Money, happiness, and aspirations: An experimental study

The past decade has witnessed an explosion of interest in the scientific study of happiness. Economists, in particular, find that happiness increases in income but decreases in income aspirations, and this work prompts examination of how aspirations form and adapt over time. This paper presents results from the first experimental study of how multiple factors—past payments, social comparisons, and expectations—influence aspiration formation and reported satisfaction. I find that expectations and social comparisons significantly affect reported satisfaction, and that subjects choose to compare themselves with similar subjects when possible. These findings support an aspirations-based theory of happiness.