Journal of Economic Perspectives Volume 20 Number 1 Winter 2006 Pages 3 24 Developments in the Measurement of Subjective Well Being Daniel Kahneman and Alan B Krueger F or good reasons economists have had a long standing preference for studying peoples revealed preferences that is looking at individuals actual choices and decisions rather than their stated intentions or subjective reports of likes and dislikes Yet people often make choices that bear a mixed relationship to their own happiness A large literature from behavioral economics and psychology finds that people often make inconsistent choices fail to learn from experience exhibit reluctance to trade base their own satisfaction on how their situation compares with the satisfaction of others and depart from the standard model of the rational economic agent in other ways If people display bounded rationality when it comes to maximizing utility then their choices do not necessarily reflect their true preferences and an exclusive reliance on choices to infer what people desire loses some of its appeal Direct reports of subjective well being may have a useful role in the measurement of consumer preferences and social welfare if they can be done in a credible way Indeed economists have already made much use of subjective well being data From 2001 to 2005 more than 100 papers were written analyzing data on selfreported life satisfaction or happiness according to a tabulation of EconLit up from just four in 1991 1995 Data on subjective well being have been used by economists to examine both macro and micro oriented questions In a classic paper Easterlin 1974 examined the relationship between economic growth and happiness More recently Di Tella MacCulloch and Oswald 2001 use data on life satisfaction from the Eurobarometer to infer how people trade off inflation for unemployment and Alesina Glaeser and Sacerdote 2005 use the same data to study whether labor y Daniel Kahneman is Eugene Higgins Professor of Psychology and Public Affairs and Alan B Krueger is Bendheim Professor of Economics and Public Affairs both at Princeton University Princeton New Jersey 4 Journal of Economic Perspectives market regulation makes people better off Gruber and Mullainathan 2004 examine the effect of cigarette taxes on self reported happiness to draw inferences about the rationality of smoking using data from the General Social Surveys for the United States and Canada Questions about subjective well being like the extent to which the respondent feels calm and peaceful have also been included as outcome measures in the Moving to Opportunity for Fair Housing and Rand Health Insurance experiments Kling Liebman and Katz 2005 Yet another use of subjective well being has been to provide an external check on economic indicators For example Nordhaus 1998 and Krueger and Siskind 1998 compare income growth deflated by the consumer price index to changes in the percentage of the population that reports an improvement in their financial position to assess bias in the price deflator In discovering the potential value of subjective well being surveys researchers are following in the footsteps of profitseeking companies like Gallup which regularly conduct morale and satisfaction surveys of workers and customers for their corporate clients What are economists to make of this enterprise Can well being be measured by a subjective survey even approximately In this paper we discuss research on how individuals responses to subjective well being questions vary with their circumstances and other factors We will argue that it is fruitful to distinguish among different conceptions of utility rather than presume to measure a single unifying concept that motivates all human choices and registers all relevant feelings and experiences While various measures of well being are useful for some purposes it is important to recognize that subjective well being measures features of individuals perceptions of their experiences not their utility as economists typically conceive of it Those perceptions are a more accurate gauge of actual feelings if they are reported closer to the time of and in direct reference to the actual experience We conclude by proposing the U index a misery index of sorts which measures the proportion of time that people spend in an unpleasant state and has the virtue of not requiring a cardinal conception of individuals feelings Measuring Subjective Experience in Principle and in the Lab The earliest popular conceptions of utility from Jeremy Bentham through Francis Ysidro Edgeworth and Alfred Marshall was as a continuous hedonic flow of pleasure or pain Kahneman has called this conception experienced utility and it is also similar to what Juster Courant and Dow 1985 call process benefits 1 Edgeworth 1 Juster Courant and Dow define process benefits as the direct subjective consequences from engaging in some activities to the exclusion of others For instance how much an individual likes or dislikes the activity painting one s house in conjunction with the amount of time one spends in painting the house is as important determinant of well being independent of how satisfied one feels about having a freshly painted house Daniel Kahneman and Alan B Krueger 5 defined the happiness of an individual during a period of time as the sum of the momentary utilities over that time period that is the temporal integral of momentary utility Several methods have been used to attempt to measure the moment tomoment flow of pleasure or pain in the laboratory An advantage of laboratory experiments is that extraneous aspects of an experience can be controlled and the unique effect of a stimulus on individuals experiences can be evaluated Participants in many experiments in psychology and in consumer research for example are required to undergo an experience such as being exposed to loud noises or watching a film clip They are asked to provide a continuous indication of the hedonic quality of their experience in real time by manipulating a lever that controls a marker on a scale which is usually defined by extreme values such as very pleasant and very unpleasant and by a neutral value In a similar fashion public opinion during a political debate is sometimes assessed by means of a dial group in which a group of observers continually indicate their pleasure or displeasure with the candidates views by continuously adjusting a dial These studies yield a temporal profile of moment to