I recently got into a (relatively) heated argument over a beer on the topic of income inequality and the psychology of happiness. My absolutist friend argued that if everybody was wealthier then we would all be happier, whatever the levels of inequality. He refused to accept that there is considerable scientific evidence that income inequality makes everybody less happy, even those who are relatively well off.
Apart from the politics of inequality, arguments about the psychology of happiness reveal an important truth for research and business. The brain does not see the world in absolute quantifiable terms, but relativistically. Many visual illusions are based on how the brain processes information and colour and lighting relative to the context of an object. The same colour can look lighter or darker depending on the colours surrounding it.
Similarly, pricing research shows that most of the time we have no idea what things really cost, and we rely on comparisons and benchmarks to judge if things are expensive or cheap. That’s why Rolls-Royce sell their cars at boat shows and not at car shows. It is also why we will pay as much for a small number of coffee capsules for a machine as we will for a large jar of instant coffee (the frame of reference is a café rather than a cup of coffee).
For the record, data from the Gallup World Poll and the World Top Incomes Database show that the more income is concentrated in the hands of the few, the more likely individual people are to report lower levels of life satisfaction and a higher number of negative daily life experiences. At a country level, this means that there is a negative correlation between perceived well-being and inequality rates, whatever the absolute level of income. For example, Singapore is very wealthy, but also has moderately high levels of income inequality and relatively low levels of perceived well-being (relative to countries with similar levels of development).
The lesson for researchers is always to consider the most relevant comparisons when designing discussion guides and questionnaires. In our brains, everything is relative and nothing is absolute. More broadly, humans are social creatures and we look to other people as much as we look to ourselves and our individual desires. As John Donne put it, “No man is an island.” •
By Neil Gains, Tapestry Works