Reference Points

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In The Science of Well-being, Dr. Laurie Santos tells us:

Reference points are a salient (but often irrelevant) standard against which all subsequent information is compared. We think in terms of reference points. Laurie tells us this is one of the annoying features of the mind. We don’t think in terms of absolutes

“What’s the salary that you get your required income that would make you happy? And it just goes up depending on what you were making before. So, if you’re making $30,000, and you’re thinking about your next raise, you say, “Well, the required income I would need to be happy is 50K.” Whereas if you’re at a $100,000, and you’re thinking about your required income you then say, “Aha, actually it’s not like 50K. That’s not. It’s not like twice as good as I should have been. What I really need is 250 K.” Now, you’re kind of constantly bumping yourself up. And this, is this idea that our idea of a good income is not just done in absolute terms. It’s done relative to some reference point. And the reference point is often what we use to make a little bit ago, or what we’re making right now, that we kind of never get satisfied.

The more annoying reference point, and the one that I think messes us up even more in all these other different contexts, is not our own reference point where we are right now, or where we were before. It’s the reference point of where other people are at. It’s our social comparisons. Well, it turns out that comparisons against other people are one of the number one things that affects whether or not we not only like our salary but also like our job. This is what Clark and Oswald looked at. They actually did a big survey of 5,000 British workers at various jobs and what they found was that a person’s job satisfaction, how much they liked their job, actually went down as their comparative income went up. In other words, as your income is less than the other people in your firm, if you feel like you’re making less, you like your job actually less. So as other people’s income goes up, you like your job even less. So we would assume that our minds, if they’re going to use reference points, use reasonable ones. But it turns out that our minds don’t do that. They seem to soak in anything around us as a reference point.”

O’Guinn and Schrum found:

if you go up in numbers of hours of TV watching, you go down in your estimate of your own wealth relative to others.”

Schor found:

for every hour of TV you watch, people are spending $4 more on stuff Kuhn and colleagues found: “You’re almost twice as likely to buy a new car yourself if you live next to the person who won the lottery than you are if you’re just kind of in a control case. It’s kind of like just seeing the new car in the other person’s lot makes you want it so bad that you buy this car that you probably don’t even need.”

Vogel and colleges found:

“the more Facebook use you have, the lower your self-esteem, and the magnitude of this effect. Again, soak that in, is twice as much as the magnitude of increased income on happiness, right? This is messing you guys up pretty badly.”

Our minds make judgments relative to reference points and these reference points and social comparisons diminish our happiness. They can mess us up.

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