Happiness research in the dismal science'

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Happiness research in the dismal science.
The Fred Gruen Lecture

• Paul Frijters RSSS / ANU

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Outline

• Hisboldness in expressing his views, lack of
  fear in being proved wrongare qualities that
  made him a great role model (David Gruen on Fred
  Gruen)
• A quick overview of happiness economics how do
  we measure happiness and what do we think we know
  so far.
• Economics and happiness up close the costs and
  benefits of economic development.
• What would a happiness maximising country look
  like based on current best-guess ?

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A quick overview of happiness economics

• Following the French sociologist Cantril
  (1960,1965), and decades of psychologists, a
  whole horde of economists has started to look at
  happiness across countries in the last 10 years.
• In Australia also, many economists have joined
  the debate recently
• Alison Booth, Nick Carroll, Bruce Chapman, Paul
  Flateau, Andrew Leigh, Mike Shields, Mark Wooden,
  and several others.

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The questions used

• How satisfied are you at present with your life,
  all things considered?
• 0 (completely dissatisfied) to 10 (completely
  satisfied).
• Other formats have been used
• 0-5, or 0-20 scales, or verbal answers
  happy/unhappy
• the above is the most used one.

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Validation?
Self-reported happiness relates strongly
to. ?

• activity in the brains pleasure centers (Dr.
  Heaths prisoner experiments in 1950s). Happiness
  (and emotions generally) are suppressed by fear
• health, smiles, positive emotional arousal, and
  future intentions the unhappy quit and are
  unhealthy.
• People communicate happiness as information to
  others ? people are thus reasonably good at
  predicting others happiness there appears a
  universal body language of happiness which we are
  evolutionary geared to picking up Happiness and
  reading it are thus probably hard-wired.

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What makes a person happy?

• Not at all children, education, and rain (in Oz
  cities).
• Surprisingly little but a bit higher income, a
  recognised socially valued activity (a job!),
  having a partner, regular sex, sunshine, and rain
  (in Oz countryside).
• Quite a bit health, positive mood, self-esteem,
  lack of fear.

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What matters most? Benevolent fate?
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Does this mean religion?
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Hence

• Believing many things are out of your control,
  but will nevertheless work out for you (the glass
  is half-full) is the main trait predicting
  whether you are happy.
• Your health, social position, and your income
  matter somewhat, but not that much.
• The main theory for the discrepancy between what
  makes us happy and what we seem to desire and
  chase after were thrill seekers un-able to
  anticipate that a buzz will wear off (Rabin,
  1998).

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Economics and happiness what can be said about
the benefits (happiness or otherwise) of economic
growth?

• Comparing my life to that of my parents
  generation, I cannot but be impressed by the very
  much more fortunate circumstances in which my
  adult life has been lived
• (pg. 22, autobiography F. Gruen).

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1995/2000 World Value survey findings
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The ISSP 2002 data (mainly OECD)
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Gains from income at the bottom Russia
Life satisfaction (0-4)
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Gains versus no-gains when East (poor) met West
(rich)?
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And no-gains at the top far West?
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Other benefits to economic development
(2002-2005)?
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Murder rates?
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And overall level of conflict after WW2 deaths
per year?
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Ambivalent aspects of development
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Interpretation

• A clear national happiness gain from income at
  the bottom. No noticeable gain from economic
  growth after around 15000 a year.
• Other benefits of growth (rule of law, life
  expectancy, literacy rate, reduced murder rate)
  also disappear around 20000.
• With growth beyond 20000, we see continued
  increases in energy consumption and pressure on
  nature. From about 10,000 we see
  below-replacement fertility rates.
• Australia should thus not expect much notice-able
  benefit of further economic growth.

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Why the lack of happiness gain?

• Main explanations in the literature
• Individuals adapt (the hedonic treadmill
  Brinckman and Cambell 1972).
• Masses of laboratory evidence.
• Economic evidence the answer to the question
  What level of income would you say is good
  goes up almost as much as income in about 20
  Western countries where the question was posed.
• Whilst at the bottom, money buys necessities, at
  the top it mainly buys status, which is a
  so-called positional good
• the more one person, household, region, or even
  country has, the less the other has there is no
  net gain of status. Indeed, the status race may
  crowd out social relations.

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A best-guess of what a happiness maximising
country would look like.

• One becomes much more careful in proffering
  advice if there is a possibility that it might be
  taken (Fred, page 18).
• It would be a moderately rich and optimistic
  place where people are lead to believe some
  greater power is looking out for them.
• It would probably have a lot of drug use,
  especially in the last stages of life (the
  prozac nation going out on a high).
• Wealth, status races, use of natural resources,
  and excessive mobility (migrants are relatively
  unhappy and have severed social relations) would
  be heavily taxed to minimise their negative
  externalities. Leisure would be untaxed.
• Change and strife would be kept at a minimum.

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A final contention and a question

• Contention weve reach the end of what economic
  growth can buy us in terms of desirable outcomes
  (happiness, longevity, and safety). From now on,
  economic growth seems a race between increased
  pressure on natural resources (leading to climate
  change and reduced Earth Carrying Capacity) and
  reduced fertility (saving us by making us rare
  before we destroy ourselves).
• Implication for economics as a moral science at
  the top end of the PPP scale, its no longer about
  growth. Its about making sure people dont have
  incentives to inflict negative effects on others
  (via use of resources, status races, spreading
  fear).
• Question to the audience why do we (most
  citizens / politicians / scientists) so warmly
  support economic growth? Is it really out of
  empathy with a rich fellow Australian who can
  afford another yacht?