Jennifer L. Aaker, Melanie Rudd, and Cassie Mogilner, “If Money Doesn’t
Make You Happy, Consider Time.” Stanford Graduate School of Business,
Research Paper No. 2067, November 2010; gated published version here.
• There are (income) budget constraints and there are time constraints; most economics subjective wellbeing research has concerned income. But our happiness depends to a large measure on how we spend our time.
• Social activities involving friends and family are more conducive to happiness than are solitary activities. Work is not all that conducive to happiness, but it helps considerably if you like your boss, and if you have a best friend at work.
• Imagining and planning for happy experiences (such as travel) can bring more happiness (and use less time) than the activities themselves.
• Control over discretionary time is a source of happiness. Being mindful of the present – breathe deeply, slowly – helps to keep away anxiety about time being short.
• Happiness tends to be minimized about the age of fifty, and older people associate happiness less with excitement and more with peacefulness. Spending time with old friends and family is more valuable to happiness for older people than for younger people.
Saturday, January 30, 2016
Do People Choose What Makes Them Happy?
Daniel J. Benjamin, Ori Heffetz, Miles S. Kimball, and Alex Rees-Jones,
“What Do You Think Would Make You Happier? What Do You Think You
Would Choose?” American Economic Review 102(5): 2083–2110, 2012 (ungated version here).
• The motivation for this study by Benjamin et al. (2012) is that subjective wellbeing (SWB) is often used as a proxy for unmeasureable “utility.” In the standard economics model, people choose in ways to maximize their utility; do they choose in ways to maximize subjective wellbeing?
• Benjamin et al. use surveys with binary choices such as whether you would choose a job with more pay and less sleep or an alternative job with less pay and more sleep. People also are asked to indicate which option would make them happier.
• The results of the surveys are that subjective wellbeing and choice are strongly positively correlated; indeed, of all the factors measured, (predicted) subjective wellbeing has the strongest connection to (predicted) choice. The measure of subjective wellbeing that is most strongly connected with choice is one that tries to capture lifetime satisfaction, as opposed to measures that aim more at shorter-term positive affect.
• When subjective wellbeing and choice deviate, they do so in a systematic way. People will make choices that do not maximize subjective wellbeing in circumstances in which the chosen option contributes more to a sense of purpose, for instance, or family happiness, or control, or social status.
• To investigate whether self-control shortcomings explain the divergence between choice and happiness – that is, I know I would be happier with choice A but I cannot resist temptation so I make choice B – the authors asked respondents about their meta-preferences, about which choice they wished they would make. Most of the deviations of choice from SWB maximization cannot be explained by self-control problems.
• The motivation for this study by Benjamin et al. (2012) is that subjective wellbeing (SWB) is often used as a proxy for unmeasureable “utility.” In the standard economics model, people choose in ways to maximize their utility; do they choose in ways to maximize subjective wellbeing?
• Benjamin et al. use surveys with binary choices such as whether you would choose a job with more pay and less sleep or an alternative job with less pay and more sleep. People also are asked to indicate which option would make them happier.
• The results of the surveys are that subjective wellbeing and choice are strongly positively correlated; indeed, of all the factors measured, (predicted) subjective wellbeing has the strongest connection to (predicted) choice. The measure of subjective wellbeing that is most strongly connected with choice is one that tries to capture lifetime satisfaction, as opposed to measures that aim more at shorter-term positive affect.
• When subjective wellbeing and choice deviate, they do so in a systematic way. People will make choices that do not maximize subjective wellbeing in circumstances in which the chosen option contributes more to a sense of purpose, for instance, or family happiness, or control, or social status.
• To investigate whether self-control shortcomings explain the divergence between choice and happiness – that is, I know I would be happier with choice A but I cannot resist temptation so I make choice B – the authors asked respondents about their meta-preferences, about which choice they wished they would make. Most of the deviations of choice from SWB maximization cannot be explained by self-control problems.
Tuesday, January 19, 2016
Helliwell (2012) on the Social Context of Well-Being
John F. Helliwell, “Understanding and Improving the Social Context of
Well-Being.” NBER Working Paper No. 18486, October 2012.
• Social and pro-social behaviors greatly contribute to well-being; that is, “social engagement …makes people happy [p. 3].”
• People tend to be happier on weekends than on weekdays, and much of the improvement can be traced to more social activities on weekends. Viewing your boss as a partner in a joint enterprise adds to happiness at work.
• In a donor-recipient transaction, the donor tends to receive the greater share of happiness gains.
• People underestimate how much their happiness will increase through pro-social activity, just as they overestimate how much happiness more income or consumption will bring.
• Social behavior improves happiness which improves health which improves happiness… [Recall the Ifcher and Zarghamee article that documented many benefits of positive affect.]
• If trust is low but not negligible, an external threat can induce social interactions that allow trust to be built.
• Happiness at work is much more closely tied to trust than to pay.
• Elderly people saw substantial health benefits when they created a water club to fight dehydration. It was later learned that the health gains came not from changes in water availability, but from the social interactions connected with the club.
• Social and pro-social behaviors greatly contribute to well-being; that is, “social engagement …makes people happy [p. 3].”
• People tend to be happier on weekends than on weekdays, and much of the improvement can be traced to more social activities on weekends. Viewing your boss as a partner in a joint enterprise adds to happiness at work.
• In a donor-recipient transaction, the donor tends to receive the greater share of happiness gains.
• People underestimate how much their happiness will increase through pro-social activity, just as they overestimate how much happiness more income or consumption will bring.
• Social behavior improves happiness which improves health which improves happiness… [Recall the Ifcher and Zarghamee article that documented many benefits of positive affect.]
• If trust is low but not negligible, an external threat can induce social interactions that allow trust to be built.
• Happiness at work is much more closely tied to trust than to pay.
• Elderly people saw substantial health benefits when they created a water club to fight dehydration. It was later learned that the health gains came not from changes in water availability, but from the social interactions connected with the club.
Sacks, Stevenson, and Wolfers (2012), on Happiness, Income, and Easterlin
Daniel W. Sacks, Betsey Stevenson and Justin Wolfers, “The New Stylized
Facts About Income and Subjective Well-Being.” Emotion 12(6): 1181- 1187, 2012 [pdf].
• The Easterlin Effect (or Paradox) suggests that while within a country at a point in time, richer people are happier than poorer people, that in that same country over time, rising incomes do not lead to more happiness, nor are richer countries happier than poorer countries.
• A potential explanation of the Easterlin Effect is that people care about their relative income standing, and only compare themselves with their current compatriots.
• Sacks, Stevenson, and Wolfers examine lots of data from many countries over many years, and find that there is essentially no evidence in support of the Easterlin Effect. Higher income is associated with higher happiness, whether the comparisons are made within a country, across countries, or over time.
• The main measure that they use for subjective well-being employs a ladder analogy; people assess their lives on a ladder with steps 0 to 10, higher numbers meaning more satisfaction.
• There is a declining marginal impact of income on happiness – an additional 100 dollars brings a larger dollop of happiness to a poor person than to a rich person. Further, the lack of support for the Easterlin Effect does not rule out the possibility that relative income might have a small influence on well-being.
• The US remains a puzzle, as over the last 40 years, average income has nearly doubled, while happiness has slightly declined. Part of the answer might be that the increase in average happiness masks the fact that income inequality has increased, which means that many people did not share in the income gains.
• The Easterlin Effect (or Paradox) suggests that while within a country at a point in time, richer people are happier than poorer people, that in that same country over time, rising incomes do not lead to more happiness, nor are richer countries happier than poorer countries.
• A potential explanation of the Easterlin Effect is that people care about their relative income standing, and only compare themselves with their current compatriots.
• Sacks, Stevenson, and Wolfers examine lots of data from many countries over many years, and find that there is essentially no evidence in support of the Easterlin Effect. Higher income is associated with higher happiness, whether the comparisons are made within a country, across countries, or over time.
• The main measure that they use for subjective well-being employs a ladder analogy; people assess their lives on a ladder with steps 0 to 10, higher numbers meaning more satisfaction.
• There is a declining marginal impact of income on happiness – an additional 100 dollars brings a larger dollop of happiness to a poor person than to a rich person. Further, the lack of support for the Easterlin Effect does not rule out the possibility that relative income might have a small influence on well-being.
• The US remains a puzzle, as over the last 40 years, average income has nearly doubled, while happiness has slightly declined. Part of the answer might be that the increase in average happiness masks the fact that income inequality has increased, which means that many people did not share in the income gains.
Wednesday, January 13, 2016
Karlan and Appel (2011) on Buying or Not Buying
Dean Karlan and Jacob Appel, “To Buy: Doubling the Number of Families with a Safety Net.” Chapter 3, pages 39-54, in More than Good Intentions: Improving the Ways the World's Poor Borrow, Save, Farm, Learn, and Stay Healthy, New York: Dutton, 2011. [Also see this Q&A with the authors at the Freakonomics blog.]
• For a successful anti-poverty policy, you need an intervention that reduces poverty, of course; but further, you need your intervention to be taken up by the targeted poor people. Many policies that “work” do not achieve high levels of take-up, including oral rehydration therapy (for protection against the effects of diarrhea), and ant-malarial mosquito nets.
• Behavioral economist Sendhil Mullainathan talks about “The Last Mile Problem,” the relative neglect of take-up after the intervention has been designed.
• Decisions to borrow money are influenced by far more factors than the interest rate. Randomized controlled experiments indicate that a photo of a pretty woman on loan informational material makes it more likely that men will borrow, and providing but one instead of four sample loans helps, too. In-person meetings, especially when introduced by a trusted acquaintance, doubles take-up.
• In another randomized controlled experiment, a cell phone giveaway did not increase borrowing; indeed, that promotion had a perverse impact.
• Choice overload leads to “I’ll think about it tomorrow”- type responses.
• Rainfall insurance for poor farmers in India is woefully undersubscribed, although (so Karlan and Appel assert) very beneficial.
• For a successful anti-poverty policy, you need an intervention that reduces poverty, of course; but further, you need your intervention to be taken up by the targeted poor people. Many policies that “work” do not achieve high levels of take-up, including oral rehydration therapy (for protection against the effects of diarrhea), and ant-malarial mosquito nets.
• Behavioral economist Sendhil Mullainathan talks about “The Last Mile Problem,” the relative neglect of take-up after the intervention has been designed.
• Decisions to borrow money are influenced by far more factors than the interest rate. Randomized controlled experiments indicate that a photo of a pretty woman on loan informational material makes it more likely that men will borrow, and providing but one instead of four sample loans helps, too. In-person meetings, especially when introduced by a trusted acquaintance, doubles take-up.
• In another randomized controlled experiment, a cell phone giveaway did not increase borrowing; indeed, that promotion had a perverse impact.
• Choice overload leads to “I’ll think about it tomorrow”- type responses.
• Rainfall insurance for poor farmers in India is woefully undersubscribed, although (so Karlan and Appel assert) very beneficial.
Monday, January 11, 2016
Will Wilkinson (2007) on Happiness and Policy
Will Wilkinson, “In Pursuit of Happiness Research: Is It Reliable? What Does It Imply for Policy?” Policy Analysis no. 590, April 11, 2007.
• Wilkinson challenges three claims: (1) the US-market style approach and restricted welfare state are bad for happiness; (2) positional externalities justify progressive taxation; and, (3) economic growth is unimportant for happiness.
• Do people understand their own affective states? If we have neural habituation, no. We can feel terrific and not notice. Think of all those people who were constantly suffering before antibiotics and other medical advances.
• We can be sad and happy simultaneously. Happiness itself is multidimensional; even happiness researchers can’t agree on how to measure it.
• Asking if it is better to live in Denmark or the US is a bit like asking whether it is better to live in the city or the country. It depends. The US actually ranks pretty high in measured happiness, incidentally.
• There isn’t much evidence that lower inequality, a more advanced welfare state, or higher government spending, raise subjective well-being, even among the poor or the left-leaning.
• While income inequality has been rising of late in the US, inequality in happiness is falling.
• Economic freedom is a strong correlate with subjective well-being.
• Culture allows us to embed status-seeking within positive sum environments.
• Wilkinson challenges three claims: (1) the US-market style approach and restricted welfare state are bad for happiness; (2) positional externalities justify progressive taxation; and, (3) economic growth is unimportant for happiness.
• Do people understand their own affective states? If we have neural habituation, no. We can feel terrific and not notice. Think of all those people who were constantly suffering before antibiotics and other medical advances.
• We can be sad and happy simultaneously. Happiness itself is multidimensional; even happiness researchers can’t agree on how to measure it.
• Asking if it is better to live in Denmark or the US is a bit like asking whether it is better to live in the city or the country. It depends. The US actually ranks pretty high in measured happiness, incidentally.
• There isn’t much evidence that lower inequality, a more advanced welfare state, or higher government spending, raise subjective well-being, even among the poor or the left-leaning.
• While income inequality has been rising of late in the US, inequality in happiness is falling.
• Economic freedom is a strong correlate with subjective well-being.
• Culture allows us to embed status-seeking within positive sum environments.
Bruno Frey (2008) on “Happiness Policies”
Bruno S. Frey, “Happiness Policies.” Chapter 13, pages 151-175, in Happiness: A Revolution in Economics, Cambridge: MIT Press, 2008.
• Unemployment harms subjective well-being (SWB), as does inflation; but on a percentage-point-by-percentage-point basis, unemployment is worse. If we could lower the unemployment rate by 5% while raising the inflation rate by 8%, we would increase SWB.
• Marriage is good for SWB, while separation and divorce are bad for it. Mobility destroys friendships and happiness. Procedural aspects, not only consequences, are important for SWB – people like fair procedures, or the opportunity to be heard.
• Gross National Happiness looks at non-material aspects of well-being, and captures outcomes, not inputs. A National Happiness Index would weight everyone the same, whereas GDP essentially counts individuals proportionally to the value of their market activity. Much of GDP is based on inputs, too. The World Bank’s Human Development Index draws upon a capabilities approach to human flourishing.
• It would be hard to turn SWB into a policy imperative in a reasonable way. Some forms of SWB are sustainable, others are liable to adaptation. SWM measures can be (and would be) manipulated if they were to be utilized in a deterministic fashion for policy purposes. It is probably best to use SWB to inform policymaking, but not to treat it as dispositive.
• We could try to tax to correct for positional externalities, but the usual problems of tax evasion and avoidance would be severe. Do we want to shift status competition into the man-on-horseback variety? Society functions better when status differentials are accepted, and if they are not so acceptable, when they are cloaked.
• Unemployment harms subjective well-being (SWB), as does inflation; but on a percentage-point-by-percentage-point basis, unemployment is worse. If we could lower the unemployment rate by 5% while raising the inflation rate by 8%, we would increase SWB.
• Marriage is good for SWB, while separation and divorce are bad for it. Mobility destroys friendships and happiness. Procedural aspects, not only consequences, are important for SWB – people like fair procedures, or the opportunity to be heard.
• Gross National Happiness looks at non-material aspects of well-being, and captures outcomes, not inputs. A National Happiness Index would weight everyone the same, whereas GDP essentially counts individuals proportionally to the value of their market activity. Much of GDP is based on inputs, too. The World Bank’s Human Development Index draws upon a capabilities approach to human flourishing.
• It would be hard to turn SWB into a policy imperative in a reasonable way. Some forms of SWB are sustainable, others are liable to adaptation. SWM measures can be (and would be) manipulated if they were to be utilized in a deterministic fashion for policy purposes. It is probably best to use SWB to inform policymaking, but not to treat it as dispositive.
• We could try to tax to correct for positional externalities, but the usual problems of tax evasion and avoidance would be severe. Do we want to shift status competition into the man-on-horseback variety? Society functions better when status differentials are accepted, and if they are not so acceptable, when they are cloaked.
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