He Said He Was Not Happy, Should We Care?

Donald Lien September 12, 2013

What is this? Where does it come from? Why do we care? Is it here to stay?

Happiness

Happiness Measurement Determinants of Happiness Policy Implications Related Work

Main Topics

Momentary feelings of joy and pleasure, referred to in psychology as positive and negative affect (Happiness)

Overall contentment with life (Life Satisfaction)

Quality of life achieved by developing and fulfilling one’s potential (Eudaimonia or the good life)

Three Concepts

Please imagine a ladder with steps numbered from zero at the bottom to ten at the top. Suppose we say that the top of the ladder represents the best possible life for you and the bottom of the ladder represents the worst possible. If the top is 10 and the bottom step is 0, on which step of the ladder do you feel you personally stand at the present time?

Gallop World Poll

All things considered, how satisfied are you with your life as a whole these days? Use 0 to 10, where 0 is dissatisfied and 10 is satisfied

Gallop World Poll

Taken all together, how would you say things are these days – would you say that you are very happy, pretty happy, or not too happy?

General Social Survey

All things considered, how satisfied are you with your life as a whole these days? Please use this card to help with your answer. Dissatisfied (1) 2 3 4 …Satisfied (10)

World Values Survey

On the whole, are you very satisfied, fairly satisfied, not very satisfied, or not at all satisfied with the life you lead?

Euro-Barometer Survey

Overall, How happy are you? 0 indicates very unhappy 100 indicates very happy

Hong Kong and Beijing Surveys

Experience Sampling Method Day Reconstruction Method U-Index Brain Imaging

Other Measurement Methods

The extent the same questions yield identical answers when administered in the same conditions

Reliability

The extent the measure can be explained in terms of life circumstances and other candidate variables

The extent it is correlated with other subjective and objective measures of well-being

How and whether it predicts subsequent outcomes and behavior

Validity

Genes and environment (Level 1) External features (Level 2) Personal features (Level 2) Happiness (Level 3)

Basic Framework

Income Work Community and governance Values and religion

External Factors

Mental health Physical health Family experience Education Gender Age

Personal Features

Easterlin Paradox (1974) At a point in time within any society, richer

people are on average happier than poorer people (cross-sectional fact)

Over time within many societies, the population does not on average become happier when the country’s income rises (time series fact)

Income

US: 1950-1970, 1963-1976, 1972-2006 West Germany: 1973-2007, 1985-2006 Recent debate

Evidence

Relative income Adaptation

Explanantion

Kahneman and Krueger (2006)

Clark et al (2008): Death of Wife

Clark et al (2008): Death of Husband

Lucas (2005): Divorce

Di Tella at (2007): Firing

Di Tella at (2007): Effect of a 50% spike in income

When people become unemployed they experience sharp falls in well-being and their well-being remains at the lower level until they are re-employed

The main impact of unemployment on well-being is not through the loss of income, but rather through loss of social status, self-esteem, workplace social life, and other factors

Unemployment

Others’ unemployment (at the regional, household, and couple level) generally has a positive effect on the well-being of the unemployed (at least for men)

Even low quality jobs are associate with higher life satisfaction

It is better to get people bad jobs than no jobs at all

Unemployment

Overall self-employment has no effect on life satisfaction

A positive correlation is found in American data and European data

For the non-OECD data and Latin American countries, self-employment is associated with lower satisfaction

Free to choose vs. insufficient employment opportunities in the formal sector

Self Employment

Women report higher satisfaction and happiness than men

But this finding is dominated by advanced countries

Outside the industrial countries the happiness gap is smaller or even reversed

Overtime, women become less happy relative to men in the US and Europe

Gender

US women have lower U-index scores than men, and thus less misery

Women are relatively happier in countries where gender rights are more equal

Though women report higher life satisfaction than men, their rates of mental illness are also higher

Gender

It is U-shaped through life Satisfaction declines, reaches a minimum in

middle-age (between 40 and 50), and then rises again

Explanations could include the wisdom of maturity, or the beneficial effect of reduced (or more realistic) aspiration

Between 70 and 80, worsening health begins to take its effect and average happiness begins to decline once more

Age

Level of education has no clear direct impact on happiness

Indirect effects include higher income, increased employability, job security, and faster promotion

Education

Having children is no guarantee of higher happiness

The pleasure of parenting depends on the age of the children, on the quality of the parenting couple, and on the social context, including having enough time to enjoy family life

A man who has children lives like a dog, a man without children dies like a dog

Children

Inflation Income inequality Quality of work Retirement Social Capital Religion Altruism and materialism TV watching Environment Mental and physical health

Other Factors

Relevance of economic policies Intrinsic vs. extrinsic incentives GNP vs. GNH (Gross National Happiness)

Policy Implications

Procedural Utility How the outcome is derived also affects

utility This topic is not new though

Related Work

Adaptation Perceived utility vs. Experienced utility Salience theory of utility Bardalo, Gennaioli, & Shleifer Salience theory of choice under risk (2011) Salience and consumer choice (2012) Salience and asset prices (2013)

Related work

Importance of emotion in decision making Tuckett (2011): Minding the Markets: An

Emotional Finance View of Financial Stability Taffler and Tuckett (2012): Fund

Management: An Emotional Finance Perspective

Fairchlid (2012): From Behavioural to Emotional Finance: Insights into Financial Market Behaviour

Related Work

Thank you very much!

It is a great pleasure to be here.