Will We be Happier in the Future? Research on the Effect of Covid-19 on Income and Life Satisfaction of the US Citizens

Abstract

In this study, individuals’ mispredictions regarding their own income and life satisfaction in the future and projection bias effect, as one of the reasons for these mispredictions, are explained. Projection bias, a cognitive bias associated with individuals’ inability to empathize with their future selves, renders individuals mistaken that they would think the way they do now while making predictions about the future, and causes them to be mis-predicted about their future life satisfaction. Individuals may make systematic mistakes, by not considering adaptation to the future situation, upon currently predicting their future life satisfaction. Our study aims to explain that the life satisfaction of individuals, upon experiencing certain negative events such as Covid-19, tends to revert to their previous level when such negativity disappears or becomes a normal part of life, meaning, when individuals adapt to this situation. In our study, based on the data of the Gallup Panel and Gallup National Health and Well-Being Index in the USA, it is revealed that the income and life satisfaction of the US citizens decreased as soon as Covid-19 pandemic broke out. At the same time, the projection bias underlying the life satisfaction level of individuals in the next five years is explained by comparing with the previous years, and it is suggested that this situation should be taken into consideration upon determining policies regarding income and life satisfaction by supporting the idea that life satisfaction estimates may be erroneous given the literature.