Is Money Overrated? Misperceived Satisfaction from Income

People often make important choices in pursuit of higher income, but do they place too much weight on income when deciding what path to take? We propose a simple model of misspecified learning in which individuals overestimate the marginal satisfaction from income—the expected effect of an income increase on overall life satisfaction—and therefore give income too much importance in their decisions. Guided by this model, we designed a pre-registered experiment that elicits beliefs about the marginal satisfaction from income and randomly assigns scientific evidence about it. Respondents substantially overestimate the marginal satisfaction from income both for themselves and for others, but especially for themselves. These biases shrink when respondents are exposed to scientific evidence, and the effects persist one month later. To study whether these beliefs matter for behavior, we measure income-versus-non-income trade-offs using job-choice scenarios tailored to each respondent and a real-world decision the respondent is facing. To elicit the latter, we make a methodological contribution: an AI-led interview method that moves beyond static, predefined survey instruments by combining the flexibility of qualitative interviewing with the discipline of closed-ended survey measurement. We find that biased beliefs are consequential: after learning that income matters less for life satisfaction than they initially thought, respondents place less weight on income in their decisions.