Toward National Well-Being Accounts

By DANIEL KAHNEMAN ALAN B KRUEGER DAVID SCHKADE NORBERT SCHWARZAND ARTHUR STONE

Economists have traditionally eschewed di-rect measures of well-being on methodologicalgrounds the private nature of experience and thediscomfort of making interpersonal comparisonsInstead income is often used as a proxy for op-portunities and well-being If people are not fullyrational however their choices will not necessar-ily maximize their experienced utility and in-creasing their opportunities will not necessarilymake them better off (Kahneman 1994 Cass RSunstein and Richard Thaler 2004) Direct mea-sures of experienced utility become particularlyrelevant in a context of bounded rationality

Furthermore advances in psychology andneuroscience suggest that experienced utilityand well-being can be measured with some ac-curacy (Kahneman et al 1999) Robust andinterpersonally consistent relationships havebeen observed between subjective measures ofexperience and both specific measures of brainfunction and health outcomes In part becauseof these findings economic research using sub-jective indicators of happiness and life satisfac-tion has proliferated in recent years (see BrunoFrey and Alois Stutzer [2002] for a survey)Most work on well-being uses a question onoverall life satisfaction or happiness We sug-gest an alternative route based on time budgetsand affective ratings of experiences

I Plausible and Puzzling Findingsof Well-Being Research

Numerous studies have established that lifesatisfaction is weakly correlated with incomeand with religiosity but uncorrelated with either

education or climate Minnesota for example isamong the happiest states The function thatrelates satisfaction to age is U-shaped reportedhappiness rises with age from age 45 to 70controlling for health Life satisfaction is lowamong the unemployed and is affected by lifeevents such as marriage divorce and bereave-ment People who describe themselves as happyor as satisfied with their health are likely to beextraverted sociable and optimistic Theyshow a characteristic pattern of electrocorticalactivity with greater activity in the left than inthe right prefrontal cortex (Richard J Davidson2003 H L Urry et al 2004) They have astronger response to an influenza vaccine andrecover more quickly from controlled wounds(J K Kiecolt-Glaser et al 2002 S Cohen etal 2003)

The list of plausible results is long but re-search using the standard measures of well-being has also produced two major puzzles(Ronald Inglehart and Jacques-Rene Rabier1986) (i) surprisingly small effects of circum-stances on well-being (eg income marital sta-tus etc) (ii) surprisingly large differences inthe level of life satisfaction in various countries

The most remarkable finding in the well-being literature is the extent to which peopleadapt to circumstances even extreme circum-stances P Brickman et al (1978) reported thatafter a period of adjustment lottery winnerswere not much happier than a control groupand paraplegics were not much unhappier Datafrom the German Socio-Economic Panel indi-cate that the effects on life satisfaction of bothmarriage and widowhood largely dissipatewithin three years of the event (Richard ELucas et al 2003) R A Easterlin (1995) findsthat average self-reported happiness did not in-crease in Japan from 1958 to 1987 althoughreal income increased fivefold

Findings of adaptation are robust but open tomultiple interpretations Brickman and D TCampbell (1971) proposed a hedonic treadmillhypothesis people adapt to situations that areinitially pleasant or unpleasant much as they

Kahneman and Krueger Woodrow Wilson School ofPublic and International Affairs Princeton UniversityPrinceton NJ 08544 Schkade Department of ManagementMcCombs School of Business University of Texas AustinTX 78712 Schwarz Institute for Social Research Univer-sity of Michigan Ann Arbor MI 48106 Stone Departmentof Psychiatry and Behavioral Science School of MedicineStony Brook University Stony Brook NY 11794 Krueger isalso affiliated with the National Bureau of Economic Research

429

adapt to a warm bath The pleasure or painevoked by a new situation declines in intensityand is eventually replaced by neutral feelingsKahneman et al (1999) observed that mean-reversion is also compatible with the hypothesisof an aspiration treadmill pleasure or painmight persist but the evaluation of these expe-riences is relative to expectations and expecta-tions eventually adjust On this hypothesisglobal reports of subjective well-being exagger-ate the amount of hedonic adaptation that actu-ally occurs The ambiguity can only be resolvedby measuring the hedonic quality of experienceseparately from expectations

The second puzzle is the consistent finding oflarge differences in reports of life satisfactionacross seemingly similar countries For exam-ple 64 percent of the Danes described them-selves as ldquovery satisfiedrdquo with their lives in aEurobarometer survey but only 16 percent ofthe French did so The difference between theFrench and the Danes is more than twice aslarge as the difference between the employedand unemployed in either country Across 63countries included in the World Values Surveythe standard deviation of country means ofoverall satisfaction is 112 more than half of theaverage standard deviation of individuals withincountries (221) These differences appear im-plausibly large and they raise additional doubtsabout the validity of global reports of subjectivewell-being which may be susceptible to cul-tural differences in the norms that govern self-descriptions (Alex Inkeles 1993 Ed Diener2000 Diener and Eunkook M Suh 2000)

II Subjective versus Objective Aggregationand Other Potential Biases

F Y Edgeworth (1881) imagined a ldquohedon-imeterrdquo which continuously records an individ-ualrsquos utility (in Jeremy Benthamrsquos sense of theterm as momentary positive or negative feel-ings) Happiness is defined by the integral ofutility over time Kahneman et al (1997) pro-vide a formal analysis of the conditions underwhich global judgments of the total utility ofextended outcomes will satisfy temporal inte-gration That paper also reviews experimentalresearch demonstrating that individualsrsquo globalretrospective assessments of their experiencesconsistently violate the logic of temporal inte-gration In particular global subjective judgments

of episodes generally overweight experiencesthat are either extreme or recent and assignlittle or no weight to the duration of an experi-ence People are apparently unable to producean accurate and unbiased evaluation of experi-ences that extend over time

The life satisfaction and happiness questionsthat are used in well-being research request thetype of global assessment that people performpoorly on in the psychological laboratory Ex-perimental variations of surveys have shownthat many irrelevant factors affect these evalu-ations Thus reports of life satisfaction are in-fluenced by manipulations of current mood andof the immediate context including earlierquestions on a survey that cause particular do-mains of life to be temporarily salient (NSchwarz and F Strack 1999) Satisfaction withlife and with particular domains (eg incomework) is also affected by comparisons withother people and with past experiences (AndrewE Clark 2003) The same experience of plea-sure or displeasure can be reported differentlydepending on the standard to which it is com-pared and the context

In summary global subjective evaluations ofonersquos life are unlikely to provide an accuraterepresentation of the concept of utility thatEdgeworth proposed Discrepancies will arisebecause the durations of experiences are notadequately weighted in global assessments andbecause these assessments are unduly influ-enced by the immediate context and by irrele-vant standards of comparison To overcomethese biases we need measures of well-beingthat have the following characteristics (i) theyshould represent actual hedonic and emotionalexperiences as directly as possible (ii) theyshould assign appropriate weight to the durationof different segments of life (eg work leisureetc) (iii) they should be minimally influencedby context and by standards of comparison

III Experience Sampling and the DailyReconstruction Method

The Experience Sampling Method (ESM)collects information on individualsrsquo experiencesin real time in their natural environments(Mihalyi Csikszentmihalyi 1990 Stone andS Shiffman 1994) ESM is intended to over-come problems inherent in global satisfactionquestions namely imperfect recall and duration

430 AEA PAPERS AND PROCEEDINGS MAY 2004

neglect It is therefore the current gold standardfor measurement of well-being in the Edge-worth tradition ESM is carried out by supply-ing subjects with an electronic diary (eg aspecially programmed palm pilot) that beeps atrandom times during a day and asks respondentsto describe what they were doing just before theprompt The electronic diary also ask respon-dents to indicate the intensity of various feelings(eg happy frustratedannoyed etc) Thesedata may be averaged to produce a metric re-flecting actual daily experience ESM appears tomeet the principal requirements for a measureof well-being that reflects an integration of im-mediate experience However ESM is not apractical method for national well-being ac-counts (NWBA) (i) it is impractical to imple-ment in large samples (ii) the rate ofnonresponse may be unacceptable for some ac-tivities (iii) infrequent activities are only rarelysampled

Fortunately data collected from ESM can bereasonably approximated by other more practi-cal methods One alternative we developed isthe Daily Reconstruction Method (DRM) TheDRM asks respondents to fill out a diary corre-sponding to events of their previous day Nextrespondents describe each episode by indicat-ing (i) when the episode began and ended (ii)what they were doing (iii) where they wereand (iv) whom they were with To ascertainhow they felt during each episode on selectedaffect dimensions respondents were asked tofill out the box in Table 1 for each episode Notethat responses are anchored at ldquonot at allrdquo anatural zero point that is likely to have a com-mon and stable meaning for respondents

The DRM involves a retrospective report onan emotional state but the procedure was de-signed to achieve accurate recall by directingrespondents to retrieve specific episodes frommemory The method appears to have been suc-cessful it reproduced a complex pattern of di-urnal variation in tiredness and in positive andnegative affect which had previously been ob-tained in an ESM study (see Kahneman et al2003) Data collected from ESM or DRM canbe used to characterize the average affectiveexperience that people perceive during particu-lar situations We use the term ldquosituationrdquo torefer to features of an episode when whatwhere and who with Table 2 summarizes themean affect ratings for selected activities Net

affect is defined as the average of the positiveadjectives less the average of the negative ad-jectives for individuals engaged in each activ-ity If an episode involved more than oneactivity it enters more than one time so totalhours in a day are not constrained to sum to 24for NWBA it would be desirable to either ap-portion multiple activities that occur in an epi-sode or restrict attention to the focal activityThe sample consists of 909 working women inTexas and the data are described in more detailin Kahneman et al (2003) Notice that commut-ing to and from work and working score rela-tively low while leisure activities score high asexpected

Easier ways of collecting the same type ofinformation also appear to be possible In on-going work we have experimented with askingquestions about feelings associated with partic-ular events such as the last episode of commut-ing to work We call this the Event RecallMethod or ERM for short We collected ERMdata for another 504 working women in TexasFor most activities the ERM and DRM yieldedinsignificant differences ERM has the impor-tant advantage of being easy to administer in atelephone survey Notice however that the se-lection of who participates in activities and forhow long differs in ERM and DRM whichwould affect the results if heterogeneous pref-erences lead to very different time allocationsacross people

Interestingly a study of kidney dialysis patientsand matched controls using ESM (Jason Riis et

TABLE 1mdashTHE BOX FILLED OUT BY RESPONDENTS

FOR EACH EPISODE IN THE DRM

How did you feel during this episode

Please rate each feeling on the scale given A rating of0 means that you did not experience that feeling at all Arating of 6 means that this feeling was a very importantpart of the experience Please circle the number between0 and 6 that best describes how you felt

Not at all Very muchHappy 0 1 2 3 4 5 6Frustratedannoyed 0 1 2 3 4 5 6Depressedblue 0 1 2 3 4 5 6Hassledpushed around 0 1 2 3 4 5 6Warmfriendly 0 1 2 3 4 5 6Angryhostile 0 1 2 3 4 5 6Worriedanxious 0 1 2 3 4 5 6Enjoying myself 0 1 2 3 4 5 6Tired 0 1 2 3 4 5 6

431VOL 94 NO 2 MEMOS TO THE COUNCIL OF BEHAVIORAL-ECONOMICS ADVISORS

al 2003) and a study of teachers in exemplaryand failing schools using DRM (Kahneman et al2003) both find evidence of adaptation lendingsupport for the hedonic treadmill interpretation

IV Time-Based National Well-Being Accounts

We return to Bentham and Edgeworthrsquos no-tion that utility is the integral of the stream ofpleasures and pains associated with events overtime A simple formulation is that utility is timeseparable Write an individualrsquos utility in dis-crete time as Ui jhijij where hij is theamount of time individual i is engaged in situ-ation j (eg washing the dishes with onersquosspouse) and ij is the net affective experienceduring situation j

A measure of national well-being (WB)therefore is

(1) WB ijhijij N

where N is the population size Notice that (1)can be written as jHju j ijhij(ij u j)N

where Hj is the average of hij over people and u jis the average net affect experienced duringsituation j In our data time spent on an activityis virtually uncorrelated with net affect acrosspeople (r 001) so NWBA can be measuredby

(2) WB Hju j

This equation has the advantage that time useand affect can be from separate surveys1

To compute equation (1) net affect and timeuse can be collected from DRM For (2) u j canbe collected from ERM (or DRM) and Hj froma separate survey such as the Bureau of LaborStatisticsrsquo new monthly American Time UseSurvey

There are of course many assumptions un-derlying this formulation We must assume thataffective experiences can be compared acrosspeople that net affect provides a cardinal mea-sure of utility utility is time separable and thata simple measure of net affect represents theutility of an experience In addition to theseconceptual hurdles there are several practicalproblems as well the situations that are relevantfor well-being must be identified (what goesinto j) the allocation of time must be measureddata on net affect for a representative sample indifferent situations must be collected and theadjectives that go into defining affect must bespecified The question is not whether (1) pro-vides a perfect measure of well-being butwhether it adds useful information to the stan-dard global questions by which well-being iscommonly measured

In our view the conceptual assumptions under-lying (1) can be defended though undoubtedly notto everyonersquos satisfaction Psychologists are morecomfortable than economists when it comes tocomparing indicators of feelings or utility acrossindividuals The facts that self-reported satisfac-tion is correlated with physiological measuresand health outcomes and that there is somecorrelation between objective circumstancesand affective ratings suggest that there is some

1 This idea is not new to us Greg Dow and F ThomasJuster (1985) use this framework to analyze time-use datacombined with what we call ldquodomain-specific satisfactionrdquofor 13 activities using the adjective ldquoenjoyrdquo

TABLE 2mdashMEAN NET AFFECT BY ACTIVITY

ActivityPercentageof sample

Time spent(hours)

Netaffect

Intimate relations 11 021 474Socializing after work 49 115 412Dinner 65 078 396Relaxing 77 216 391Lunch 57 052 391Exercising 16 022 382Praying 23 045 376Socializing at work 41 112 375Watching TV 75 218 362Phone at home 43 093 349Napping 43 089 327Cooking 62 114 324Shopping 30 041 321Computer at home 23 046 314Housework 49 111 296Childcare 36 109 295Evening commute 62 062 278Working 100 688 265Morning commute 61 043 203

Notes Net affect is the average of three positive adjectives(enjoyment warm happy) less the average of five negativeadjectives (frustrated depressed angry hassled criticized)All the adjectives are reported on a 0ndash6 scale ranging fromldquonot at allrdquo to ldquovery muchrdquo The ldquotime spentrdquo column is notconditional on engaging in the activity The sample consistsof 909 employed women in Texas

432 AEA PAPERS AND PROCEEDINGS MAY 2004

signal in interpersonal comparisons of affect2

Additionally in Kahneman et al (2003) we findthat positive and negative affect are highly cor-related across situations (less so across individ-uals) suggesting that net affect provides anaccurate characterization of situations

V Conclusion

The goal of public policy is not to maximizemeasured GDP so a better measure of well-being could help to inform policy Here wepropose measuring national well-being byweighting the time allocated to various activi-ties by the subjective experiences associatedwith those activities The main advantages ofour bottom-up approach vis-a-vis top-down lifesatisfaction measures are (i) it avoids some ofthe biases (eg duration neglect) of global ret-rospective evaluations and (ii) it is connected tothe allocation of time which can be measuredIf time is not allocated optimally to begin withthen well-being accounts could provide a par-ticularly useful point of reference for society

The NWBA can be used to summarize theaverage affective well-being of a populationThree potential uses are the following (i)Changes in well-being in a country over timecan be tracked and the growth can be decom-posed into a component due to changes in theallocation of time across situations a compo-nent due to changes in affect for a given set ofsituations and a residual (ii) For subpopula-tions (eg rich vs poor) at a given time dif-ferences in well-being can be attributed todifferences in time allocated across situationsdifferences in affect derived from a given set ofsituations and a residual (iii) Differences inwell-being between countries can likewise becompared and decomposed

In addition time-based measures of well-beingcould also be related to individual outcomessuch as health and brain activity Well-beingaccounts could help to understand how subjec-tive experiences relate to health

Because of adaptation and the fact that indi-vidual fixed effects (possibly genetic factors)

account for much of the variance in self-reported satisfaction one may ask whether aNWBA index that is not particularly responsiveto changes in policy or living standards is ofmuch interest Several responses are possible(i) Although circumstances account for littlevariation in self-reported life satisfaction acrosssubjects the relevant consideration is how cir-cumstances relate to the average level of well-being (ii) The allocation of time changes overtime and can be influenced by policy (egovertime laws) it would be useful to see howsuch changes map into well-being (iii) GDPonly grows by 3 percent or so each year sosmall changes are typical in measures of mate-rial well-being A large sample would beneeded to detect such changes on an annualbasis however

REFERENCES

Brickman P and Campbell D T ldquoHedonic Rel-ativism and Planning the Good Societyrdquo inM H Appley ed Adaptation-level theoryNew York Academic Press 1971 pp 281ndash305

Brickman P Coates D and Janoff-Bulman RldquoLottery Winners and Accident Victims IsHappiness Relativerdquo Journal of Personalityand Social Psychology August 1978 36(8)pp 917ndash27

Clark Andrew E ldquoInequality-Aversion and In-come Mobility A Direct Testrdquo Workingpaper Centre National de la ResercheScientifique DELTA Paris France June2003

Cohen S Doyle W J Turner R B AlperC M and Skoner D P ldquoEmotional Style andSusceptibility to the Common Coldrdquo Psycho-somatic Medicine July-August 2003 65(4)pp 652ndash57

Csikszentmihalyi Mihaly Flow The psychologyof optimal experience New York Harper andRow 1990

Davidson Richard J ldquoAffective Neuroscienceand Psychophysiology Toward a SynthesisrdquoPsychophysiology September 2003 40(5)pp 655ndash65

Diener Ed ldquoSubjective Well-Being The Sci-ence of Happiness and a Proposal for a Na-tional Indexrdquo American Psychologist January2000 55(1) pp 34ndash43

2 One perhaps trivial but reassuring indication we haveof the signal in interpersonal comparisons using our DRMapproach is that individuals who reported sleeping less weremore likely to report feeling tired during each hour of theday

433VOL 94 NO 2 MEMOS TO THE COUNCIL OF BEHAVIORAL-ECONOMICS ADVISORS

adapt to a warm bath The pleasure or painevoked by a new situation declines in intensityand is eventually replaced by neutral feelingsKahneman et al (1999) observed that mean-reversion is also compatible with the hypothesisof an aspiration treadmill pleasure or painmight persist but the evaluation of these expe-riences is relative to expectations and expecta-tions eventually adjust On this hypothesisglobal reports of subjective well-being exagger-ate the amount of hedonic adaptation that actu-ally occurs The ambiguity can only be resolvedby measuring the hedonic quality of experienceseparately from expectations

The second puzzle is the consistent finding oflarge differences in reports of life satisfactionacross seemingly similar countries For exam-ple 64 percent of the Danes described them-selves as ldquovery satisfiedrdquo with their lives in aEurobarometer survey but only 16 percent ofthe French did so The difference between theFrench and the Danes is more than twice aslarge as the difference between the employedand unemployed in either country Across 63countries included in the World Values Surveythe standard deviation of country means ofoverall satisfaction is 112 more than half of theaverage standard deviation of individuals withincountries (221) These differences appear im-plausibly large and they raise additional doubtsabout the validity of global reports of subjectivewell-being which may be susceptible to cul-tural differences in the norms that govern self-descriptions (Alex Inkeles 1993 Ed Diener2000 Diener and Eunkook M Suh 2000)

II Subjective versus Objective Aggregationand Other Potential Biases

F Y Edgeworth (1881) imagined a ldquohedon-imeterrdquo which continuously records an individ-ualrsquos utility (in Jeremy Benthamrsquos sense of theterm as momentary positive or negative feel-ings) Happiness is defined by the integral ofutility over time Kahneman et al (1997) pro-vide a formal analysis of the conditions underwhich global judgments of the total utility ofextended outcomes will satisfy temporal inte-gration That paper also reviews experimentalresearch demonstrating that individualsrsquo globalretrospective assessments of their experiencesconsistently violate the logic of temporal inte-gration In particular global subjective judgments

of episodes generally overweight experiencesthat are either extreme or recent and assignlittle or no weight to the duration of an experi-ence People are apparently unable to producean accurate and unbiased evaluation of experi-ences that extend over time

The life satisfaction and happiness questionsthat are used in well-being research request thetype of global assessment that people performpoorly on in the psychological laboratory Ex-perimental variations of surveys have shownthat many irrelevant factors affect these evalu-ations Thus reports of life satisfaction are in-fluenced by manipulations of current mood andof the immediate context including earlierquestions on a survey that cause particular do-mains of life to be temporarily salient (NSchwarz and F Strack 1999) Satisfaction withlife and with particular domains (eg incomework) is also affected by comparisons withother people and with past experiences (AndrewE Clark 2003) The same experience of plea-sure or displeasure can be reported differentlydepending on the standard to which it is com-pared and the context

In summary global subjective evaluations ofonersquos life are unlikely to provide an accuraterepresentation of the concept of utility thatEdgeworth proposed Discrepancies will arisebecause the durations of experiences are notadequately weighted in global assessments andbecause these assessments are unduly influ-enced by the immediate context and by irrele-vant standards of comparison To overcomethese biases we need measures of well-beingthat have the following characteristics (i) theyshould represent actual hedonic and emotionalexperiences as directly as possible (ii) theyshould assign appropriate weight to the durationof different segments of life (eg work leisureetc) (iii) they should be minimally influencedby context and by standards of comparison

III Experience Sampling and the DailyReconstruction Method

The Experience Sampling Method (ESM)collects information on individualsrsquo experiencesin real time in their natural environments(Mihalyi Csikszentmihalyi 1990 Stone andS Shiffman 1994) ESM is intended to over-come problems inherent in global satisfactionquestions namely imperfect recall and duration

430 AEA PAPERS AND PROCEEDINGS MAY 2004

neglect It is therefore the current gold standardfor measurement of well-being in the Edge-worth tradition ESM is carried out by supply-ing subjects with an electronic diary (eg aspecially programmed palm pilot) that beeps atrandom times during a day and asks respondentsto describe what they were doing just before theprompt The electronic diary also ask respon-dents to indicate the intensity of various feelings(eg happy frustratedannoyed etc) Thesedata may be averaged to produce a metric re-flecting actual daily experience ESM appears tomeet the principal requirements for a measureof well-being that reflects an integration of im-mediate experience However ESM is not apractical method for national well-being ac-counts (NWBA) (i) it is impractical to imple-ment in large samples (ii) the rate ofnonresponse may be unacceptable for some ac-tivities (iii) infrequent activities are only rarelysampled

Fortunately data collected from ESM can bereasonably approximated by other more practi-cal methods One alternative we developed isthe Daily Reconstruction Method (DRM) TheDRM asks respondents to fill out a diary corre-sponding to events of their previous day Nextrespondents describe each episode by indicat-ing (i) when the episode began and ended (ii)what they were doing (iii) where they wereand (iv) whom they were with To ascertainhow they felt during each episode on selectedaffect dimensions respondents were asked tofill out the box in Table 1 for each episode Notethat responses are anchored at ldquonot at allrdquo anatural zero point that is likely to have a com-mon and stable meaning for respondents

The DRM involves a retrospective report onan emotional state but the procedure was de-signed to achieve accurate recall by directingrespondents to retrieve specific episodes frommemory The method appears to have been suc-cessful it reproduced a complex pattern of di-urnal variation in tiredness and in positive andnegative affect which had previously been ob-tained in an ESM study (see Kahneman et al2003) Data collected from ESM or DRM canbe used to characterize the average affectiveexperience that people perceive during particu-lar situations We use the term ldquosituationrdquo torefer to features of an episode when whatwhere and who with Table 2 summarizes themean affect ratings for selected activities Net

affect is defined as the average of the positiveadjectives less the average of the negative ad-jectives for individuals engaged in each activ-ity If an episode involved more than oneactivity it enters more than one time so totalhours in a day are not constrained to sum to 24for NWBA it would be desirable to either ap-portion multiple activities that occur in an epi-sode or restrict attention to the focal activityThe sample consists of 909 working women inTexas and the data are described in more detailin Kahneman et al (2003) Notice that commut-ing to and from work and working score rela-tively low while leisure activities score high asexpected

Easier ways of collecting the same type ofinformation also appear to be possible In on-going work we have experimented with askingquestions about feelings associated with partic-ular events such as the last episode of commut-ing to work We call this the Event RecallMethod or ERM for short We collected ERMdata for another 504 working women in TexasFor most activities the ERM and DRM yieldedinsignificant differences ERM has the impor-tant advantage of being easy to administer in atelephone survey Notice however that the se-lection of who participates in activities and forhow long differs in ERM and DRM whichwould affect the results if heterogeneous pref-erences lead to very different time allocationsacross people

Interestingly a study of kidney dialysis patientsand matched controls using ESM (Jason Riis et

TABLE 1mdashTHE BOX FILLED OUT BY RESPONDENTS

FOR EACH EPISODE IN THE DRM

How did you feel during this episode

Please rate each feeling on the scale given A rating of0 means that you did not experience that feeling at all Arating of 6 means that this feeling was a very importantpart of the experience Please circle the number between0 and 6 that best describes how you felt

Not at all Very muchHappy 0 1 2 3 4 5 6Frustratedannoyed 0 1 2 3 4 5 6Depressedblue 0 1 2 3 4 5 6Hassledpushed around 0 1 2 3 4 5 6Warmfriendly 0 1 2 3 4 5 6Angryhostile 0 1 2 3 4 5 6Worriedanxious 0 1 2 3 4 5 6Enjoying myself 0 1 2 3 4 5 6Tired 0 1 2 3 4 5 6

431VOL 94 NO 2 MEMOS TO THE COUNCIL OF BEHAVIORAL-ECONOMICS ADVISORS

al 2003) and a study of teachers in exemplaryand failing schools using DRM (Kahneman et al2003) both find evidence of adaptation lendingsupport for the hedonic treadmill interpretation

IV Time-Based National Well-Being Accounts

We return to Bentham and Edgeworthrsquos no-tion that utility is the integral of the stream ofpleasures and pains associated with events overtime A simple formulation is that utility is timeseparable Write an individualrsquos utility in dis-crete time as Ui jhijij where hij is theamount of time individual i is engaged in situ-ation j (eg washing the dishes with onersquosspouse) and ij is the net affective experienceduring situation j

A measure of national well-being (WB)therefore is

(1) WB ijhijij N

where N is the population size Notice that (1)can be written as jHju j ijhij(ij u j)N

where Hj is the average of hij over people and u jis the average net affect experienced duringsituation j In our data time spent on an activityis virtually uncorrelated with net affect acrosspeople (r 001) so NWBA can be measuredby

(2) WB Hju j

This equation has the advantage that time useand affect can be from separate surveys1

To compute equation (1) net affect and timeuse can be collected from DRM For (2) u j canbe collected from ERM (or DRM) and Hj froma separate survey such as the Bureau of LaborStatisticsrsquo new monthly American Time UseSurvey

There are of course many assumptions un-derlying this formulation We must assume thataffective experiences can be compared acrosspeople that net affect provides a cardinal mea-sure of utility utility is time separable and thata simple measure of net affect represents theutility of an experience In addition to theseconceptual hurdles there are several practicalproblems as well the situations that are relevantfor well-being must be identified (what goesinto j) the allocation of time must be measureddata on net affect for a representative sample indifferent situations must be collected and theadjectives that go into defining affect must bespecified The question is not whether (1) pro-vides a perfect measure of well-being butwhether it adds useful information to the stan-dard global questions by which well-being iscommonly measured

In our view the conceptual assumptions under-lying (1) can be defended though undoubtedly notto everyonersquos satisfaction Psychologists are morecomfortable than economists when it comes tocomparing indicators of feelings or utility acrossindividuals The facts that self-reported satisfac-tion is correlated with physiological measuresand health outcomes and that there is somecorrelation between objective circumstancesand affective ratings suggest that there is some

1 This idea is not new to us Greg Dow and F ThomasJuster (1985) use this framework to analyze time-use datacombined with what we call ldquodomain-specific satisfactionrdquofor 13 activities using the adjective ldquoenjoyrdquo

TABLE 2mdashMEAN NET AFFECT BY ACTIVITY

ActivityPercentageof sample

Time spent(hours)

Netaffect

Intimate relations 11 021 474Socializing after work 49 115 412Dinner 65 078 396Relaxing 77 216 391Lunch 57 052 391Exercising 16 022 382Praying 23 045 376Socializing at work 41 112 375Watching TV 75 218 362Phone at home 43 093 349Napping 43 089 327Cooking 62 114 324Shopping 30 041 321Computer at home 23 046 314Housework 49 111 296Childcare 36 109 295Evening commute 62 062 278Working 100 688 265Morning commute 61 043 203

Notes Net affect is the average of three positive adjectives(enjoyment warm happy) less the average of five negativeadjectives (frustrated depressed angry hassled criticized)All the adjectives are reported on a 0ndash6 scale ranging fromldquonot at allrdquo to ldquovery muchrdquo The ldquotime spentrdquo column is notconditional on engaging in the activity The sample consistsof 909 employed women in Texas

432 AEA PAPERS AND PROCEEDINGS MAY 2004

signal in interpersonal comparisons of affect2

Additionally in Kahneman et al (2003) we findthat positive and negative affect are highly cor-related across situations (less so across individ-uals) suggesting that net affect provides anaccurate characterization of situations

V Conclusion

The goal of public policy is not to maximizemeasured GDP so a better measure of well-being could help to inform policy Here wepropose measuring national well-being byweighting the time allocated to various activi-ties by the subjective experiences associatedwith those activities The main advantages ofour bottom-up approach vis-a-vis top-down lifesatisfaction measures are (i) it avoids some ofthe biases (eg duration neglect) of global ret-rospective evaluations and (ii) it is connected tothe allocation of time which can be measuredIf time is not allocated optimally to begin withthen well-being accounts could provide a par-ticularly useful point of reference for society

The NWBA can be used to summarize theaverage affective well-being of a populationThree potential uses are the following (i)Changes in well-being in a country over timecan be tracked and the growth can be decom-posed into a component due to changes in theallocation of time across situations a compo-nent due to changes in affect for a given set ofsituations and a residual (ii) For subpopula-tions (eg rich vs poor) at a given time dif-ferences in well-being can be attributed todifferences in time allocated across situationsdifferences in affect derived from a given set ofsituations and a residual (iii) Differences inwell-being between countries can likewise becompared and decomposed

In addition time-based measures of well-beingcould also be related to individual outcomessuch as health and brain activity Well-beingaccounts could help to understand how subjec-tive experiences relate to health

Because of adaptation and the fact that indi-vidual fixed effects (possibly genetic factors)

account for much of the variance in self-reported satisfaction one may ask whether aNWBA index that is not particularly responsiveto changes in policy or living standards is ofmuch interest Several responses are possible(i) Although circumstances account for littlevariation in self-reported life satisfaction acrosssubjects the relevant consideration is how cir-cumstances relate to the average level of well-being (ii) The allocation of time changes overtime and can be influenced by policy (egovertime laws) it would be useful to see howsuch changes map into well-being (iii) GDPonly grows by 3 percent or so each year sosmall changes are typical in measures of mate-rial well-being A large sample would beneeded to detect such changes on an annualbasis however

REFERENCES

Brickman P and Campbell D T ldquoHedonic Rel-ativism and Planning the Good Societyrdquo inM H Appley ed Adaptation-level theoryNew York Academic Press 1971 pp 281ndash305

Brickman P Coates D and Janoff-Bulman RldquoLottery Winners and Accident Victims IsHappiness Relativerdquo Journal of Personalityand Social Psychology August 1978 36(8)pp 917ndash27

Clark Andrew E ldquoInequality-Aversion and In-come Mobility A Direct Testrdquo Workingpaper Centre National de la ResercheScientifique DELTA Paris France June2003

Cohen S Doyle W J Turner R B AlperC M and Skoner D P ldquoEmotional Style andSusceptibility to the Common Coldrdquo Psycho-somatic Medicine July-August 2003 65(4)pp 652ndash57

Csikszentmihalyi Mihaly Flow The psychologyof optimal experience New York Harper andRow 1990

Davidson Richard J ldquoAffective Neuroscienceand Psychophysiology Toward a SynthesisrdquoPsychophysiology September 2003 40(5)pp 655ndash65

Diener Ed ldquoSubjective Well-Being The Sci-ence of Happiness and a Proposal for a Na-tional Indexrdquo American Psychologist January2000 55(1) pp 34ndash43

2 One perhaps trivial but reassuring indication we haveof the signal in interpersonal comparisons using our DRMapproach is that individuals who reported sleeping less weremore likely to report feeling tired during each hour of theday

433VOL 94 NO 2 MEMOS TO THE COUNCIL OF BEHAVIORAL-ECONOMICS ADVISORS

neglect It is therefore the current gold standardfor measurement of well-being in the Edge-worth tradition ESM is carried out by supply-ing subjects with an electronic diary (eg aspecially programmed palm pilot) that beeps atrandom times during a day and asks respondentsto describe what they were doing just before theprompt The electronic diary also ask respon-dents to indicate the intensity of various feelings(eg happy frustratedannoyed etc) Thesedata may be averaged to produce a metric re-flecting actual daily experience ESM appears tomeet the principal requirements for a measureof well-being that reflects an integration of im-mediate experience However ESM is not apractical method for national well-being ac-counts (NWBA) (i) it is impractical to imple-ment in large samples (ii) the rate ofnonresponse may be unacceptable for some ac-tivities (iii) infrequent activities are only rarelysampled

Fortunately data collected from ESM can bereasonably approximated by other more practi-cal methods One alternative we developed isthe Daily Reconstruction Method (DRM) TheDRM asks respondents to fill out a diary corre-sponding to events of their previous day Nextrespondents describe each episode by indicat-ing (i) when the episode began and ended (ii)what they were doing (iii) where they wereand (iv) whom they were with To ascertainhow they felt during each episode on selectedaffect dimensions respondents were asked tofill out the box in Table 1 for each episode Notethat responses are anchored at ldquonot at allrdquo anatural zero point that is likely to have a com-mon and stable meaning for respondents

The DRM involves a retrospective report onan emotional state but the procedure was de-signed to achieve accurate recall by directingrespondents to retrieve specific episodes frommemory The method appears to have been suc-cessful it reproduced a complex pattern of di-urnal variation in tiredness and in positive andnegative affect which had previously been ob-tained in an ESM study (see Kahneman et al2003) Data collected from ESM or DRM canbe used to characterize the average affectiveexperience that people perceive during particu-lar situations We use the term ldquosituationrdquo torefer to features of an episode when whatwhere and who with Table 2 summarizes themean affect ratings for selected activities Net

affect is defined as the average of the positiveadjectives less the average of the negative ad-jectives for individuals engaged in each activ-ity If an episode involved more than oneactivity it enters more than one time so totalhours in a day are not constrained to sum to 24for NWBA it would be desirable to either ap-portion multiple activities that occur in an epi-sode or restrict attention to the focal activityThe sample consists of 909 working women inTexas and the data are described in more detailin Kahneman et al (2003) Notice that commut-ing to and from work and working score rela-tively low while leisure activities score high asexpected

Easier ways of collecting the same type ofinformation also appear to be possible In on-going work we have experimented with askingquestions about feelings associated with partic-ular events such as the last episode of commut-ing to work We call this the Event RecallMethod or ERM for short We collected ERMdata for another 504 working women in TexasFor most activities the ERM and DRM yieldedinsignificant differences ERM has the impor-tant advantage of being easy to administer in atelephone survey Notice however that the se-lection of who participates in activities and forhow long differs in ERM and DRM whichwould affect the results if heterogeneous pref-erences lead to very different time allocationsacross people

Interestingly a study of kidney dialysis patientsand matched controls using ESM (Jason Riis et

TABLE 1mdashTHE BOX FILLED OUT BY RESPONDENTS

FOR EACH EPISODE IN THE DRM

How did you feel during this episode

Please rate each feeling on the scale given A rating of0 means that you did not experience that feeling at all Arating of 6 means that this feeling was a very importantpart of the experience Please circle the number between0 and 6 that best describes how you felt

Not at all Very muchHappy 0 1 2 3 4 5 6Frustratedannoyed 0 1 2 3 4 5 6Depressedblue 0 1 2 3 4 5 6Hassledpushed around 0 1 2 3 4 5 6Warmfriendly 0 1 2 3 4 5 6Angryhostile 0 1 2 3 4 5 6Worriedanxious 0 1 2 3 4 5 6Enjoying myself 0 1 2 3 4 5 6Tired 0 1 2 3 4 5 6

431VOL 94 NO 2 MEMOS TO THE COUNCIL OF BEHAVIORAL-ECONOMICS ADVISORS

al 2003) and a study of teachers in exemplaryand failing schools using DRM (Kahneman et al2003) both find evidence of adaptation lendingsupport for the hedonic treadmill interpretation

IV Time-Based National Well-Being Accounts

We return to Bentham and Edgeworthrsquos no-tion that utility is the integral of the stream ofpleasures and pains associated with events overtime A simple formulation is that utility is timeseparable Write an individualrsquos utility in dis-crete time as Ui jhijij where hij is theamount of time individual i is engaged in situ-ation j (eg washing the dishes with onersquosspouse) and ij is the net affective experienceduring situation j

A measure of national well-being (WB)therefore is

(1) WB ijhijij N

where N is the population size Notice that (1)can be written as jHju j ijhij(ij u j)N

where Hj is the average of hij over people and u jis the average net affect experienced duringsituation j In our data time spent on an activityis virtually uncorrelated with net affect acrosspeople (r 001) so NWBA can be measuredby

(2) WB Hju j

This equation has the advantage that time useand affect can be from separate surveys1

To compute equation (1) net affect and timeuse can be collected from DRM For (2) u j canbe collected from ERM (or DRM) and Hj froma separate survey such as the Bureau of LaborStatisticsrsquo new monthly American Time UseSurvey

There are of course many assumptions un-derlying this formulation We must assume thataffective experiences can be compared acrosspeople that net affect provides a cardinal mea-sure of utility utility is time separable and thata simple measure of net affect represents theutility of an experience In addition to theseconceptual hurdles there are several practicalproblems as well the situations that are relevantfor well-being must be identified (what goesinto j) the allocation of time must be measureddata on net affect for a representative sample indifferent situations must be collected and theadjectives that go into defining affect must bespecified The question is not whether (1) pro-vides a perfect measure of well-being butwhether it adds useful information to the stan-dard global questions by which well-being iscommonly measured

In our view the conceptual assumptions under-lying (1) can be defended though undoubtedly notto everyonersquos satisfaction Psychologists are morecomfortable than economists when it comes tocomparing indicators of feelings or utility acrossindividuals The facts that self-reported satisfac-tion is correlated with physiological measuresand health outcomes and that there is somecorrelation between objective circumstancesand affective ratings suggest that there is some

1 This idea is not new to us Greg Dow and F ThomasJuster (1985) use this framework to analyze time-use datacombined with what we call ldquodomain-specific satisfactionrdquofor 13 activities using the adjective ldquoenjoyrdquo

TABLE 2mdashMEAN NET AFFECT BY ACTIVITY

ActivityPercentageof sample

Time spent(hours)

Netaffect

Intimate relations 11 021 474Socializing after work 49 115 412Dinner 65 078 396Relaxing 77 216 391Lunch 57 052 391Exercising 16 022 382Praying 23 045 376Socializing at work 41 112 375Watching TV 75 218 362Phone at home 43 093 349Napping 43 089 327Cooking 62 114 324Shopping 30 041 321Computer at home 23 046 314Housework 49 111 296Childcare 36 109 295Evening commute 62 062 278Working 100 688 265Morning commute 61 043 203

Notes Net affect is the average of three positive adjectives(enjoyment warm happy) less the average of five negativeadjectives (frustrated depressed angry hassled criticized)All the adjectives are reported on a 0ndash6 scale ranging fromldquonot at allrdquo to ldquovery muchrdquo The ldquotime spentrdquo column is notconditional on engaging in the activity The sample consistsof 909 employed women in Texas

432 AEA PAPERS AND PROCEEDINGS MAY 2004

signal in interpersonal comparisons of affect2

Additionally in Kahneman et al (2003) we findthat positive and negative affect are highly cor-related across situations (less so across individ-uals) suggesting that net affect provides anaccurate characterization of situations

V Conclusion

The goal of public policy is not to maximizemeasured GDP so a better measure of well-being could help to inform policy Here wepropose measuring national well-being byweighting the time allocated to various activi-ties by the subjective experiences associatedwith those activities The main advantages ofour bottom-up approach vis-a-vis top-down lifesatisfaction measures are (i) it avoids some ofthe biases (eg duration neglect) of global ret-rospective evaluations and (ii) it is connected tothe allocation of time which can be measuredIf time is not allocated optimally to begin withthen well-being accounts could provide a par-ticularly useful point of reference for society

The NWBA can be used to summarize theaverage affective well-being of a populationThree potential uses are the following (i)Changes in well-being in a country over timecan be tracked and the growth can be decom-posed into a component due to changes in theallocation of time across situations a compo-nent due to changes in affect for a given set ofsituations and a residual (ii) For subpopula-tions (eg rich vs poor) at a given time dif-ferences in well-being can be attributed todifferences in time allocated across situationsdifferences in affect derived from a given set ofsituations and a residual (iii) Differences inwell-being between countries can likewise becompared and decomposed

In addition time-based measures of well-beingcould also be related to individual outcomessuch as health and brain activity Well-beingaccounts could help to understand how subjec-tive experiences relate to health

Because of adaptation and the fact that indi-vidual fixed effects (possibly genetic factors)

account for much of the variance in self-reported satisfaction one may ask whether aNWBA index that is not particularly responsiveto changes in policy or living standards is ofmuch interest Several responses are possible(i) Although circumstances account for littlevariation in self-reported life satisfaction acrosssubjects the relevant consideration is how cir-cumstances relate to the average level of well-being (ii) The allocation of time changes overtime and can be influenced by policy (egovertime laws) it would be useful to see howsuch changes map into well-being (iii) GDPonly grows by 3 percent or so each year sosmall changes are typical in measures of mate-rial well-being A large sample would beneeded to detect such changes on an annualbasis however

REFERENCES

Brickman P and Campbell D T ldquoHedonic Rel-ativism and Planning the Good Societyrdquo inM H Appley ed Adaptation-level theoryNew York Academic Press 1971 pp 281ndash305

Brickman P Coates D and Janoff-Bulman RldquoLottery Winners and Accident Victims IsHappiness Relativerdquo Journal of Personalityand Social Psychology August 1978 36(8)pp 917ndash27

Clark Andrew E ldquoInequality-Aversion and In-come Mobility A Direct Testrdquo Workingpaper Centre National de la ResercheScientifique DELTA Paris France June2003

Cohen S Doyle W J Turner R B AlperC M and Skoner D P ldquoEmotional Style andSusceptibility to the Common Coldrdquo Psycho-somatic Medicine July-August 2003 65(4)pp 652ndash57

Csikszentmihalyi Mihaly Flow The psychologyof optimal experience New York Harper andRow 1990

Davidson Richard J ldquoAffective Neuroscienceand Psychophysiology Toward a SynthesisrdquoPsychophysiology September 2003 40(5)pp 655ndash65

Diener Ed ldquoSubjective Well-Being The Sci-ence of Happiness and a Proposal for a Na-tional Indexrdquo American Psychologist January2000 55(1) pp 34ndash43

2 One perhaps trivial but reassuring indication we haveof the signal in interpersonal comparisons using our DRMapproach is that individuals who reported sleeping less weremore likely to report feeling tired during each hour of theday

433VOL 94 NO 2 MEMOS TO THE COUNCIL OF BEHAVIORAL-ECONOMICS ADVISORS

al 2003) and a study of teachers in exemplaryand failing schools using DRM (Kahneman et al2003) both find evidence of adaptation lendingsupport for the hedonic treadmill interpretation

IV Time-Based National Well-Being Accounts

We return to Bentham and Edgeworthrsquos no-tion that utility is the integral of the stream ofpleasures and pains associated with events overtime A simple formulation is that utility is timeseparable Write an individualrsquos utility in dis-crete time as Ui jhijij where hij is theamount of time individual i is engaged in situ-ation j (eg washing the dishes with onersquosspouse) and ij is the net affective experienceduring situation j

A measure of national well-being (WB)therefore is

(1) WB ijhijij N

where N is the population size Notice that (1)can be written as jHju j ijhij(ij u j)N

where Hj is the average of hij over people and u jis the average net affect experienced duringsituation j In our data time spent on an activityis virtually uncorrelated with net affect acrosspeople (r 001) so NWBA can be measuredby

(2) WB Hju j

This equation has the advantage that time useand affect can be from separate surveys1

To compute equation (1) net affect and timeuse can be collected from DRM For (2) u j canbe collected from ERM (or DRM) and Hj froma separate survey such as the Bureau of LaborStatisticsrsquo new monthly American Time UseSurvey

There are of course many assumptions un-derlying this formulation We must assume thataffective experiences can be compared acrosspeople that net affect provides a cardinal mea-sure of utility utility is time separable and thata simple measure of net affect represents theutility of an experience In addition to theseconceptual hurdles there are several practicalproblems as well the situations that are relevantfor well-being must be identified (what goesinto j) the allocation of time must be measureddata on net affect for a representative sample indifferent situations must be collected and theadjectives that go into defining affect must bespecified The question is not whether (1) pro-vides a perfect measure of well-being butwhether it adds useful information to the stan-dard global questions by which well-being iscommonly measured

In our view the conceptual assumptions under-lying (1) can be defended though undoubtedly notto everyonersquos satisfaction Psychologists are morecomfortable than economists when it comes tocomparing indicators of feelings or utility acrossindividuals The facts that self-reported satisfac-tion is correlated with physiological measuresand health outcomes and that there is somecorrelation between objective circumstancesand affective ratings suggest that there is some

1 This idea is not new to us Greg Dow and F ThomasJuster (1985) use this framework to analyze time-use datacombined with what we call ldquodomain-specific satisfactionrdquofor 13 activities using the adjective ldquoenjoyrdquo

TABLE 2mdashMEAN NET AFFECT BY ACTIVITY

ActivityPercentageof sample

Time spent(hours)

Netaffect

Intimate relations 11 021 474Socializing after work 49 115 412Dinner 65 078 396Relaxing 77 216 391Lunch 57 052 391Exercising 16 022 382Praying 23 045 376Socializing at work 41 112 375Watching TV 75 218 362Phone at home 43 093 349Napping 43 089 327Cooking 62 114 324Shopping 30 041 321Computer at home 23 046 314Housework 49 111 296Childcare 36 109 295Evening commute 62 062 278Working 100 688 265Morning commute 61 043 203

Notes Net affect is the average of three positive adjectives(enjoyment warm happy) less the average of five negativeadjectives (frustrated depressed angry hassled criticized)All the adjectives are reported on a 0ndash6 scale ranging fromldquonot at allrdquo to ldquovery muchrdquo The ldquotime spentrdquo column is notconditional on engaging in the activity The sample consistsof 909 employed women in Texas

432 AEA PAPERS AND PROCEEDINGS MAY 2004

signal in interpersonal comparisons of affect2

Additionally in Kahneman et al (2003) we findthat positive and negative affect are highly cor-related across situations (less so across individ-uals) suggesting that net affect provides anaccurate characterization of situations

V Conclusion

The goal of public policy is not to maximizemeasured GDP so a better measure of well-being could help to inform policy Here wepropose measuring national well-being byweighting the time allocated to various activi-ties by the subjective experiences associatedwith those activities The main advantages ofour bottom-up approach vis-a-vis top-down lifesatisfaction measures are (i) it avoids some ofthe biases (eg duration neglect) of global ret-rospective evaluations and (ii) it is connected tothe allocation of time which can be measuredIf time is not allocated optimally to begin withthen well-being accounts could provide a par-ticularly useful point of reference for society

The NWBA can be used to summarize theaverage affective well-being of a populationThree potential uses are the following (i)Changes in well-being in a country over timecan be tracked and the growth can be decom-posed into a component due to changes in theallocation of time across situations a compo-nent due to changes in affect for a given set ofsituations and a residual (ii) For subpopula-tions (eg rich vs poor) at a given time dif-ferences in well-being can be attributed todifferences in time allocated across situationsdifferences in affect derived from a given set ofsituations and a residual (iii) Differences inwell-being between countries can likewise becompared and decomposed

In addition time-based measures of well-beingcould also be related to individual outcomessuch as health and brain activity Well-beingaccounts could help to understand how subjec-tive experiences relate to health

Because of adaptation and the fact that indi-vidual fixed effects (possibly genetic factors)

account for much of the variance in self-reported satisfaction one may ask whether aNWBA index that is not particularly responsiveto changes in policy or living standards is ofmuch interest Several responses are possible(i) Although circumstances account for littlevariation in self-reported life satisfaction acrosssubjects the relevant consideration is how cir-cumstances relate to the average level of well-being (ii) The allocation of time changes overtime and can be influenced by policy (egovertime laws) it would be useful to see howsuch changes map into well-being (iii) GDPonly grows by 3 percent or so each year sosmall changes are typical in measures of mate-rial well-being A large sample would beneeded to detect such changes on an annualbasis however

REFERENCES

Brickman P and Campbell D T ldquoHedonic Rel-ativism and Planning the Good Societyrdquo inM H Appley ed Adaptation-level theoryNew York Academic Press 1971 pp 281ndash305

Brickman P Coates D and Janoff-Bulman RldquoLottery Winners and Accident Victims IsHappiness Relativerdquo Journal of Personalityand Social Psychology August 1978 36(8)pp 917ndash27

Clark Andrew E ldquoInequality-Aversion and In-come Mobility A Direct Testrdquo Workingpaper Centre National de la ResercheScientifique DELTA Paris France June2003

Cohen S Doyle W J Turner R B AlperC M and Skoner D P ldquoEmotional Style andSusceptibility to the Common Coldrdquo Psycho-somatic Medicine July-August 2003 65(4)pp 652ndash57

Csikszentmihalyi Mihaly Flow The psychologyof optimal experience New York Harper andRow 1990

Davidson Richard J ldquoAffective Neuroscienceand Psychophysiology Toward a SynthesisrdquoPsychophysiology September 2003 40(5)pp 655ndash65

Diener Ed ldquoSubjective Well-Being The Sci-ence of Happiness and a Proposal for a Na-tional Indexrdquo American Psychologist January2000 55(1) pp 34ndash43

2 One perhaps trivial but reassuring indication we haveof the signal in interpersonal comparisons using our DRMapproach is that individuals who reported sleeping less weremore likely to report feeling tired during each hour of theday

433VOL 94 NO 2 MEMOS TO THE COUNCIL OF BEHAVIORAL-ECONOMICS ADVISORS

signal in interpersonal comparisons of affect2

Additionally in Kahneman et al (2003) we findthat positive and negative affect are highly cor-related across situations (less so across individ-uals) suggesting that net affect provides anaccurate characterization of situations

V Conclusion

The goal of public policy is not to maximizemeasured GDP so a better measure of well-being could help to inform policy Here wepropose measuring national well-being byweighting the time allocated to various activi-ties by the subjective experiences associatedwith those activities The main advantages ofour bottom-up approach vis-a-vis top-down lifesatisfaction measures are (i) it avoids some ofthe biases (eg duration neglect) of global ret-rospective evaluations and (ii) it is connected tothe allocation of time which can be measuredIf time is not allocated optimally to begin withthen well-being accounts could provide a par-ticularly useful point of reference for society

The NWBA can be used to summarize theaverage affective well-being of a populationThree potential uses are the following (i)Changes in well-being in a country over timecan be tracked and the growth can be decom-posed into a component due to changes in theallocation of time across situations a compo-nent due to changes in affect for a given set ofsituations and a residual (ii) For subpopula-tions (eg rich vs poor) at a given time dif-ferences in well-being can be attributed todifferences in time allocated across situationsdifferences in affect derived from a given set ofsituations and a residual (iii) Differences inwell-being between countries can likewise becompared and decomposed

In addition time-based measures of well-beingcould also be related to individual outcomessuch as health and brain activity Well-beingaccounts could help to understand how subjec-tive experiences relate to health

Because of adaptation and the fact that indi-vidual fixed effects (possibly genetic factors)

account for much of the variance in self-reported satisfaction one may ask whether aNWBA index that is not particularly responsiveto changes in policy or living standards is ofmuch interest Several responses are possible(i) Although circumstances account for littlevariation in self-reported life satisfaction acrosssubjects the relevant consideration is how cir-cumstances relate to the average level of well-being (ii) The allocation of time changes overtime and can be influenced by policy (egovertime laws) it would be useful to see howsuch changes map into well-being (iii) GDPonly grows by 3 percent or so each year sosmall changes are typical in measures of mate-rial well-being A large sample would beneeded to detect such changes on an annualbasis however

REFERENCES

Brickman P and Campbell D T ldquoHedonic Rel-ativism and Planning the Good Societyrdquo inM H Appley ed Adaptation-level theoryNew York Academic Press 1971 pp 281ndash305

Brickman P Coates D and Janoff-Bulman RldquoLottery Winners and Accident Victims IsHappiness Relativerdquo Journal of Personalityand Social Psychology August 1978 36(8)pp 917ndash27

Clark Andrew E ldquoInequality-Aversion and In-come Mobility A Direct Testrdquo Workingpaper Centre National de la ResercheScientifique DELTA Paris France June2003

Cohen S Doyle W J Turner R B AlperC M and Skoner D P ldquoEmotional Style andSusceptibility to the Common Coldrdquo Psycho-somatic Medicine July-August 2003 65(4)pp 652ndash57

Csikszentmihalyi Mihaly Flow The psychologyof optimal experience New York Harper andRow 1990

Davidson Richard J ldquoAffective Neuroscienceand Psychophysiology Toward a SynthesisrdquoPsychophysiology September 2003 40(5)pp 655ndash65

Diener Ed ldquoSubjective Well-Being The Sci-ence of Happiness and a Proposal for a Na-tional Indexrdquo American Psychologist January2000 55(1) pp 34ndash43

2 One perhaps trivial but reassuring indication we haveof the signal in interpersonal comparisons using our DRMapproach is that individuals who reported sleeping less weremore likely to report feeling tired during each hour of theday

433VOL 94 NO 2 MEMOS TO THE COUNCIL OF BEHAVIORAL-ECONOMICS ADVISORS

Diener E and Suh E M eds Culture andsubjective well-being Cambridge MA MITPress 2000

Dow Greg and Juster F Thomas ldquoGoods Timeand Well-Being The Joint Dependence Prob-lemrdquo in F Thomas Juster and Frank P Staf-ford eds Time goods and well-being AnnArbor MI Institute for Social Research Uni-versity of Michigan 1985 pp 397ndash413

Easterlin R A ldquoWill Raising the Income of AllIncrease the Happiness of Allrdquo Journal ofEconomic Behavior and Organization June1995 27(1) pp 35ndash47

Edgeworth F Y Mathematical psychics An es-say on the application of mathematics to themoral sciences London UK Kegan Paul1881 reprinted New York M Kelly 1967

Frey Bruno and Stutzer Alois ldquoWhat Can Econ-omists Learn from Happiness ResearchrdquoJournal of Economic Literature June 200240(2) pp 402ndash35

Inglehart R and Rabier Jacques-Rene ldquoAspira-tions Adjust to SituationsmdashBut Why Are theDutch So Much Happier than the GermansSubjective Well-Being in Longitudinal andComparative Perspectiverdquo in Frank M An-drews ed Research on the quality of lifeAnn Arbor MI Institute of Social ResearchUniversity of Michigan 1986 pp 1ndash56

Inkeles Alex ldquoIndustrialization Modernizationand the Quality of Liferdquo International Jour-nal of Comparative Sociology JanuaryndashApril1993 34(1ndash2) pp 1ndash23

Kahneman Daniel ldquoNew Challenges to the Ra-tionality Assumptionrdquo Journal of Institu-tional and Theoretical Economics March1994 150(1) pp 18ndash36

Kahneman Daniel Diener E and Schwarz Neds Well-being Foundations of hedonicpsychology New York Russell Sage Foun-dation Press 1999

Kahneman Daniel Krueger Alan SchkadeDavid Schwarz Norbert and Stone ArthurldquoA Survey Method For Characterizing Daily

Life Experience The Day ReconstructionMethod (DRM)rdquo Mimeo Princeton Univer-sity 2003

Kahneman Daniel Wakker Peter P and SarinRakesh ldquoBack to Bentham Explorations ofExperienced Utilityrdquo Quarterly Journal ofEconomics May 1997 112(2) pp 375ndash405

Kiecolt-Glaser J K McGuire L Robles T Fand Glaser R ldquoPsychoneuroimmunology andpsychosomatic medicine Back to the futurerdquoPsychosomatic Medicine January-February2002 64(1) pp 15ndash28

Lucas Richard E Clark Andrew E GeorgellisYannis and Diener Ed ldquoRe-examining Adap-tation and the Set Point Model of HappinessReactions to Changes in Marital StatusrdquoJournal of Personality and Social Psychol-ogy March 2003 84(3) pp 527ndash39

Riis Jason Loewenstein George BaronJonathan Jepson Christopher Fagerlin An-gela and Ubel Peter ldquoIgnorance of HedonicAdaptation to Hemo-Dialysis A Study UsingEcological Momentary Assessmentrdquo MimeoPrinceton University 2004

Schwarz N and Strack F ldquoReports of SubjectiveWell-Being Judgmental Processes and TheirMethodological Implicationsrdquo in D Kahne-man E Diener and N Schwarz eds Well-being The foundations of hedonic psychologyNew York Russell Sage 1999 pp 61ndash84

Stone A A and Shiffman S ldquoEcological Mo-mentary Assessment (EMA) in BehavioralMedicinerdquo Annals of Behavioral MedicineAugust 1994 16(3) pp 199ndash202

Sunstein Cass R and Thaler Richard ldquoLibertar-ian Paternalism Is Not an Oxymoronrdquo Uni-versity of Chicago Law Review 2004(forthcoming)

Urry H L Nitschke J B Dolski I JacksonD C Dalton K M Mueller C J Rosen-kranz M A Ryff C D Singer B H andDavidson R J ldquoMaking a Life Worth LivingNeural Correlates of Well-beingrdquo Psycho-logical Science 2004 (forthcoming)

434 AEA PAPERS AND PROCEEDINGS MAY 2004