My behavioral economics students are taking an exam as we speak. On said exam is a question about whether people are good at predicting what their preferences are going to look like in the future. (Spoiler alert: they aren’t.) In class, we’ve gone through examples of this inability to predict future tastes that range from the reasonably mundane (people don’t appear to anticipate the endowment effect) to the socially important but awkward to talk about in class (people seem unaware that they will start liking a bunch of kinky shit once they are sexually aroused). This line of research began, like a lot of behavioral economics topics, in the psychology world, where researchers have found, for example, that people overestimate how much happier winning the lottery will make them.
The reason for the latter type of misprediction is that people are generally unaware that they are subject to the concept of the hedonic treadmill, which states that people’s expectations and tastes adapt such that people tend to revert to a baseline level of happiness after major positive or negative events. The corollary to the hedonic treadmill, not surprisingly, is that permanent increases in happiness require increasingly nicer toys as time goes on. In other words, this:
(Unfortunately, unlike Zach, I am less convinced that people have control over their hedonic treadmills, but I’m doing my part to educate just in case.)
Apparently this concept even holds between generations as Louis CK has pointed out on several occasions. This isn’t surprising, since later generations have norms and expectations of a higher level of technology, standard of living, etc. right from the start. (Luckily we haven’t seen any major decreases in technology or standard of living over time in order to see if the effect works in the opposite direction!) In a strictly economic sense, the failure of individuals to anticipate the hedonic treadmill implies that we tend to overestimate the utility (or disutility) that future consumption will bring. As I’ve pointed out before, this is certainly something to consider when deciding whether to purchase that new big-screen TV.
Good advice, just in time for the holiday season. =P