the last period on the weight of thatpartial satisfaction for general satisfaction this period. We expect to see thatthe weight of the partial satisfaction areas for general satisfaction increasesif the individual was more satis®ed with the area involved in the previousperiod.


Predictions of individuals of the satisfaction value of future events areprone to human de®ciencies. Firstly, individuals seem unable to anticipatechanges in their reference position. As a result, they fail to anticipate thatthey will value something higher when they possess it. In Festinger (1957)experiment for instance, the subjective desirability of a consumer good asreported by test persons increased markedly after an individual had chosenthat consumer object: an object that was purchased appeared more beautifuland more useful than it had before the purchase. The ®nding that individualsfail to anticipate before a purchase their change in evaluation after a pur-chase is known in economics as the endowment effect (Thaler, 1980), and hasbeen replicated in many psychological choice-experiments (e.g. Kahneman,Knetsch & Thaler, 1991; Loewenstein & Adler, 1995; Simonson, 1990;Kahneman & Schnell, 1992). 4

Another problem individuals face when they anticipate future outcomes isthat they overestimate small probabilities and underestimate large proba-bilities, as demonstrated by Kahneman and Tversky (1979), Van de Stadt,Antonides and Van Praag (1984) and Tversky and Fox (1995). This helps toexplain gambling, insurance and tournaments (see Frijters, 1998). The pointof these two ®ndings for this paper is that it is hard to infer from the satis-faction effect of choices whether individuals were trying to maximize theirsatisfaction levels or not. Individuals may be unsuccessful in maximizingtheir general satisfaction because they fail to take a change of referenceposition into account and they cannot deal with small probabilities. We cantherefore only check whether individuals' intentions and choices are consis-tent with the idea that they try to maximize general satisfaction.

2. Data, methods and results

The ®rst panel data set used is the Russian National Panel data set, fromwhich we used the ®rst two waves, collected in 1993 and 1994. This paneldata set was designed to track intentions and actions of individuals over timeand hence contains information for several areas of individuals' lives aboutthe intentions that individuals have to change aspects of their lives in the

4 It has been argued that this e�ect is evolutionary driven because individuals who have learned to value

what they have will defend it more rigorosly and will also have a better bargaining position when others

want to o�er them alternatives (they can credibly say no to unfair o�ers).


future, the level of satisfaction that individuals currently attain within an areaof their lives and whether any actions have been taken since the last in-terview in that area. With this panel data set we can hence test for severalareas of individuals' lives whether they are more likely to intend to changeaspects of their lives if they are more unsatis®ed with that area currently,and whether they have actually changed an aspect of their life they wereunsatis®ed with last year. The correspondence between the intentions in1993 and the actions in 1994 is not complete however. It is for instance notasked in 1994 whether an individual followed up on his intentions tochange his marital status in 1993. All that is known is whether the maritalstatus actually changed, but this can be the result of exogenous in¯uencessuch as the partner's actions. Hence the areas for which intentions areavailable do not perfectly overlap with the areas for which follow-up ac-tions are known. For some areas (such as satisfaction with social contacts),neither is known.

The second panel data set used is the German Socio-Economic Panel(GSOEP), described in Wagner, Burkhause and Behringer (1993) 5 of whichwe used the 1992 and 1993 West-German waves. This panel data set was notdesigned to track intentions and actions over time. Therefore we have to use`loose' questions which were posed here and there in the questionnaires asindicators of whether individuals have an intention to change an area of theirlife or have changed an area of their life. This means there will be virtually nooverlap between intentions and actual choices. The GSOEP panel doeshowever have extensive information on socio-economic variables of indi-viduals, such as income, demographic composition, and education. Like theRussian panel data set, the GSOEP also has extensive information on thegeneral satisfaction levels of the respondents and on satisfaction levels withparticular areas of their lives.

What is missing for both data sets are questions that probe the personalityof the individual involved. As a result, we will have to make do with de-mographic variables, such as age and gender, as additional explanatoryvariables for intentions and changes, apart from satisfaction variables.

5 The GSOEP is a longitudinal household survey sponsored by the Deutsche Forschungsgemeinschaft

and organized by the German Institute for Economic Research (Berlin), and the Center for Demography

and Economics of Aging (Syracuse University). We are grateful to these institutes and the project director

Dr. G. Wagner for making this dataset available.


2.1. Descriptive statistics

For both data sets used, the sample averages and variances of some im-portant variables are given in Table 1.

The precise de®nitions of these and other variables are given in the ap-pendix. The most glaring di�erence between the two data sets is that therespondents in the GSOEP are generally more satis®ed with all aspects oftheir lives (especially their ®nances), are younger, slightly more often maleand better educated than their Russian counterparts.

As to the analyses, reweighting measures were used initially for both datasets to see whether sample-selection biased the results, but as they did notin¯uence the results signi®cantly, the results shown are on unweightedsamples. A general discussion of selection issues and characteristics of theRussian data set can be found in (Frijters, 1999, Ch. 2).

2.2. The intention to change in Russia and Germany

In the Russian panel data set we have information available on the in-tentions of individuals to change their circumstances in three spheres of theirlives, namely the intention of individuals to change their family conditions,

Table 1

Descriptive statistics of the Russian data set 1992 and the GSOEP 1993

Descriptive statistics of: The Russian data set 1992 The GSOEP 1993

Average S.D. Average S.D.

ln (monthly income) 10.9 0.8 7.9 1.7

Education 12.8 4.4 12.1 2.4

Male 0.37 0.4 0.43 0.5

Age 44 12 39 12

l 11.4 0.8

Life satisfaction 5.1 2.5 6.9 1.9

Health satisfaction 6.7 2.3

Marital satisfaction 7.7 2.7

Housing satisfaction 5.4 3.1 7.2 2.2

Job satisfaction 6.2 2.7 7.1 2.0

Social satisfaction 6.9 2.5

Leisure satisfaction 6.6 2.4

Financial satisfaction 3.0 2.2 6.2 2.3

Work condition satisfaction 5.4 2.7

Environmental satisfaction 5.5 2.2

N 2924 6970


their housing conditions and their job conditions. In Table 2, we report thee�ect of various factors on the probability that an individual intends to makespeci®c changes to an aspect of his life. The dependent variable equals one ifan individual indicated a speci®c intention to change an area of his life, andequals zero otherwise. We include variables denoting the ability of the in-dividual to change an area of his life, such as income, age, education, the®nancial needs of the household (denoted by l) and gender as explanatoryvariables. The ®nancial need of the household here refers to the income thehousehold claims to need to label that income level as ``not good, not bad''.We also include variables denoting the current satisfaction levels of the in-dividual and the relative place of the partial satisfaction level involved. Weinclude two dummies, one that denotes whether the partial satisfaction in-volved is the maximum satisfaction level of all the partial satisfaction levelsreported, and a second which denotes whether the partial satisfaction levelequals the minimum partial satisfaction level as an indication of the relativeplace of a partial satisfaction level in the set of partial satisfactions.

Table 2 shows the results of a Probit analysis. A maximum score estimatorwas also used, which is a semi-parametric method which makes fewer as-sumptions on the error-distribution (see Horowitz, 1992, 1993). Because theresults of the maximum score estimation are not substantially di�erent from

Table 2

Concrete intentions to change an aspect of one's life by personal action in Russiaa

Family situation Housing situation Job situation

Probit t-value Probit t-value Probit t-value

Circumstances

ln (income) 0.06 0.9 0.22 4.4 )0.07 1.0

Education 0.02 1.8 0.01 2.0 0.01 0.9

Male )0.12 1.7 0.03 0.5 0.26 3.3

ln (age) 11.4 4.0 )0.97 12.0 )1.04 8.0

ln2 (age) )1.72 4.3

l 0.02 0.2 0.04 0.7 0.19 2.5

Satisfactions

Life satisfaction )0.07 1.8 )0.03 1.1 )0.04 0.9

Satisfaction with this sphere )0.30 5.1 )0.26 5.1 )0.44 7.2

Maximum satisfaction? )0.003 0.0 )0.41 4.8 )0.11 1.0

Minimum satisfaction? )0.21 1.4 )0.23 2.7 0.01 0.0

ÿ2Log�L� 1685.2 2845.3 1365.4

Number of yi equal to 1 446 994 311

N 1646 2522 1693

a A polynomial age-pro®le was tried for all intentions. It was retained only if signi®cant. Constants are not

shown.


those of the Probit analyses however, the maximum score results are notshown but do suggest some robustness of the results.

The explanatory variables have been grouped into individual circum-stances and individual satisfaction variables. Looking at the individual cir-cumstances, we ®nd that age is by far the most important. 6 A higher agedecreases the intention to change, in the case of family life even quadraticallyso (from 20 years of age onwards, the older the respondent gets, the in-creasingly unlikely becomes the intention of making changes in family life).As change brings ®xed costs, it may be expected that younger individualshave longer to retrieve these costs. Another explanation for the strong neg-ative in¯uence of age on the intention to change is that older respondentshave already made all the changes they believe could increase their generalsatisfaction.

Another individual circumstance, income, plays a less signi®cant role inthe intention to change. Only the intention to change one's housing condi-tions is signi®cantly increased by a higher income. As changes in housing arelikely to be costly, this was to be expected. The fact that higher income isnegatively related to the intention to change one's job conditions is alsounderstandable, as those with a high income will not want to change jobs. Onthe other hand, a high level of ®nancial need a�ects the intention to change.Individuals with relatively high ®nancial needs may look for a higher payingjob. Gender is relevant for increasing the intention to change job-condi-tions. 7 A possible explanation is that men are more ambitious in theworkplace than women. In short, the e�ects of individual circumstances onthe intention to change, seems quite reasonable.

As to the in¯uence of satisfaction variables, the most important factor inall three areas of satisfaction is the absolute satisfaction level of the particularsphere involved. The relative place of the partial satisfaction amongst allreported partial satisfaction levels is less important. It therefore does notseem likely from these results that individuals prioritize the changes theyintend to make, i.e., they do not merely want to change the circumstances inthe area with which they are least satis®ed. It seems rather that individuals

6 The relative e�ect of a variable is the coe�cient of that variable multiplied by the variance of that

variable. Using the variances given in Table 2, we can see that this is highest for age.7 An interesting sideline is that when individuals are asked whether they intend to change anything,

males are much more likely to say they will change something. When however asked about the speci®c

changes they intend to make (for which we report the results), the gender e�ect reduces. It seems that more

men than women intend to change an area of their lives while having no ®rm plans as to what to change.


intend changing any sphere with a low satisfaction value. The e�ects of theabsolute value of the satisfaction variables are always quite signi®cant.

In Table 3, the results are given for the probability that German respon-dents intend changing their housing conditions:

Again, the absolute level of the partial satisfaction involved is an impor-tant variable with the expected sign.

The e�ect of individual circumstances is again reasonable: the higher theeducation, the more likely an individual is to intend to change and the higherthe age (from the age of about 11 upwards), the lower the probability ofintent to change, just as in Russia. The e�ects of satisfaction variables are notonly of the anticipated sign, but are also stronger than in the Russian case.Hence, the results for Germany are encouraging.

2.3. Actual changes

Here we look at whether individuals in Russia have actually made changesfrom period 1 to period 2 for the areas of work and of housing.

In Table 4, a real change in an individual's housing conditions is de®ned tohave occurred when the individual moved to another house, bought or rentedthe current house, repaired his own house, had a lodger move in, or madeanother change speci®ed by the respondent. A real change in an individual's

Table 3

Intentions to change the housing situation by personal action in Germany

Housing situation Job situation

Probit t-value Probit t-value

Circumstances

ln (income) )0.02 0.5 0.001 0.1

Education 0.07 9.1 0.30 2.4

Male 0.02 0.3 0.04 0.9

ln (age) 4.22 4.0 )9.50 6.5

ln2(age) )0.68 4.2 1.24 6.0

Satisfactions

Life satisfaction )0.02 0.9 )0.11 4.4

Satisfaction with this sphere )0.12 3.8 )0.31 9.2

Maximum satisfaction? )0.10 1.8 0.07 1.0

Minimum satisfaction )0.06 0.8 0.15 2.1

ÿ2Log�L� 4147.7 3204.3

# yi equal to 1 988 504

N 4119 6970


job conditions occurred when the individual went to work for another or-ganization or started his own business.

The results for Russia in Table 4 mainly reveal a tale of insigni®cance.Only gender, age and job satisfaction are signi®cant explanatory variables forwhether a change occurred in the job situation. As expected, males are morelikely to change their job and the likelihood decreases ever more sharply after18 years of age. The fact that the higher the satisfaction with the job theprevious year, the less likely a change is, is consistent with our expectation,but the explanatory power is weak, probably due to the high volatility of thesituation in the Russian republic over the 1993±1994 period: in the presentuncertain Russian situation events which are uncontrollable and unforeseenby respondents may be the main determinants of changes. We also note thatthe number of actual changes is less than the number of intended changes.

There were no signi®cant factors in the explanation of changes in housingconditions. There simply seem to be too many random changes between yearsfor any variable to have a signi®cant in¯uence on the housing changes. In-deed, we can see from both housing and job changes that the actual per-centage of individuals making a change is about a third of the percentage ofindividuals who had an intention to change a year back, which is anotherindicator of the volatility of actual changes.

One encouraging ®nding is that there was no residual e�ect from the in-tention to change: when the intention to change the last period was included

Table 4

Choices in housing and work in Russia from 1993 to 1994 (Probit)

Housing sit. t-value Job sit. t-value

Circumstances in 1993

ln (income) 0.13 1.7 )0.02 0.2

Education 0.02 1.8 )0.01 0.8

Male )0.02 0.3 0.53 4.2

ln (age) 0.89 0.4 12.6 2.3

ln2 (age) )0.0001 0.5 )1.75 2.4

l )0.04 0.5 )0.004 0.1

Satisfactions in 1993

Life satisfaction 0.01 0.3 0.06 0.8

Satisfaction with this sphere 0.08 1.1 )0.21 2.1

Maximum satisfaction? 0.07 0.6 0.12 0.7

Minimum satisfaction 0.04 0.4 0.11 0.6

ÿ2Log�L� 1374.8 536.2

Number of yi equal to 1 272 84

N 1432 968


in the explanation of actual choices, the e�ect turned out to be very small andinsigni®cant, which is why the speci®cation shown does not include the in-tention to change. When dropping all explanatory variables and includingonly the intention to change, the intention to change was signi®cant. Thismeans that, insofar as there is any predictive power in the intention tochange, this predictive power is fully encompassed by the variables used toanalyze actual changes. Hence it seems that although we for instance do nothave personality traits as explanatory variables, there simply are no per-sonality traits which, apart from their e�ect via the variables shown, have ane�ect on the intention to change that is predictive to actual changes.Therefore, insofar as there are variables that predict both intentions andchanges, we seem to be using them.

There has been one previous study I am aware of that has used satisfactionvariables to predict choices, which is the study of Clark et al. (1998) wholooked at the e�ect of job satisfaction on future quit-behavior using 10 yearsof the GSOEP. They found that a lower job satisfaction level signi®cantlyincreased the chance of quitting in the future, though the e�ect found wassmall. No intentions, general satisfaction or relative level of job satisfactionwere used.

For Germany, Table 5 shows more signi®cant results:

Table 5

Real changes from 1993 to 1994 in jobs and family life in Germanya

Divorced/

separated?

t-value Quit job? t-value

Circumstances in 1993

ln (income) )0.07 1.0 )0.05 0.7

Education 0.04 1.7 0.02 1.2

Male )0.08 0.6 )0.13 1.5

ln (age) )0.02 5.0 0.05 1.5

ln2(age) )0.0012 2.5

Satisfactions in 1993

Life satisfaction )0.10 1.6 0.03 0.5

Satisfaction with this spherea )0.20 2.4 )0.15 2.2

Maximum satisfaction? 0.19 1.2 0.12 1.0

Minimum satisfaction )0.53 2.8 )0.06 0.3

ÿ2Log�L� 495.3 868

581 122

N 4119 2328

a For the family situation there was no clear corresponding partial satisfaction. The one used is satisfaction

with leisure time.


We ®nd again that the more dissatis®ed an individual was with the areain question the previous year, the more likely it was that an individualwould choose to change his circumstances. Though the e�ects found are notvery signi®cant, it was the case that the intention to change housing had noresidual in¯uence on actual changes in housing. We therefore ®nd againthat we seem to be using all the variables that predict both intentions andchanges.

The e�ect of individual circumstances is similar to that in Russia.On the basis of the results for Germany and Russia it seems that satis-

faction variables have some, but limited, explanatory power for choices andintentions. There are so many changes from one year to the next and thereare so many circumstances beyond the control of the individual (opportu-nities for promotion, the attitudes of other household members, luck, etc.),that the relationships between the explanatory variables and actual changesare weak. This holds especially for the data set of the Russian Republic andless so for the West-German data set.

Nevertheless, the signi®cant relationships are as expected: the lower thepartial satisfaction with an area in the last period, the higher the probabilityof a change in this period.

2.4. Importance factors and weights

Now we look at whether individuals ®nd the areas of their lives with whichthey are satis®ed, more important. First, we analyze the question posed in theGerman panel data set of whether success in the job was important to theindividual (many other importance questions were posed, but only this onehas a clear corresponding partial satisfaction question to accompany it).Keeping in mind that the higher the dependent variable, the more importantan individual thinks that success in his job is to him, we ®nd the resultspresented in Table 6.

Here the results rather conform to expectation, as the importance of workincreases with the satisfaction with work. The coe�cients of the dummyvariables denoting the relative place of satisfaction with work are also asexpected.

The fact that older individuals ®nd work less important ®ts neatly with thefact that they are less likely to intend to change their work situation: whychange something that is not deemed important? We also ®nd that malerespondents are more likely to ®nd their job important, which may indicate a


higher level of ambition. We may hence con®rm the hypothesis that satis-faction with work is positively correlated with the subjective importance ofwork.

The second way we investigated whether individuals adapt their opinionsas to how important several areas of their lives are for their general satis-faction, was by postulating that if an individual was very satis®ed with asub®eld in the previous period, this sub®eld is going to be more important tothe individual in this period. If for instance an individual is very unsatis®edwith his housing conditions, he may adapt to the situation by spending lessand less time in his house and may try to spend less time thinking about hishousing conditions. The mechanism of reducing the importance of thoseareas of one's life with which one is very dissatis®ed may hold for all partialsatisfactions. We thus predict that the importance of an area of one's life forcurrent life satisfaction depends on the partial satisfactions of the previousperiod (PEj;tÿ1):

GElife;t � X 0b�XM

j�1

�aj � cjPEj;tÿ1�PEj;t � dGElife;tÿ1 � �it:

The right-hand side of this equation has three structural components. The®rst component, X 0b, denotes the e�ect of exogenous variables on generalsatisfaction. The second component,

PMj�1�aj � cjPEj;tÿ1�PEj;t; denotes the

Table 6

The importance of job succes in Germanya

Importance of job t-value

Circumstances

ln (income) 0.08 2.9

Education 0.007 0.9

Male 0.36 9.5

Age 0.68 0.8

Age2 )0.23 1.8

SatisfactionsLife satisfaction )0.001 0.0

Satisfaction with job 0.12 7.2

Maximum satisfaction? 0.12 2.2

Minimum satisfaction )0.04 0.5

ÿ2Log�L� 8634.4

N 4005

a The method used is ordered-probit. The intercepts are not reported.


e�ect from partial satisfactions on general satisfaction in which one can in-terpret the term �aj � cjPEj;tÿ1� as the weight of the current satisfaction levelon general satisfaction. As one can see, the higher cjPEj;tÿ1, the higher thee�ect of the current partial satisfaction level on general satisfaction. Hence, cj

denotes the in¯uence of the partial satisfaction in the previous period on theweights of the partial satisfaction in this period, and we expect this coe�cientto be positive. 8 The third component, dGElife;tÿ1; which is present in only oneof the two speci®cations shown, is used to capture the e�ect of variableswhich we do not have available in the data but which are correlated overtime.

We tried a least-absolute-deviations (LAD) estimator with bootstrappedcon®dence intervals in order to see whether the assumption of normality ofthe error-terms had any e�ect in this case. Because the di�erences betweensimple OLS and this semi-parametric technique were minute, the assumptionof normally distributed error-terms is reasonable in this case and we onlyshow the OLS results here.

The results for Germany and Russia are summarized in Table 7.The results tell a mixed tale: when the general satisfaction of the previous

period is not used as a control, all the c's are positive and their combinedeffect is signi®cantly positive. When the general satisfaction of the previousperiod is used as a control, virtually all the c's are positive, but most areinsigni®cant. It hence seems likely that part of the effect of the c's in thespeci®cation without the general satisfaction of the previous period pick uppart of the effect of the omitted variable GElife;tÿ1. As most of the c's arepositive in both tables though, there is some indication of a selective memoryeffect.

It may be the case that adaptation takes less than one year, the time be-tween the available panel waves. An individual experiencing a very low sat-isfaction level in one area of his life may start ignoring this area of his life in amatter of weeks rather than years. Indeed, the study by (Suh, Diener & Fujita(1996)) suggests that only the events of the last three months are relevant forself-reported satisfaction levels. If this is also the case in the yearly panel datawe use here, we would expect more signi®cant results with more frequentlyinterviewed respondents. Of course, this is mere guesswork at this point.

8 The results for this reduced-form model are only used for this hypothesis. For a much more in-depth

analysis of the explanation of life-satisfaction from the partial satisfaction, see Frijters (1999, Ch. 5).


We thus ®nd only limited evidence that respondents claim to ®nd an areamore important if they were more satis®ed with that area in the past.

3. Conclusions

We set out trying to see whether an individual's verbal and choice behaviorwas consistent with the hypothesis that they are trying to maximize self-re-ported levels of satisfaction.

The respondents we investigated were more on average likely to intend tochange those areas they are unsatis®ed with in this period, were more likelyto actually have changed those areas they were unsatis®ed with in the last

Table 7

The weights of satisfactions in previous years on general satisfactiona

Russia 1994 Germany 1993

GS t-value GS t-value GS t-value GS t-value

Job sat a 0.15 3.9 0.16 4.0 0.14 8.0 0.15 8.2

c )0.002 0.6 0.005 0.9 0.004 1.4 0.008 3.0

Fin sat a 0.27 6.8 0.28 6.8 0.14 6.7 0.15 6.8

c 0.005 0.8 0.01 1.6 0.006 1.5 0.02 4.5

Housing sat a 0.08 2.2 0.09 2.3 0.10 5.2 0.10 5.4

c 0.009 1.2 0.01 1.7 0.002 0.9 0.005 2.1

Health sat a 0.19 9.6 0.21 10.4

c )0.006 2.3 0.001 0.4

Family sat a 0.18 5.3 0.19 5.4

c )0.001 0.5 0.006 0.1

Social sat a 0.17 4.8 0.17 4.7

c 0.002 0.7 0.005 1.1

Leisure sat a 0.08 4.6 0.09 5.2

c 0.007 2.8 0.01 3.7

Gen sattÿ1 0.14 3.8 0.26 12.4

X 0bln (income) )0.05 0.7 )0.05 0.7 0.02 0.8 0.02 0.9

Education 0.01 1.5 0.01 1.6 0.003 0.6 0.002 0.4

Male )0.01 0.4 )0.02 0.3 )0.03 1.2 )0.03 1.0

ln (age) 0.08 0.3 0.07 0.2 )0.22 1.4 )0.29 1.8

ln2(age) )0.0001 0.6 )0.0001 1.2 0.0001 1.6 0.001 2.1

l 0.04 0.7 0.04 0.5

R2 0.38 0.36 0.50 0.42

N 622 622 2080 2080

a Satisfaction with working conditions is insigni®cant and not shown for Russia. Satisfaction with envi-

ronment is insigni®cant and not shown for Germany.


period, and tended to ®nd the areas of their lives they are dissatis®ed with lessimportant. The e�ects were not strong however, though more signi®cant forthe German GSOEP data set than for the Russian data set. The combinedresults give only limited support to the hypothesis that individuals indeed tryto maximize self-reported levels of satisfaction. At the very least, self-re-ported levels of satisfactions were signi®cant determinants of intentions andchoices, alongside `objective' variables such as age, education, gender andincome. A major drawback was the unavailability of personality factors toinclude in the analyses.

One of the implications for future research is that year-by-year observa-tions on individuals may be spaced too far in time to capture the importanceof satisfaction levels on choices because circumstances change quickly andthe memory of many events fades rapidly.

Acknowledgements

The author would like to thank two anonymous referees for helpfulcomments on earlier versions of the paper.

Appendix A

In this appendix, the variables used in the analyses are de®ned and ex-plained.

A.1. Satisfaction questions

The satisfaction questions are all translated from a 0±10 scale to an�ÿ1;�1� scale by inversely relating them to the empirical distributionamongst households. It may be noted that re-scaling makes it easier to workwith these variables without changing the preference structure or qualita-tively altering any of the results one would get by analyzing the raw ques-tions. Some of the satisfaction questions are di�erently worded amongst thetwo panels, but the di�erences are assumed to be small, unless mentioned asotherwise in the main text. De®nitions:

Life satisfaction in Russia: ``How satis®ed are you with your life as awhole in the present time on a scale of 1±10''.Life satisfaction in Germany: ``How satis®ed are you with your life as a


whole in the present time on a scale of 0±10''.Financial satisfaction (R): ``How satis®ed are you with the ®nancial situ-ation of your family in the present time on a scale of 1±10''.Financial satisfaction (G): ``How satis®ed are you with your householdincome on a scale of 0±10''.Housing satisfaction (R): ``How satis®ed are you with your current hous-ing conditions (1±10)''.Housing satisfaction (G): ``How satis®ed are you with your current dwell-ing (0±10)''.Job satisfaction (R): ``How satis®ed are you with your current job (1±10)''.Job satisfaction (G): ``How satis®ed are you with your current work (0±10)''.Family satisfaction (R): ``How satis®ed are you with your marriage at thecurrent time (1±10)''.Family satisfaction (G): ``How satis®ed are you with your leisure time atthe current time (0±10)''.Social satisfaction (R): ``How satis®ed are you with your social contactsat the current time (1-10)''.Health satisfaction (G): ``How satis®ed are you with your health time atthe current time (0±10)''.Environment satisfaction (G): ``How satis®ed are you with your environ-ment at the current time (0±10)''.

From these raw numbers, call them sijt (the satisfaction level of individual iin sphere j in period t), we get the empirically used Sijt de®ned by the fol-lowing transformation: Sijt � Nÿ1�sijt; �sjt; var�sijt�� whereby �sjt denotes theempirical average of the satisfaction sphere j and var�sijt� denotes the em-pirical variance of the satisfaction sphere j at time t. See Frijters (1999,chapter 5) for a more detailed explanation of how this works.

A.2. Intentions

The dummy designating the intention to change the family situation (R) isde®ned as one if the respondent gave an answer indicating a speci®c intentto act to the question: ``How are you going to change your family life''.The dummy designating the intention to change the housing situation (R)is de®ned as one if the respondent gave an answer indicating a speci®c in-tent to act to the question: ``How are you going to change your housingsituation''.


The dummy designating the intention to change the job situation (R) isde®ned as one if the respondent gave an answer indicating a speci®c in-tent to act to the question: ``How are you going to change your job life''.The dummy designating the intention to change the housing situation (G)is de®ned as one if the respondent gave a speci®c area of housing which heintended to improve in the coming years.The dummy designating the intention to change the job situation (G) is de-®ned as one if the respondent said it was certain that he would either quithis job, change jobs or would reduce working hours in the next two years.

A.3. Importance factors, personal characteristics, ®nancial need

The importance of the job (G) was de®ned by the answer to the question:``How important is success in your job to you: very important/impor tant/notvery important/unimportant''. This question was analyzed with ordered-Pro-bit techniques. The higher the latent variable the more important the sphere.

Education is de®ned in years attained.Income equals gross household income.

l denotes the empirical log-mean of the ®ve Income Evaluation Questions:``how much household income would your family need before taxes eachmonth to say that your income was: very good/good/so-so/bad/very bad''.Analyses on Russia are reported with l, given the emphasis on the analysis ofl in other publications. The insigni®cance of the variable for the intentions,importances and changes is also present for Germany, where we report theanalyses without l as a large proportion of German respondents do not havel-values. It may be noted that for the smaller sample of individuals for whichwe did have German l-values, it was found to be an insigni®cant variable.

The dummy variable Separated (G) is de®ned as one when the respondentindicates that (s)he has been separated from his/her partner over the last year.If the individual has quit the job or terminated the contract prematurely, theindividual is regarded as having quit the job.

All intentions and actual changes are (0,1) dummy variables.

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Do individuals try to maximize general satisfaction?