Sachs (2018) on “America’s Health Crisis and the Easterlin Paradox”

Jeffrey D. Sachs, “America’s Health Crisis and the Easterlin Paradox.” Chapter 7 in World Happiness Report 2018, available at https://worldhappiness.report/ed/2018/.

• In the US, “income per capita has more than doubled since 1972 while happiness… has remained roughly unchanged or has even declined.” (The Easterlin Paradox lives on in the US of A...)

• Some culprits: obesity, substance abuse (particularly with opioids), and depression

• Aggregate factors that influence cross-country SWB include: health; social support networks; personal freedom; social trust; and generosity

• The US displays declining life expectancy! Drug overdose deaths are a part of the story

• Some 38% of US adults are obese: added sugar and snacks are among the suspects. Corn subsidies promote the consumption of high-fructose corn syrup

• The obesity/depression circle: "Studies have found that obesity is a significant predictive factor for subsequent depression, while depression is a predictive factor for subsequent obesity [p. 151]." 

• There's also a screen time/depression circle, while video games and social media provide new sources of addiction

• Mental illness and depression remain the major determinants of well-being. In the US, "There is significant evidence of a major, long-term, and continuing epidemic of clinical depression...[p. 153]." 

• Behavioral Economics Outlines also has outlined a contribution by Professor Sachs to the 2019 World Happiness Report on addiction and unhappiness  in the US. Incidentally, the 2021 World Happiness Report, co-edited and with other contributions by Professor Sachs, is available here. (All nine of the reports that have been released to date can be found here.)

Hoang and Knabe (2019) on Unemployment and Happiness

Thi Truong An Hoang and Andreas Knabe, “Time Use, Unemployment, and Well-being: an Empirical Analysis Using British Time-use Data.” CESifo Working Paper No. 7581, March 2019.

• Unemployment seems to lower subjective well-being (SWB) when measured as life satisfaction – but most people find the hours spent at their jobs not to be very happy.

• Perhaps the unemployed have better days, on average, than the employed, because the unemployed can shift time away from working and commuting – that is, the unemployed might win at SWB measured as (duration-weighted) affect, while losing in the life satisfaction measure of SWB.

• If an employed person and an unemployed person are both engaged in a leisure activity like listening to music, say, the employed person is likely to receive more satisfaction from it; this reflects the "saddening effect" of unemployment, where holding activities constant, the unemployed receive less pleasure from the activities than do the employed. 

• But the unemployed are able to engage in relatively pleasurable activities more frequently than the employed: this is the "time-composition effect" of unemployment.

• In the authors' British time-use data, the employed hold the edge in life satisfaction and in "life being worthwhile" measures of SWB; work itself seems meaningful, but not particularly enjoyable.

• The unemployed sleep more, and watch tv more. They also spend more time looking for a job, and that is an activity that people do not enjoy.

• Despite the saddening effect of unemployment – when engaging in the same activity, the employed capture more happiness than do the unemployed – the unemployed capture more happiness (affect) in a typical day than do the employed, thanks to the time-composition effect. Working really is not all that happiness-inducing.

• People enjoy weekends more than weekdays, and the weekend bonus is greater for the employed.

• Incidentally, there's some US data that shows significant differences in time use between prime-age men who are not in the labor force versus the unemployed.

• All this work on posting this outline is making me sad.

Balasubramanian and Cashin (2019) on Gross National Happiness in Bhutan

Sriram Balasubramanian and Paul Cashin, “Gross National Happiness and Macroeconomic Indicators in the Kingdom of Bhutan.” IMF Working Paper WP/19/15, January 2019.

• The population of Bhutan is about 735,000 people, who are much influenced by the state religion, the Vajrayana tradition in Buddhism. "At the core of this philosophy are the key components of compassion and respect for all, and for the government to take care of its citizens [p. 3]." [The promotion of GNH has not stood in the way of alleged horrific behavior towards the ethnic Nepalese population in Bhutan, particularly in the 1990s.]

• Since 1972, Bhutan has emphasized Gross National Happiness (GNH), not Gross National Product (GNP) (or Gross Domestic Product), and that emphasis is now enshrined in Bhutan's Constitution. The Bhutanese commitment to GNH does not imply that GNP is shunned as a development indicator. 

• Pillars of GNH: (1) sustainable, equitable development; (2) cultural promotion; (3) environmental protection; and, (4) good governance. The Bhutanese also apply their GNH approach within nine more specific domains, such as health and the allocation of time. 

• Despite a rather phenomenal increase in per-capita income over the past forty years, GNH in Bhutan has not risen much -- shades of Easterlin. A report on Bhutan's 2015 GNH survey is available here.

• Men are significantly happier (on average) than women in Bhutan; urban dwellers are happier than rural folks. The least happy occupation in Bhutan is farming. 

• Poverty reduction in Bhutan has been significant: "the poverty rate in Bhutan has declined from 23.2 percent in 2007, to 12 percent in 2012, and further to 8.2 percent in 2017 [p. 20]." Urban poverty is quite small. 

Oswald and Winkelmann (2019) on Lottery Wins and Happiness

Andrew J. Oswald and Rainer Winkelmann, “Lottery Wins and Satisfaction: Overturning Brickman in Modern Longitudinal Data on Germany.” In: Rojas M. (ed.) The Economics of Happiness. Springer, Cham., 2019.

• The "Brickman" in the title refers to an influential 1978 article that first questioned the Easterlin claim that, in cross-section data, higher income leads to greater happiness, and in part used the happiness of lottery winners as evidence. Brickman et al. found almost no improvement in happiness for lottery winners. [The article is Brickman, P., Coates, D., & Janoff-Bulman, R. (1978). Lottery winners and accident victims: Is happiness relative? Journal of Personality and Social Psychology, 36(8), 917–927.]

• The (usual) positive relationship that exists between income and happiness might not be causal. That is, more money might not mean more happiness -- it could be the other way around, that happier people earn more, or there could be some other factor that drives both happiness and income.

• Lottery winners to the rescue! The income windfall of lottery winners has a suggestion of exogeneity, it does not arise from unobserved personal traits.  

• The "rescue" provided by examining lottery winners might be limited, in part by the small numbers of such winners, and in part because lottery players might share relevant characteristics that are not possessed to the same degree by the rest of the population. This latter issue can be addressed by comparing only lottery winners, looking to see if winners who win more money are happier than those who win less money.  

• Another problem in terms of generalizing claims about money and subjective wellbeing (SWB) is that it is possible that the source of income, and not just the amount, matters for SWB.

• Lottery winning doesn’t seem to do much for health or for children’s health – perhaps because winners engage more intensely in risky activities like drinking alcohol. Mental health problems and mortality might increase for lottery winners.

• If your neighbor wins the lottery, you are more likely to buy a new car and engage in home renovation -- that is, you make significant expenditures on publicly visible goods. 

• Regular lottery players (in Germany) are drawn disproportionately from the less educated segments of society.

• A (biggish?) lottery win boosts satisfaction with your income, like would occur with a 20% increase in income – but the effect fades within a couple of years. A similar tale, with smaller magnitudes, applies to overall life satisfaction.

Andrew Eric Clark, “Four Decades of the Economics of Happiness: Where Next?” Review of Income and Wealth 64(2): 245-269, June 2018.

• Happiness data allow answers to the questions: (1) what promotes happiness; (2) what activities do happy people undertake?; and, (3) how can we value a public project?

• One common measure of subjective well-being is the Cantril ladder, where respondents are asked to imagine a ladder with eleven numbered levels, from zero on the bottom (worst possible life for the respondent) to ten on the top (best possible life for the respondent).

• Studies of the effect of income on happiness generally indicate diminishing marginal happiness from income, so that the happiness boost from an additional $1000, say, is greater for lower income people than for higher income folks.

• Another nearly universal finding is that unemployment is negatively correlated with happiness. 

• A graph of happiness as a function of age tends to be u-shaped, though the reasons for this relationship are not well understood. 

• The black/white happiness gap in the US – whites tend to have higher subjective wellbeing (SWB) – is shrinking.

• Marriage seems good for happiness (or at least positively correlated with it), and single people who are happy are more likely to get married.

• Children are not a sure-fire happiness booster, though people who are happier are more likely to have kids down the road.

• Aggregate unemployment is worse for national SWB than is inflation, basically (in that a 1 percentage point increase in unemployment lowers SWB by more than does a 1 percentage point increase in the inflation rate) but an individual suffers less from unemployment when the aggregate unemployment rate is high

• Something (like a bigger house) that raises your happiness might undermine someone else’s

• Adaptation (the hedonic treadmill) is limited with respect to unemployment, poverty, disability, lack of job security, and (for something that raises SWB) cosmetic surgery!

• Do happy teachers lead to better student performance? (Some evidence (p. 258) says yes.)

• Happiness promotes health – and voting for incumbents.

• Affective happiness versus life satisfaction: “Would you prefer to live a good life, or to remember having lived a good life? [p. 264].”

Le Grand (2018) on Government Paternalism

Julian Le Grand, “Future Imperfect: Behavioral Economics and Government Paternalism.” Review of Behavioral Economics 5: 281–290, 2018.

• Nudges and even stronger government interventions are often justified on the grounds of allowing long-run, more considered or "truer" individual preferences to assert themselves. But there are problems with identifying and privileging any one set of preferences. This article offers two justifications for paternalistic interventions that do not rely on identifying true or long-run preferences. 

• The defense of paternalism offered here applies (as is usually the case in economics) to means-related paternalism, not ends-related. People's goals are taken as given (and, implicitly, rational); can policies be designed to empower people to better achieve those goals?

 • What if the government sees people engaging in an activity like smoking that the government believes will have future costs for smokers that with a high probability will more than compensate (in terms of the smokers' own values) for the increased value they enjoy from smoking now? 

• The government might reasonably want to dissuade such smoking, but why would smokers make such a mistake? Maybe they lack information, so there is much to be said for ensuring that accurate information is readily available – but this is not the same as justifying a smoking tax or ban. Maybe smokers use a different discount rate than does the government in comparing current with future costs and benefits – again, this difference should not license coercive interventions by the government.

• But maybe (drawing upon Le Grand's 2015 book with Bill New) the problem is that smokers suffer from one or more "reasoning failures": "limited technical ability, limited experience or imagination, limited willpower and limited objectivity [p. 286]." In particular, can a young smoker imagine a realistic portrayal of herself as a 65-year old? The failure of imagination is not a problem of too little information about the health risks of smoking; rather, it is a lack of knowledge of how the well-being of future selves will be affected by current smoking. A paternalistic policy can be justified not only on the basis of better knowledge of true or more-considered preferences, but on a better understanding of health effects on well-being. 

• A second defense of paternalistic interventions might be to consider how a person's future selves might contract with current selves to influence current decision making. Government could serve as a stand-in for those underrepresented future selves. Now the justification for a paternalistic intervention is market failure, in that future selves generally are unable to participate in market transactions that nevertheless implicate their interests.

• Le Grand adapts an example from a 2018 book by Robert Sugden. A young person inherits from an uncle a wine collection, though she has little interest in wine, and does not place much value on her inheritance. But her father suspects that in a few years the young person will feel differently. So he could offer her a low price for the wine today (which she will accept), and after a few years, offer to sell it back to her at a higher price. If the father was right, she will agree to both transactions, and everyone is happy. 

• For goods which, unlike wine, cannot be transferred, the government could arrange a similar (though not voluntary?) deal, by subsidizing smoking avoidance today, with the subsidy repaid by taxes in the future on the now older non-smokers. But does this "contractarian approach" avoid the identification of a true or long-term preference? Le Grand thinks that it does not, as the (imposed) subsidy is designed to override the young person's current preferences.

Špecián (2019) on True Preferences

Petr Špecián, “The Precarious Case of the True Preferences.” Society 56(3): 267-272, June 2019.

• Are voluntary trades (with no spillovers) Pareto improving? To assert that they are suggests a belief in coherent preferences. This is the standard economics approach: choices reveal underlying, true preferences.

• Behavioral evidence undermines the belief that choices reveal true preferences. Nonetheless, nudges aim to make people better off “as judged by themselves," so there is an appeal to some underlying true preferences from which those judgments emerge.

• But when can we know that people's un-nudged choices do not reflect their true preferences? How can we determine which preferences should be disregarded or questioned? Signposts of potential irrationality might include rare choices, intertemporal choices, choices involving temptation goods…

• Can we rely upon cold-state (as opposed to hot-state) preferences, or long-run, considered preferences, as somehow being "true" preferences? But maybe these proclaimed "more considered" preferences reflect social norms and are just marketed for public consumption, even as people really want to be Mr. Hyde, not Dr. Jekyll. 

• Perhaps Sugden (2008) is right, perhaps there are no underlying coherent preferences at all.

• Nudgers might believe that their interventions make matters better in practice even if these fundamental questions about how to judge individual welfare remain unresolved. [That's pretty much my view, too -- JL] Nudgers should be humble, and wary of overconfidence.