One of the most surprising findings in recent research shows that a lottery win of ￡1,000 or more won’t immediately make you happy. Instead, it takes two years before winners enjoy their money. This is in stark contrast to the effect of earned incomes on happiness: an increase in salary often leads to some immediate improvement (again, not as much as one would think) in a person’s happiness. But why does the joy from a lottery win take two years to arrive? One hypothesis is that, while traditional economic theories typically assume that a pound is a pound is a pound, the reality is that one pound won is not the same as one pound earned.
From new research on “lagged deservingness” among lottery winners that I undertook with economists Andrew Oswald and Rainer Winkelmann, earned income is regarded as money that is intrinsically deserved. Lottery income isn’t. The winner doesn’t immediately think that she is fully deserving of the money because winning the lottery creates a form of unwanted cognitive dissonance – the process associated with holding two contradictory ideas in one’s head. The winner thinks: “I’m happy about the money, but I’m not sure whether I’m really entitled to it.” Through time, however, the lottery winner can persuade herself that she deserves the money. Empirically speaking, this slow erosion of cognitive dissonance takes approximately two years to complete. Interestingly, we also found in our study that people weigh differently the various incomes that accrue to them: gift income and inheritance income are viewed in a very different way to wage income and lottery income.