Emotional Prosperity

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• Emotional Prosperity
• Invited BJIR Annual Lecture at LSE, 2009
• Andrew Oswald
• I would like to acknowledge that much of
  this work is joint with coauthors Andrew Clark,
  Nick Powdthavee, David G. Blanchflower, Rainer
  Winkelmann, and Steve Wu. I thank Andrew
  Steptoe, Francis Green, Justin Wolfers and Helen
  Urry for valuable discussions and for their kind
  permission to use certain later graphics. My
  research is supported by an ESRC professorship.

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Social science is changing

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Social science is changing

• Researchers are studying mental well-being.

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Social science is changing

• Researchers are studying mental well-being.
• We are drawing closer to psychology and medicine.

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Using random samples from many nations

• Researchers try to understand what influences
  the psychological wellbeing of
• (i) individuals
• (ii) nations.

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• Is modern society going in a sensible direction?

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The types of statistical sources

• General Social Survey of the USA
• British Household Panel Study (BHPS)
• German Socioeconomic Panel
• Australian HILDA Panel
• Eurobarometer Surveys
• Labour Force Survey from the UK
• World Values Surveys
• NCDS 1958 cohort
• BRFSS

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Regression equations

• Mental well-being f(Age, gender, education
  level, income, marital status, friendship
  networks, region, year)

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Could we perhaps learn
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..how to make whole countries happier?
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• Preferably without relying on implausibly good
  fortune

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England 8 Brazil 0
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Stiglitz-Sen-Fitoussi Report

• Bina AGARWAL University of Delhi
• Anthony B. ATKINSON Warden of Nuffield College
• François BOURGUIGNON School of Economics,
• Jean-Philippe COTIS Insee,
• Angus S. DEATON Princeton University
• Kemal DERVIS UNPD
• Marc FLEURBAEY Université Paris 5
• Nancy FOLBRE University of Massachussets
• Jean GADREY Université Lille
• Enrico GIOVANNINI OECD
• Roger GUESNERIE Collège de France
• James J. HECKMAN Chicago University
• Geoffrey HEAL Columbia University
• Claude HENRY Sciences-Po/Columbia University
• Daniel KAHNEMAN Princeton University
• Alan B. KRUEGER Princeton University
• Andrew J. OSWALD University of Warwick
• Robert D. PUTNAM Harvard University
• Nick STERN London School of Economics

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• Stiglitz Report 2009
• www.stiglitz-sen-fitoussi.fr

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The Stiglitz Commission Report

• advocates a shift of emphasis from a
  production-oriented measurement system toward
  broader measures of social progress.

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Some cheery news

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Some cheery news

• In Western nations, most people seem happy with
  their lives

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Some cheery news

• In Western nations, most people seem happy with
  their lives

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The distribution of life-satisfaction levels
among British people
Source BHPS, 1997-2003. N 74,481
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From the U.S. General Social Survey (sample size
40,000 Americans approx.)

• 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?

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Typical GHQ mental-strain questions

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Typical GHQ mental-strain questions
Have you recently Lost much sleep over
worry? Felt constantly under strain? Felt you
could not overcome your difficulties? Been
feeling unhappy and depressed? Been losing
confidence in yourself? Been thinking of yourself
as a worthless person? Been able to enjoy your
normal day-to-day activities?
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The Warwick-Edinburgh Mental Well-being Scale
(WEMWBS)

• Ive been feeling optimistic about the future
• Ive been feeling interested in other people
• Ive had energy to spare
• Ive been thinking clearly
• Ive been feeling good about myself
• Ive been feeling confident
• Ive been able to make up my own mind
• Ive been feeling loved
• Ive been feeling cheerful

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• Happiness and mental well-being are of
  interest in themselves.

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• But, more broadly, there seem to be deep links
  between mind and body.

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• Author(s) Ebrecht M, Hextall J, Kirtley LG,
  Taylor A, Dyson M, Weinman J
• PSYCHONEUROENDOCRINOLOGY    
• Volume 29    Issue 6    Pages
  798-809    Published JUL 2004 

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• Every subject received a standard 4mm-punch
  biopsy, and the healing progress was monitored
  via high-resolution ultrasound scanning.

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• Every subject received a standard 4mm-punch
  biopsy, and the healing progress was monitored
  via high-resolution ultrasound scanning.

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Ebrecht et al 2004

• The overall results showed a significant negative
  correlation between speed of wound healing and
  GHQ scores (r -.59 p lt .01)

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• In other words, happier human beings heal more
  quickly.

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A more recent paper
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A more recent paper

• Enhanced wound healing after emotional
  disclosure intervention
• Weinman, Ebrecht et al
• BRITISH JOURNAL OF HEALTH PSYCHOLOGY    Volume
  13    Pages 95-102    Part Part 1    Published
  FEB 2008

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• Participants who wrote about traumatic events had
  significantly smaller wounds 14 and 21 days after
  the biopsy compared with those who wrote about
  time management.

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• We need to understand these interconnections
  better.

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• How has the modern work on the economics of
  happiness proceeded?

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• The London School of Economics itself has
  played a prominent historical role in these
  issues.

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Prof. Lionel Robbins

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Prof. Lionel Robbins
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Prof. Lionel Robbins

• He was influential in dissuading economists
  from studying mental well-being. He worked at
  LSE for 30 years.
• "Interpersonal Comparisons of Utility A
  Comment", 1938, Economic Journal.

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• Eventually the intellectual tide turned.
• One reason was a meeting near here

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1993 Lionel Robbins Building

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1993 Lionel Robbins Building

• The first economics-of-happiness conference
  was held. A central person was Andrew Clark,
  then a PhD student at LSE.

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• Our 1993 economics-of-happiness conference, 50
  metres from here, was of course a great success?

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• Our 1993 economics-of-happiness conference, 50
  metres from here, was of course a great success?
• Well, no.

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• The conference at 10.30am before it filled up.

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• The conference at 10.30am before it filled up.
• The conference at 11.30am after it filled up.

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• 10 people came.
• Unfortunately, that included the international
  speakers whom we had asked to give keynote
  addresses.

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• Where the lecture is going next
• Various questions

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Question 1

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Question 1

• In the coming century, should our societys
  goal be happiness rather than GDP?

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Question 2

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Question 2

• In a well-off country, how might human progress
  -- emotional prosperity not just financial
  prosperity -- be assessed?

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Question 3

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Question 3

• Could physiological measures -- biomarkers --
  be used as proxies for well-being?

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Question 3

• Could physiological measures -- biomarkers --
  be used as proxies for well-being?

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Question 4

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Question 4

• What recommendations were made by the
  (Stiglitz) Commission on Human Progress set up by
  Nicholas Sarkozy?

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• Lets return for a moment to the
  microeconomics of human well-being

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• What have we learned?

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Big effects

• Unemployment
• Divorce
• Marriage
• Bereavement
• Friendship networks
• Health
• No effects from children

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• There is also an intriguing life-cycle pattern

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The pattern of a typical persons happiness
through life
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This holds in various settings
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This holds in various settings

• For example, we see the same age pattern in
  mental health among a recent sample of 800,000 UK
  citizens
• Blanchflower and Oswald, Social Science
  Medicine, 2008

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The probability of depression by age Males, LFS
data set 2004-2006
0.02
0.015
0.01
Regression coefficient
0.005
0
-0.005
-0.01
1938
1942
1946
1950
1954
1958
1962
1966
1970
1974
1978
1982
1986
1990
Year of birth
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Depression by age among females LFS data
2004-2006Q2
0.002
0
-0.002
-0.004
Regression coefficient
-0.006
-0.008
-0.01
-0.012
-0.014
1942
1946
1950
1954
1958
1962
1966
1970
1974
1978
1982
1986
1990
Year of birth
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Obviously life is a mixture of ups and downs
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• Much of the newest research follows people
  through time.
• eg. Andrew Clarks work

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The unhappiness from bereavement
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• Human beings also bounce back from, say,
  disability.
• Work with N. Powdthavee, Journal of Public
  Economics, 2008

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Life-Satisfaction Path of Those Who Entered
Disability at Time T and Remained Disabled in T1
and T2BHPS data 1996-2005
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However, there is a downside to that
adaptability (eg. marriage)

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However, there is a downside to that
adaptability (eg. marriage)

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And should you invest in a baby?
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Happiness and children
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But people do not seem to adapt to joblessness

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• An important question in a modern society is
  the impact of divorce.

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Divorce (eventually) makes people happier
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Divorce (eventually) makes people happier
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• What about money and happiness?

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A key social-science fact

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A key social-science fact

• The data show that richer people are happier and
  healthier.

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• The same phenomenon holds true at the
  cross-sectional level for nations.

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(No Transcript)
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The road to nowhere?

• Growth in income is now not correlated with
  growth in happiness
• This is the Easterlin paradox

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The Man Behind the Easterlin Paradox
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Average Happiness and Real GDP per Capita for
Repeated Cross-sections of Americans.
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Life-satisfaction country averages

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• Average GHQ Psychological Distress Levels Over
  Time in Britain BHPS, 1991-2004

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• Might this have something to do with work
  getting more stressful?
• Yes
• Work by Francis Green, Keith Whitfield, et al.

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Proportion of High-Strain Jobs
Green (2008) Work Effort and Worker Well-Being in
the Age of Affluence
Source Skills Survey series
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• What of well-being among the young?

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• Helen Sweeting et al
• GHQ increases among Scottish 15 year olds
  19872006 Social Psychiatry Psychiatric
  Epidemiology (2008).

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• Her team assesses whether life is getting more
  stressful for young people.

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Mental strain in young Scots in 1987
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Mental strain in young Scots in 1999
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Mental strain in young Scots by 2006
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• Equivalent results have been found for adults
  in the Netherlands, UK and Belgium.

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Worsening GHQ levels through time

• Verhaak, P.F.M., Hoeymans, N. and Westert, G.P.
  (2005). Mental health in the Dutch population
  and in general practice 1987-2001, British
  Journal of General Practice.
• Wauterickx, N. and P. Bracke (2005), Unipolar
  depression in the Belgian population - Trends and
  sex differences in an eight-wave sample, Social
  Psychiatry and Psychiatric Epidemiology.
• Sacker, A. and Wiggins, R.D. (2002).
  Age-period-cohort effects on inequalities in
  psychological distress. Psychological Medicine.

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• So there is much evidence that all this extra
  money we have today is not doing a lot for us.
• Easterlins Paradox.

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There has recently been a critique of Easterlins
idea

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There has recently been a critique of Easterlins
idea

• Betsey Stevenson and Justin Wolfers have
  argued that economic growth does buy happiness.
• Brookings Papers, Spring 2008

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Their work is extremely valuable

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Their work is extremely valuable

• But ultimately I think they probably have
  (approximately) the wrong answer.
• Much of their paper is concerned with
  cross-section patterns.
• In the long time-differences, which is the
  appropriate test, little is statistically
  significant in 1973-2007 European data.

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• Another key difficulty is that we know
  unemployment movements omitted from most
  regression equations -- affect mental well-being.
  
• Di Tella et al AER 2001

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• Moreover, Stevenson and Wolfers agree that
  Americans have if anything become less happy over
  the last 30 years.

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Overall

• I would say that currently the balance of the
  evidence favours Easterlin rather than
  Stephenson-Wolfers.
• though it is bad science for us ever to close
  our minds, so we must watch for new evidence as
  it accumulates

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• But many general economists have low
  life-satisfaction when they hear about this
  research.

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(No Transcript)
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They say

• Should we actually pay attention to happiness
  data?

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• The tradition of economics has been to ignore
  what people say about the quality of their own
  lives.

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• The tradition of economics has been to ignore
  what people say about the quality of their own
  lives.
• Many are opposed to the idea of measuring
  happiness.

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I always liked the retort

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I always liked the retort

• If molecules could talk, would physicists refuse
  to listen?
• A. Blinder

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I always liked the retort

• If molecules could talk, would physicists refuse
  to listen?
• A. Blinder

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So how could we move forward?

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So how could we move forward?

• Brain-science correlates as a validation

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So how could we move forward?

• Brain-science correlates as a validation
• Physiological correlates as a validation

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• RD Lane et al American Journal of Psychiatry
  July 1997.
• Neuroanatomical correlates of happiness,
  sadness, and disgust

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Brain Responses in Two Pictures(MRI Scans)
Source Richard Davidson, University of Wisconsin
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Another study

• H. Davis et al Brain Imaging and Behavior, June
  2008.

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Another study

• H. Davis et al Brain Imaging and Behavior, June
  2008.
• fMRI BOLD signal changes in elite swimmers while
  viewing videos of personal failure

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• An alternative approach is EEG

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(No Transcript)
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A brain-science approach (Urry et al Psych. Sci.
2004)
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• But, for a sceptic, there is a major
  difficulty.

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The Problem

• Biological data only validate well-being
  scores in so far as they are unambiguously
  measures of utility or happiness.

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• The next few slides are fractionally more
  technical.

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• Could we exploit neo-classical economic theory
  to assess the validity of well-being data?

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• Think not about people but about places.

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Joint work with Steve Wu

• New data from the Behavioral Risk Factor
  Surveillance System (BRFSS)
• 1.3 million randomly sampled Americans
• 2005 to 2008
• A life-satisfaction equation

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• Then we go to the compensating-differentials
  literature dating back to Adam Smith, Sherwin
  Rosen, Jennifer Roback, etc.
• The most recent is Gabriel et al 2003.

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Gabriel painstakingly takes data on

• Precipitation
• Humidity
• Heating Degree Days
• Cooling Degree Days
• Wind Speed
• Sunshine
• Coast
• Inland Water
• Federal Land
• Visitors to National Parks
• Visitors to State Parks
• Number of hazardous waste sites

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and

• Environmental Regulation Leniency
• Commuting Time
• Violent Crime Rate
• Air Quality-Ozone
• Air Quality-Carbon Monoxide
• Student-teacher ratio
• State and local taxes on property, income and
  sales and other
• State and local expenditures on higher education,
  public welfare, highways, and corrections
• Cost-of-living

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• Then there are 2 ways to measure human
  well-being or utility across space.
• Subjective and objective

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• Gabriels work assigns a 1 to the state with
  the highest imputed quality-of-life, and 50 to
  the state with the lowest.

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• So we need to uncover a negative association
  in order to find a match.

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One Million Americans Life Satisfaction and
Objective Quality-of-Life in 50 States
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To conclude across US states

• There is a close match between
  life-satisfaction scores and the quality of life
  calculated using (only) non-subjective data.

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• Next, consider the Stiglitz Commissions
  Findings

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• Stiglitz Report 2009
• Measures of .. objective and subjective
  well-being provide key information about peoples
  quality of life. Statistical offices worldwide
  should incorporate questions to capture peoples
  life evaluations, hedonic experiences in their
  own survey. P.16. Executive Summary of
  Commission Report.

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• Emphasis on growth is misguided
• Beyond GDP
• Measuring what matters

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Happiness is the new GDP   

• Smile, and the economy smiles with you.
  Factory workers in Macedonia.

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The Reports Arguments
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The Reports Arguments

• Life is now more complex
• The time has come to adapt our system of
  measurement to better reflect the structural
  changes which have characterized the evolution of
  modern economies.

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• Services dominate
• In effect, the growing share of services and the
  production of increasingly complex products make
  the measurement of output and economic
  performance more difficult than in the past.

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In this country

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In this country

• In 1900, there were 1 million coal miners (5
  of the workforce).

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In this country

• In 1900, there were 1 million coal miners (5
  of the workforce).
• Today there are approximately 1,000.

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• We need to measure well-being per se
• A unifying theme of the report, is that the
  time is ripe for our measurement system to shift
  emphasis from measuring economic production to
  measuring peoples well-being.

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• Inequality itself matters
• Recommendation 7 Quality-of-life indicators in
  all the dimensions covered should assess
  inequalities in a comprehensive way.

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• Official statistics should blend objective and
  subjective well-being data
• Recommendation 10 Measures of both objective
  and subjective well-being provide key information
  about peoples quality of life. Statistical
  offices should incorporate questions to capture
  peoples life evaluations, hedonic experiences
  and priorities in their own survey.

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• Sustainability must be a criterion
• Recommendation 11 Sustainability assessment
  requires a well-identified dashboard of
  indicatorsthe components of this dashboard
  should be interpretable as variations of some
  underlying stocks. A monetary index of
  sustainability has its place in such a dashboard

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• Where might research head in the future?

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• Biomarkers and their possible uses

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An interesting border is between happiness and
medicine
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An interesting border is between happiness and
medicine

• Is it possible that we can find physiological
  correlates with human well-being?
• Perhaps to broaden the standard policy goal of
  GDP?

158
Some of our latest work

• Joint with Nicholas Christakis (Harvard) and
  David Blanchflower (Dartmouth)
• Statistical links between the heart and income
  and happiness.

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To clinicians

• High blood pressure is potentially a sign of
  mental strain and low well-being

160

• But how about high blood pressure as a
  national measure of well-being?

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Across nations, hypertension and happiness are
inversely correlated (Blanchflower and Oswald,
2008 Journal of Health Economics)
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• Important work by Andrew Steptoe of UCL
• Whitehall II data

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Salivary cortisol (Steptoe data)
P .009
8 samples (0800 2230) Adjusted for gender,
age, occupational grade, smoking, bmi, and GHQ
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Heart rate
P .017 in men
Adjusted for age, occupational grade, concurrent
physical activity, smoking, bmi, and GHQ score
Steptoe et al, 2005 PNAS
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• It is known that heart rate rises under stress.

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Stress comes in different forms
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Stress comes in different forms
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Stress comes in different forms
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Stress comes in different forms
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Stress comes in different forms
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Stress comes in different forms
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Stress comes in different forms
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Stress comes in different forms
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Stress comes in different forms
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Stress comes in different forms
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Stress comes in different forms
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Stress comes in different forms
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• Nicolas Troubat et al (2009) European Journal of
  Applied Physiology
• 20 chess players international and
  national-level players. They all played against a
  computer.

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• The computer standard was deliberately set one
  level higher.

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• The computer standard was deliberately set one
  level higher.
• So all the players lost against the computer.

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What happened?

• Average heart-rate rose 11 beats a minute
• On average, players used up 140 calories playing
  the game
• Overall, the physiological changes were
  similarthose in moderate physical exercise.

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• In our own work, we study physiological data --
  measuring heart rate, blood pressure, fibrinogen,
  and C-reactive protein -- on a random sample of
  100,000 English citizens.

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• Pulse Average heart rate is about 72 beats
  per minute.

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Heart-Rate Equations
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Pulse and Money

• We find that for every extra 40,000 pounds a
  year, heart rate is 1 beat a minute slower.

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Interesting patterns emerge

• First, there are well-determined income gradients
  in (and only in) heart-rate and C-reactive
  protein equations.

187

• Second, heart rate seems to have potential as a
  proxy measure for mental strain, so might
  eventually be usable as a measure of negative
  utility in an economists framework.

188

• Third, education has little effect within
  biomarker equations.

189

• Fourth, it is more important to control for diet
  than has been traditionally recognized in the
  health-economics literature.

190

• Fifth, biomarker variables work powerfully in
  well-being equations.

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Thus

• There are deep connections between happiness,
  money and health.

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Some ideas to end

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Conclusions

• 1 In the next century, new measures of human
  well-being may be required.

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Conclusions

• 2 As social scientists, we probably need to
  understand better the connections between mental
  and physical health.

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Conclusions

• 3 Heart-rate and blood pressure data have
  particular potential in policy design.

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Conclusions

• 4 Social scientists will, I believe,
  collaborate more with doctors and
  epidemiologists.

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My hunch

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My hunch

• The methods of the economics of happiness and
  mental well-being will slowly enter public life.

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Other important applications
200
Other important applications

• The valuation of environmental amenities

201
Other important applications

• The valuation of environmental amenities
• The valuation of health states

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Other important applications

• The valuation of environmental amenities
• The valuation of health states
• The valuation of emotional damages for the courts.

203

• Let me close by returning to Lionel Robbins, a
  distinguished thinker and economist.

204
Conventionally

• Economics is a social science concerned with the
  efficient allocation of scarce resources

205

• We owe this definition to Lionel Robbins of
  the London School of Economics.
• For a long time, it served us well.

206

• But perhaps the time has come to think
  differently and to define economics differently.

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An alternative definition for 2009
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An alternative definition for 2009

• Economics is a social science concerned with the
  best way to allocate plentiful resources to
  maximize a societys well-being and mental health.

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There is considerable evidence

• (i) In the rich countries, happiness is running
  flat or declining
• (ii) Levels of GHQ mental-strain are rising.

210

• These (uncomfortable) facts raise fundamental
  intellectual and policy questions for our
  generation and beyond.

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Looking ahead

• Policy in the coming century may need to
  concentrate on non-materialistic goals.

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Looking ahead

• Policy in the coming century may need to
  concentrate on non-materialistic goals.
• GNH not GDP.

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Thank you.
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• Emotional Prosperity
• Andrew Oswald
• Research site www.andrewoswald.com
• I would like to acknowledge that much of this
  work is joint
• with coauthors Andrew Clark, Nick Powdthavee,
• David G. Blanchflower, and Steve Wu.