What is the 'World Happiness Report'?

The release of the UN’s ‘World Happiness Report’, edited (and to a large extent authored) by John Helliwell, Richard Layard and Jeffrey Sachs, does not seem to have captured much media attention. I became aware of it only while looking for reports of the meeting on ‘Happiness and Well-being:  Defining a New Economic Paradigm’, which was held in New York early this month. My interest stems from my attendance at a preliminary meeting in Bhutan last year. I still don’t have much idea what happened in New York, but the ‘World Happiness Report’ deserves consideration.

The mainstream media apparently didn’t consider the ‘World Happiness Report’ to be particularly newsworthy. That is presumably because it doesn’t contain much information that is new. It is not news that people in wealthy countries tend to be happier than people in poor countries. It is not news that average levels of happiness are still fairly low in China despite substantial gains in income levels over the last couple of decades. (That makes it difficult for me to understand reports that the Chinese government has apparently made it difficult for people in China to obtain the report via the internet.)

   

The report consists of an introduction by Jeff Sachs and chapters on the state of world happiness, the causes of happiness and misery, and policy implications. The report also contains three case studies – one on measurement of Gross National Happiness in Bhutan, one on the work of the ONS in Britain and the other OECD proposals for measurement of subjective well-being.

The introduction sets the scene by arguing that the quest for happiness should be seen to be intimately linked to the quest for sustainable development.  The author seems particularly concerned that economic growth will ‘undermine the Earth’s life support systems’: ‘In years or decades, conditions for life ‘may become dire in several fragile regions of the world.’ He is also concerned that economic growth is not making people happier: countries ‘achieve great progress in economic development as conventionally measured; yet along the way succumb to a new crisis of obesity, smoking, diabetes depression and the other ills of modern life’. He suggests that we can ‘protect the Earth while raising quality of life’ if we adopt ‘lifestyles and technologies that improve happiness (or life satisfaction) while reducing human damage to the environment.’

In my view the picture painted in the introduction is exaggerated, in terms of both impacts of economic growth on the environment and human happiness. In broad terms, the regions where conditions for life are under threat are suffering from lack of economic growth, rather than too much of it. The regions where happiness levels are highest have had greatest economic growth.

It is tempting to dismiss the introduction as alarmist nonsense.  It provokes in me the same feelings as I get when religious fanatics try to tell me that the end of the world is nigh. Yet, I readily acknowledge that some aspects of human activity are impacting adversely on the environment and that many people who have the benefits of living in high-income countries do not make good use of the opportunities that modern life offers to them. My point is that the introduction is unlikely to persuade many people that the measurement of happiness is worth considering seriously.

The introduction raises in my mind the question of how measurement of happiness will induce people to change their lifestyles in ways that reduce environmental damage. Will this occur through a spontaneous change in culture or are we about to see a new wave of central planning to regulate individual lifestyles? Perhaps happiness research will provide evidence that individuals with a small environmental footprint tend to be happier, other things being equal. Such evidence might induce larger numbers of people to make substantial lifestyle changes spontaneously.  I would not be surprised to see such evidence emerge, but the possibility of obtaining it doesn’t seem to be discussed in this report.

I think there is reason to be concerned that we are about to see a new wave of central planning of individual lifestyles, linked to happiness measurement. I am not referring here to limited action by governments to change relative prices in order to reduce specific negative spillovers associated with economic growth e.g. through carbon taxes or trading schemes. My concern is about the manipulation of the tax and regulatory system in ways designed to counter any aspirations that people might have that are not immediately reflected in happiness or life satisfaction. The author of the introduction fuels my concerns by objecting to the view that ‘happiness is in the eye of the beholder, an individual’s choice, something to be pursued individually rather than a matter of national policy’. There are plenty of political players in most countries, who will be only too eager to use this report to support their efforts to try to make people happier by regulating their lives.

Will these government planners be successful in their efforts to use happiness data to make people happier? It seems to me that there are parallels here with the use of GDP in economic planning. Half a century ago economic planners had great hopes that national income measurement - then being standardized with United Nations involvement – would help them in their efforts to lift economic growth rates. The UN’s 1969 Declaration on Social Progress and Development (discussed on this blog a few weeks ago) must have provided economic planners with great comfort by supporting their efforts to raise GDP through economic planning.  In the end, GDP measurement has helped to show that the efforts of the economic planners were counter-productive. I would not be surprised if social planning to raise happiness levels eventually meets a similar fate.

Planners are faced with the challenge of evidence that individual freedom is important to life satisfaction.  On that basis, it seems reasonable to predict that people will tend to become increasingly discontented as social planners intensify their efforts to make them happier.

Unfortunately, the introduction to the report has side-tracked me from considering the main content. People who might be interested in my views on the other chapters have probably stopped reading already. In case anyone is still reading, however, I will add some brief comments.

For the most part, the report equates ‘happiness’ with subjective well-being. It focuses on subjective well-being measures based on questions about happiness and life satisfaction. The authors seem to have in mind that those two questions should form the basis of happiness measurement systems. (The Bhutan case study is an exception. Objective measures of well-being are included in the measurement of GNH in Bhutan along with subjective measures.)

The report contains interesting information on the distribution of happiness in different countries as well as on average levels of happiness. The information on the distribution of happiness suggests to me that great caution is required in interpreting average happiness levels (whether mean, median or mode) as indicators of national happiness. This is particularly so in Latin American and African countries where inequality of happiness is relatively high.

The focus of the report on subjective well-being seems to me to be a weakness, despite its recognition that happiness measurement is part of a larger effort to understand well-being. This weakness is particularly evident when the report comes to making suggestions about policy priorities. It is apparent in that section that the authors were unable to confine themselves to findings arising from subjective well-being research. For example, the report states that a decent education for all is essential. Few would argue with that, but the research findings reported suggest that education makes a contribution to life satisfaction only through its effects on income.

In my view the methodology for measuring well-being should recognize all the factors that people consider to impinge on the opportunities available to them to live the kinds of lives they want to live. It seems likely that many people would consider education to affect those opportunities in ways that are not accounted for by either income or life satisfaction. Similarly, are other factors that contribute to the opportunities for people to live the lives they want to live, including health and the state of the environment, are probably not adequately accounted for by measures of subjective well-being.

Postscript:
Jim Belshaw has made the additional point, in the comments below and on his blog, that when you measure something there is a great temptation to focus on improving 'performance' as measured. Extending this reasoning, if happiness measures focus on contentment one might therefore expect government policies to focus to a greater extent on making people feel content - for example, by viewing ambition as a mental health problem and making medications freely available to treat it.

Perhaps we seek wealth to enjoy autonomy?

‘The question was whether it is more important to provide individuals with money or with autonomy. Our results suggest that providing individuals in nations with autonomy has overall a larger and more consistent effect on well-being than money. Money leads to autonomy (Welzel et al., 2003; Welzel & Inglehart, 2010), but it does not add to well-being or happiness.’

That is from the concluding paragraph of an article by Ronald Fischer and Diana Boer, ‘What is more important for national well-being: Money or autonomy?’, recently published in the Journal of Personality and Social Psychology.

The question of whether it is more important to provide individuals with money or autonomy strikes me as odd. Who has the power to choose whether individuals should be provided with money or autonomy? Governments don’t normally have that power.

I suppose it is possible to imagine a powerful paternalistic ruler contemplating whether to give his serfs a monetary bonus or to give them autonomy. It is clear from their article that when the authors refer to autonomy they are talking about a situation where individuals ‘can make their own choices in life’ rather than, for example, just choose what hobbies to pursue in their spare time. If our paternalistic ruler is contemplating giving his serfs the power to make their own choices in life, what he has in mind must involve economic freedom and opportunities for wealth creation.

When individuals have the opportunity to do so, they tend to use their own labour, skills and property for purposes that they value. Those purposes include cooperating with others for mutual advantage e.g. through specialization and exchange, and developing better products and more efficient technologies. Recognition of individual autonomy thus underpins the specialization, exchange and innovation that are integral to wealth creation.

The quoted passage refers to an article by Welzel and Inglehart in support of the proposition that ‘money leads to autonomy’. As discussed in my last post, one of the points made in that article is that in countries with higher levels of economic development (i.e. countries with higher self-expression values) people tend to achieve higher life satisfaction to a greater extent through activities that enhance autonomy (feelings of agency). Economic freedom leads to wealth and wealth leads to greater enjoyment of autonomy through pursuit of objectives further up the hierarchy of needs than survival and financial security.

The finding by Fischer and Boer that ‘money does not add to well-being’ doesn’t actually mean that income or wealth makes no contribution to well-being. It seems to me that what the finding means is that the contribution of income to well-being is encompassed in the contribution of income to individualism (self-expression values).

The authors’ research involved constructing indexes to compare negative psychological well-being, anxiety and burnout in different countries by combining the results of a large number of studies throughout the world. Statistical analysis was then undertaken to determine the extent to which these indexes could be explained by income levels or an indicator of individualism. When income and individualism were included separately in some of the analyses both of these variables were statistically significant, but when they were included together income became statistically insignificant. This suggests that the effects of income on well-being tend to be incorporated in the individualism (self-expression) variable.

I doubt whether that result would surprise many economists. First, it is well known that as incomes rise people tend to place a higher value on leisure (the income elasticity of demand for leisure is positive). Second as leisure increases, an increasing proportion of income tends to be spent on goods that are complementary to leisure (e.g. holiday packages). Third, goods that account for an increasing proportion of spending (goods with high income elasticity of demand) tend to be more strongly related to individual self-expression than to survival. Finally, increased wealth is valued for the options it provides as well as for the goods that are purchased with it. There are precautionary motives for accumulation of wealth e.g. as insurance against unemployment or ill health. People also value the option to be able to take advantage of opportunities (e.g. the holiday adventure of a lifetime) that may arise in future.

As I see it, the greater happiness of people in high-income countries can probably be attributed to greater satisfaction of fundamental human needs related to autonomy, relatedness and competence in those countries. When individual agency has been recognized, people have tended to use their autonomy for good purposes, establish better relations with others, become more competent and create wealth. The wealth is important only to the extent that it helps individuals to pursue purposes that they value – and to enjoy autonomy, good relations with others and a sense of achievement.

How much does over-work affect happiness?

The results of a survey conducted recently by the Australia Institute apparently shows that half of Australians (61 per cent of those working overtime) were prevented from spending enough time with family in the preceding week as a result of over-work. According to the press release (which is the most detailed description of the study I could find) a lot of people don’t have time to exercise, eat healthy meals or go to the doctor when they should.

If we take the results of this survey at face value it would appear that over-work is a huge problem in Australia. I suspect, however, that the problem or over-work is not as widespread as the Australia Institute suggests. I also suspect that over-work has a much smaller adverse impact on happiness than does under-work.

Cartoon by Nicholson from "The Australian" newspaper: www.nicholsoncartoons.com.au

The results of a study by Bruce Headey, Ruud Muffels and Gert Wagner, based on a long-running German panel survey, shows working hours to be one of the factors that has a long-term impact on life satisfaction. One of the things I like about the study is that the variable used is a measure of the extent to which respondents achieve their preferred tradeoff between work and leisure, rather than divergence of working hours from some arbitrary standard chosen by researchers. The relevant variable was the gap between the number of hours a week respondents said they would prefer to work and the number of hours per week they actually work. Those who worked over 3 hours per week more than they preferred were treated as overworked and those who worked over 3 hours per week less than they preferred were treated as underworked (‘Long running German panel survey shows that personal and economic choices, not just genes matter for happiness’ PNAS, 2010).

The results indicate that the negative impact of under-work on life satisfaction was about four times greater than the negative impact of over-work. The authors suggest that this ‘is presumably because lost consumption rankles worse than lost leisure’. (It would seem that the regression analysis does not control for income levels.) The study suggests that the negative effect of unemployment is much worse than that of either over-work or under-work (about four times greater than for underwork).

Some of the other results of the study might help further to put these findings into perspective. The study shows that social participation – a measure of frequency of meetings with and helping out friends, relatives and neighbours – has a substantial positive effect on life satisfaction of around the same magnitude as the negative effect of under-work. The positive effect on life satisfaction of frequent exercise is of about the same magnitude as the negative effect of over-work. The adverse effect of having a neurotic personality is about ten times greater than that of being overworked, but having a neurotic partner has only about half the adverse effect of being overworked.

What should we make of these findings? One obvious qualification is that it isn’t clear to what extent they might apply outside Germany. Leaving that aside, it seems to me that the most important implication is the importance to individual happiness of having the opportunity to work as many hours as the individuals concerned want to work. Under-work is not as bad as unemployment, but it is likely to be a much worse problem for the individuals concerned than is over-work.

It is hard to see how anyone could argue that overwork could be a huge problem when people are free to choose among jobs on the basis of hours of work along with other employment conditions. Some individuals may make bad choices, allowing themselves too little time for social participation and exercise, but that is not a systemic problem.

Update:
The Australia Institute report has now been published. It has some features that I like e.g. over-work and under-work are judged relative to respondent's desired hours of work. However, I think the findings on percentages prevented from spending enough time with family tend to overstate the extent of the problem. The percentages who always feel rushed or pressured for time are relatively low. It seems that having children living in the household is as great a source of time pressure as working overtime (Figure 4). Finally, the study doesn't tell us much about the emotional well-being of those who work more or less than their preferred number of hours. This seems to me to be an area where data on life satisfaction can be useful.

Postscript:
I have posted more information on this subject, including subjective well-being data for Australia, in a more recent post entitled: Is work-life balance a big problem in Australia?

Once a neurotic always a neurotic?

Martin Seligman’s view that authentic happiness comes from using your character strengths makes sense to me. For example, it seems reasonable to expect that activities that would bring lasting happiness to a person whose strengths are curiosity, love of learning and zest would differ from those that would bring lasting happiness to one whose strengths are kindness, fairness and a forgiving nature, or to one whose strengths are judgement, perseverance and leadership. (In his book ‘Authentic Happiness’, Seligman identifies 24 strengths under the general headings: wisdom and knowledge, courage, humanity and love, justice, temperance and transcendence.)

This idea of playing to signature strengths also appeals to the economist in me because it involves specialization on the basis of comparative advantage. Thinking in those terms, specialization doesn’t necessarily enable a person with little education or poor health to achieve a high real income – merely a higher real income than he or she would be able to obtain by attempting to be a jack of all trades. Similarly, a neurotic person – one who has an enduring tendency to experience negative emotions – may not have a life full of joy even if he or she plays to character strengths and focuses activities that do not necessarily require a sunny disposition.

Seligman recognizes that some people whose inherited characteristics make them low in positive affectivity are less likely to be happy. His recommendation for such people is that they should learn to exercise greater control over their emotions by using techniques such as recognizing and disputing negative thoughts.

Do people who successfully follow such advice become less neurotic? From what I have read, the standard answer given by psychologists is ‘no’. For example, Daniel Nettle tells us:

‘High neuroticism scorers will always be vulnerable to negative thoughts and feelings. That they cannot change. However, there are techniques in which they can train themselves that seem to have quite a marked effect on how they deal with this vulnerability, which can make a great deal of difference to their being in the world' (‘Happiness’, 2005: 113).

Timothy Pychyl has a relevant post on the ‘Psychology Today’ blog in which he notes that some leaders in the field of positive psychology have outed themselves as neurotics. (When I did an online test I discovered that I also have a tendency to be somewhat neurotic – but that would probably be only too obvious to readers this blog as well as to everyone else who knows me.) Pychyl suggests that while neurotics can learn to act out of character they can’t change their personalities.

Survey data suggests that personality traits for the vast majority of people tend to remain stable after age 30. End of story? Well, not quite. Such studies also indicate that a small proportion of individuals undergo significant changes in personality (see: Terracciano, Costa and Mc Crae, ‘Personality plasticity after age 30’, 2006).

There is some recent evidence of personality change during treatment for depression both using drugs (Paxil) and cognitive behavioural therapy (CBT). The results of one study, led by Tony Tang, suggest that both the drug therapy and CBT outperformed a placebo and had similar effects in changing neuroticism and extraversion scores.

There has also been some research relating to changes in the brain that might be produced by meditation. A study led by Richard Davidson, which examined changes in brain electrical activity following an eight-week training program in mindfulness meditation, found that the program resulted in significantly larger increases in electrical activity in areas of the brain associated with emotional regulation (‘Well-being and affective style’, 2004). A more recent paper by Davidson includes the following remarks:

‘Mindfulness training can be hypothesized to change an individual’s relationship to his or her emotions so that they are not viewed as fundamental constituents of self, but rather as more fleeting phenomena that appear to the self. We would not necessarily expect mindfulness training to alter the neural circuitry of emotional responding in response to a challenge per se, but rather we might expect a change in the connectivity between emotion circuits and those used for the representation of self. We would predict decreased connectivity between emotion processing and self-relevant processing regions’ (‘Commentary: Empirical explorations of mindfulness’, 2010).

I don’t claim to know a great deal about neuroticism or meditation (apart from my own limited experience) but if meditation helps people to be calm and composed, and less likely to panic, or feel threatened, stressed out, frustrated, or bothered in the face of challenges, then I would have thought that would probably be reflected in lower neuroticism according to standard measures used by psychologists.

Finally, as an economist, it seems to me that revealed preferences are worth considering. As I have discussed previously, the self-help industry seems successful according to the usual market tests. When people engage in meditation or other forms of contemplation instead of sleeping longer or indulging in more immediately pleasurable activities, this suggests to me that they may actually obtain some of the benefits that they claim in terms of desired changes in personality traits.

Postscript
There is an update of this post entitled: How much does personality change over time?

Would an hedonimeter help us to choose between push-pin and poetry?

There seems to be enduring interest in the post, ‘Is push-pin as good as poetry’, that I wrote a few years ago. That post was about John Stuart Mill’s rejection of Jeremy Bentham’s assertion that if the game of push-pin gives more pleasure than poetry then it is more valuable than poetry. Mill argued that some pleasures are superior to others and that it is possible for people to become addicted to inferior pleasures. I followed up on the question of whether push-pin might be addictive in a subsequent post.


A logical place to begin this post would be to define an hedonimeter. Before I do that, however, I want to make the point that Mill’s thoughts about higher and lower pleasures seem to have been a side-track that did not lead anywhere in the subsequent development of economics. A few years after publication of Mill’s essay on utilitarianism, the famous economist, William Stanley Jevons, came down strongly in favour of Bentham’s view of utility. According to Jevons:

‘Whatever can produce pleasure or prevent pain may possess utility. ... The food which prevents the pangs of hunger, the clothes which fend off the cold of winter, possess incontestable utility; but we must beware of restricting the meaning of the word by any moral considerations. Anything which an individual is found to desire and to labour for must be assumed to possess for him utility. In the science of Economics we treat men not as they ought to be, but as they are’ (‘The Theory of Political Economy’, 1871, III.2).

Francis Edgeworth, who came with the idea of an hedonimeter, was a strong supporter of Jevons’ view that utility has two relevant dimensions: intensity and time. Edgeworth suggested that we:

‘...imagine an ideally perfect instrument, a psychophysical machine, continually registering the height of pleasure experienced by an individual ... From moment to moment the hedonimeter varies; the delicate index now flickering with the flutter of the passions, now steadied by intellectual activity, low sunk whole hours in the neighbourhood of zero, or momentarily springing up towards infinity’ (‘Mathematical Physics’, 1881).

I think that description tells us, in today’s language, that an hedonimeter might be a sexy idea. It will probably be a long time before you can buy an hedonimeter at your local supermarket but research indicates that levels of various chemicals (e.g. cortisol) in the body and activity in various parts of the brain are related to pleasant and unpleasant experiences. It seems likely that if we were able to conduct surveys using hedonimeters – perhaps one day it might be possible to carry one around like a pedometer – they would give similar results to those obtained by Daniel Kahneman and Alan Krueger using evaluated time use (ETU) techniques. In surveys using ETU techniques respondents are asked to account for time spent on various activities on the preceding day and to rate their feelings for each activity in terms of a range of affective categories e.g. happy, worried/ anxious or angry/hostile. The ETU data suggests that people tend to get most pleasure from sex and socializing and least pleasure from working and commuting.

If anyone was really interested in comparing the pleasures people obtain from push-pin and poetry it is possible to imagine conducting an experiment in which participants played push-pin and attended poetry readings and rated their experiences. If you were concerned that such information might not be relevant to you personally, you might be able to get someone to design an appropriate experiment to enable you to rate and record your emotions during the two experiences.

How would you feel about using the results of an ETU exercise (or an hedonimeter) to decide something that may actually be important to you – for example, whether to play sport A or B or have a holiday at location X or Y - on the basis of the balance of emotions that you have experienced in those activities in the past? I don’t know about you, but I would want to see whether the hedonimeter results are consistent with my memories of the different experiences before I decided whether to use them.

A recent presentation by Daniel Kahneman (on TED) suggests that what my reflective self might feel about my memories of the experiences that I want to choose between could differ substantially from the emotions that my experiencing self has actually felt (or what an accurate hedonimeter might record).

Would you ignore the evidence of an hedonimeter if it conflicted with your memories of the experience? Would you ignore suggestions from your spouse or a friend that your memories of a holiday might be biased by the way you felt about something that happened at the end? If you had a reliable hedonimeter to record your memory of past pleasures would you give less weight to consideration of what experiences it is good to have (or issues such as those raised by J S Mill about the superiority and inferiority of different pleasures) in making your choices? Why do humans have selective memories? Do our selective memories serve a useful function from an evolutionary perspective?
Winton Bates

Postscript 1:
In retrospect I would like to add some further questions: Do the reasons why human have selective memories make any difference to the way you and I should live our lives? If I am told that there are good evolutionary reasons why I should remember how an experience ended (e.g. because it was important to the survival of my ancestors to remember which of their hunting expeditions were successful and unsuccessful) is this relevant to the decisions I should make today?
I am beginning to think that while the evolutionary reasons for cognitive bias may be interesting they may not be particularly relevant to our current decision-making.

Postscript 2:
I obviously became sidetracked while attempting to answer this question. My answer is that whether the hedonimeter would help us to make the choice depends on the criterion we think is most appropriate. If the criterion is pleasure, the hedonimeter might help. If the criterion is what is good for us, then pleasure is only factor that we would take into account and an accurate measure of pleasure might not be particularly useful. We might consider that it is better for us to spend Thursday evenings reading poetry rather than playing pushpin even though we might get more pleasure from playing pushpin.

How do preferences relate to well-being?

Readers of this blog will know that I am attracted to a developmental view of individual well-being. I have previously argued that if happiness is viewed as a positive emotional state (involving, for example, peace of mind, optimism, uncompression, exuberance, flow, joy and cheerfulness) then well-being cannot be the same thing as happiness. Well-being also involves other factors - including personal security and security of property, health and longevity, access to goods and services – as well as a positive emotional state. (See: What are the links between freedom and flourishing?) The kind of life that is best for all humans is a life of flourishing - one that follows a pattern of psychological and physical growth filled with enjoyment.

 What does a developmental view of individual well-being have to say about the relationship between well-being and the satisfaction of preferences? Richard Kraut’s questions whether a more preferred outcome is necessarily a better outcome for an individual, even if it satisfies her properly informed and rational desires. His point is that it is possible to have properly informed and rational desires that are not good for us.

 One example Kraut gives is a desire for fame:


“There is no way to criticize the desire for fame except to say that its object is not something that it is good to have. But it should not be at all surprising that human beings sometimes have desires whose objects fall into this category. Nature has not installed in us some wonderful mechanism that guarantees that what propels us forward and focuses our minds on certain courses of action will bring us to something that it is good for us to have. Somehow or other, we have to take steps to learn about what is good for us, and even to care about what is good for us; that is not a topic about which we inevitably come to have tacit knowledge merely by virtue of having desires” (“What is good and why”, p 185).


Daniel Hausman and Michael McPherson note that if well-being is not the same as preference satisfaction then the normative significance that economists attach to preference satisfaction would appear to be without foundation. These authors then offer a new partial defence of welfare economics based on the view that if people are more or less self-interested with respect to certain alternatives, then economists can use their preferences to make inferences concerning what they believe will benefit them. This means that if it is reasonable to suppose that individuals are good judges of what will benefit them, then economists can use people’s preferences as evidence concerning what in fact makes them better off (‘Preference satisfaction and welfare economics’, Economics and Philosophy: 25 (2009).


What happens if we are dealing with policy issues where evidence has accumulated that individuals are often poor judges of what will benefit them? Does this mean that paternalistic government intervention will produce better outcomes? No. The argument that imperfections in individual judgement justify government intervention is just as fallacious as the old argument that departures from perfect competition in markets justify government interventions to increase competition.


In order to consider whether intervention is warranted it is necessary to consider the consequences of alternative institutions, or rules of the game. The judgements that governments make on behalf of individuals may be worse than the judgements that people make on their own behalf. For example, compulsory superannuation in Australia forces some young people to begin to save for their retirement at a time of their life when they would probably be better off saving to buy a house.


In addition, it is important to consider the consequences of government interventions that displace personal responsibility. It is good for adult humans to accept responsibility for decisions affecting their own well-being because this contributes to their personal development and self-respect.

What makes a planet happy?

I find it hard to take seriously the concept of a happy planet. Is Earth happier than Mars? How would we know? It seems to me that only sentient beings can be happy, but that might just reflect the limited perspective of a sentient being. For all I know a rock might have a completely different perspective.

The happy planet index constructed by the New Economics Foundation (nef) doesn’t actually attempt to compare the happiness of different planets. What it attempts to do is to assess how happy our planet is with what is happening in different countries. I hope that makes you smile because if you take the happy planet index too seriously I think you are at risk of becoming unhappy – and that might make the planet unhappy!

The countries that are given the highest ratings in nef’s index are Costa Rica, Dominican Republic, Jamaica, Guatemala and Vietnam. These places don’t seem to me to offer the ideal of a good life for the people who live in them, even though many of these people say they are satisfied with their lives.

The authors claim that the results show that a good life is possible without “costing the earth”. Andrew Norton has pointed out that the results do not support this conclusion. Average happiness levels are relatively low in several countries that are ranked among the top 50 in the happy planet index.

As defined by the nef the happy planet index is a productivity measure. The numerator (or output measure) is happy life years, measured by multiplying average life satisfaction levels by average life expectancy. The denominator (or input measure) is a linear function of the average “ecological footprint”, which is a measure of the total amount of land required to provide all resource requirements plus the amount of vegetated land required to absorb CO2 emissions.

The basic idea seems to be that “the planet” becomes happier when people in a particular country become happier without using more “land” or when people maintain their current happiness level while using less “land”.

How do we know that this is what makes the planet happier? How do we know that the planet cares whether or not humans are happy?

My point is that the happiness of the planet only exists in the mind of the human who thought up the idea of the happy planet index. There is nothing wrong with trying to imagine what it would be like to be a planet that has feelings, but this is a game that anyone can play. Some people could imagine, for example, that the happiness of the planet will rise if more CO2 is produced. After all, CO2 is food for plants and planets like plants. Don’t they?

It would be possible for everyone on earth to have their own happy planet index that takes account of the things that they imagine that the planet might value. It would probably be preferable, however, to come down to earth and acknowledge that there is potential for everyone on the planet to vary in the extent to which they value various things that are important to them.

If nef’s happy planet index serves a useful purpose I think it is to remind us that surveys that measure our subjective well-being do not necessarily take into account all the things that are important to us. When we report how satisfied we are with life we take account of the things that are most salient to us at the time. We don’t necessarily take into account our own future well-being and the well-being of future generations of family members, let alone the well-being of other relatives and friends, the well-being of other humans, the well-being of animal pets, the well-being of other living things, or other matters that might be important to us.

Do people make good choices between income and leisure?

“What are the applied implications of our findings? In the work area we suggest that a balance between hours of work, social time and leisure will produce the highest well-being, whereas even work that is enjoyable will produce less well-being if carried out for too many hours. Conversely, it would be an error to assume that people would be happiest if all their time were spent in pleasurable leisure activities. ... At the policy level an implication is that too many work hours, without sufficient free time or vacation, will prove less rewarding for most people” (Diener, Weiting Ng and Will Tov, 2008, ‘Balance in life and declining marginal utility of diverse resources’, Applied Research Quality Life).

This quote is from the conclusions of an article which assesses how average happiness levels differ with differing amounts of time spent in various ways (free time, with family and friends, and commuting) as well as with income levels. The findings seem to confirm the predictions of standard economic thinking in this area i.e. as our consumption of any good (including non-market goods such as leisure) rises the marginal utility of adding an additional unit of the good tends to decline.

What does the article tell us about marginal utility? The part of the study that seems most informative uses data from the Gallup World Poll, a representative sample of people almost covering about 95 percent of the world. As its main measure of happiness the study uses affect balance, which measures relative experience of positive feelings (enjoyment, and smiling and laughing) and negative feelings (depression, anger, sadness and worry) for the previous day.

The results suggest that the marginal utility of “free time” and “time with family and friends” is quite high for the first few hours of each activity (in the time category zero to four hours) and then declines to around zero. The marginal utility of additional income rises steeply for incomes up to around $US 40, 000 and then increases moderately, if at all. (The ladder of life indicator shows a similar pattern, but with the marginal utility of income remaining positive at high income levels).

How much additional income would a person need to earn to compensate for the loss of utility associated with the sacrifice of an hour of free time or an hour with family or friends. My rough calculation suggests that the hourly rate of pay required would be around $28 for a person with an income of around $20, 000 per year. (The loss in utility for sacrifice of an hour of leisure equals 0.075. Income on the preceding day would have needed to rise by $28 in order to raise utility by 0.075.)

For people with higher incomes, the hourly wage rate needed to compensate for the loss of an hour of leisure time would be very much higher. At first sight it might appear that with incomes in excess of around $60,000 the hourly rate of pay required to compensate for sacrifice of an hour of leisure would be huge. We need to remember, however, that some of the people earning this additional income might be saving it to spend at times of their lives when their earning capacity is diminished and the marginal utility of additional income is much higher. There are also some people who enjoy their work so much that they would not require any compensation for sacrificing an hour of free time. More research is required before we will have a good understanding of why people make the choices they make between income and leisure.

The quote at the beginning of this article suggests that the choice that individuals make between income and leisure is a government policy issue. Why should it be? The weight of evidence suggests that when governments attempt to regulate how people live their lives they tend to make people more miserable rather than happier. As I see it, the main benefit of research of this kind is that the findings may help individuals to improve their own well-being and that of their families by enabling them to make better choices.

Can we use dollars to compare how much various life events affect well-being?

The life events I propose to discuss here are things like major improvements or worsening in financial situation, getting married or divorced, having a child, serious personal injury, death of a spouse, being made redundant and change of residence. I will focus on subjective well-being, as measured by surveys which ask people for a numerical rating of their satisfaction with life.

One way to compare the impact of life events on well-being is to calculate what change in income would have an equivalent impact after controlling for other factors. Some readers might recall research findings for the U.S. and Britain which suggested that the increased income equivalent of a lasting marriage is around $100,000 and an increase in income of around $60,000 would be required to compensate for the loss in well-being associated with becoming unemployed. (These numbers come from some pioneering research by David Blanchflower and Andrew Oswald published in 2000.)

There are several problems with the methodology of this early research which tend to overstate the income changes equivalent to life events. First, the methodology is based on estimates of the (small) impact that higher incomes have on current well-being without taking account of the impact of higher incomes on future well-being. Higher incomes enable the wealth accumulation (and the redistributions through tax and welfare systems) that make it possible for people to maintain their well-being during periods when earning potential is diminished (e.g. during retirement) or when they incur heavy costs or heavy costs are incurred on their behalf (e.g. education and medical expenses).

Second, the methodology focused on the impact of being in a particular state (e.g. married or unmarried) rather than on the duration or timing of the effects that life events have on well-being. Life events typically have large impacts on life satisfaction for only a relatively short period.

Third, the methodology was unable to distinguish causation. For example, it was unable to assess whether married people are happier than unmarried people because marriage tends to make people happy or because happy people are more likely to get married.

Research in this area has progressed a great deal in recent years, with the use of ongoing surveys that enable changes in the well-being of the same sample of people to be linked over time to life events. The HILDA survey (Australian data) shows that the events with the greatest positive effect on life satisfaction for both males and females included a major financial improvement in the past three months, having been married in the last three months and birth of a child (less than nine months ago). The events with greatest negative effect on life satisfaction included being detained in jail, a major financial worsening at any time in the last year, a recent separation from a spouse or partner and recent death of a relative or family member.

A recent paper by Paul Frijters, David Johnston and Michael Shields estimates the one-off windfall improvement in finances needed to compensate for various life events (‘Happiness dynamics with quarterly life event data’, DP 3604, IZA, July 2008). The windfall approach seems preferable because a comparison of the effects on current well-being of different life events avoids the conceptual and measurement problems of attempting to compare the effects of life events with the effects of differences in income levels.

The authors obtained the following estimates of compensating windfall financial gains for various life events:

Death of spouse/ child: + $178, 300
Serious personal injury or illness: + $ 59,200
Change of residence: - $ 53,000
Birth or adoption of child: - $ 18,300
Marriage - $ 16,500
Separation from spouse or partner: +$ 14,900
Fired or made redundant: + $ 6,900
Victim of property crime: +$ 2,700

(Currency: Australian dollars; $A1 = about $US 0.80. Assumed discount rate = 5% ) .

I should note that these compensating windfall estimates are additive. For example, a person who is fired might become separated from his or her spouse and experience a major financial worsening at the same time.

It seems to me that the magnitude of these estimated compensating windfalls generally make a lot more sense than do the much larger estimates of income-equivalents of life events. Nevertheless, I feel uneasy about the idea that the life satisfaction of people who suffer the death of a spouse or child would be unaffected, on average, if they received a windfall gain of around $A 178,300 at the same time. Can any amount of monetary compensation actually be sufficient to enable life satisfaction to remain unaffected while a person is mourning the loss of a loved one?

Do well-being surveys measure utility?

Economists often think of utility and well-being as the same thing. If a person chooses to buy an additional unit of good A rather than an additional unit of good B, they tend to assert that this “revealed preference” shows that the marginal utility provided by good A exceeds that provided by good B. If asked to explain what this means in simple terms an economist might say that the additional unit of good A increases the person’s well-being by more than an additional unit of good B.

At this point some readers will immediately want to bring in complications like the possibility of irrational behaviour. A branch of economics (behavioral economics) explores this possibility, but I want to put this possibility aside for the moment.

The question I want to focus on is whether well-being surveys that are conducted by asking people questions relating to their personal well-being are measuring the well-being or utility referred to by economists. Some economists assume that it is, but I think they are mistaken.

What is it that the surveys actually measure? They measure a variety of different things. Most commonly they measure happiness or satisfaction with life by asking people to provide numerical evaluations in response to a single question. Some more complex surveys (e.g. the ACQOL survey) measure perceptions of the quality of life by asking questions about satisfaction with various aspects of life such as standard of living, achievements, relationships and health. Others ( e.g. nef’s “National accounts of wellbeing”) incorporate a framework of questions relating to life evaluations, emotional well-being, vitality, resilience and self-esteem, and feelings of autonomy and competence etc.

I think it is fair to say, however, that the surveys measure how people feel about their current lives. (Some do include questions about future security but when this averaged with other factors most weight is given to how people feel about their current lives.) For the purposes of this discussion let us call this “current well-being” and assume that the surveys measure it accurately.

At this point the economists reading this will immediately recognize that the surveys cannot be measuring utility because people often make trade-offs between their current well-being and future well-being. This is most obvious in savings decisions where current consumption may be sacrificed to enable a higher consumption levels to be enjoyed in future. It also occurs, for example, when people decide to put up with working long hours or spending a lot of time commuting in order to make their families more financially secure.

Economists still probably learn at an early stage of their study of the subject how to picture these kinds of choices in their minds, but for the benefit of anyone else who might be reading this I will draw a relevant diagram below. Readers who prefer stories to diagrams might prefer to read an earlier post, entitled “Do good decisions always make us happy?”. For the benefit of any readers who might find an appeal to authority more persuasive I should also mention that Gary Becker and Luis Rayo have suggested that the happiness measured in surveys can be viewed as “a commodity in the utility function in the same way that owning a car and being healthy are” (comment on Stevenson/Wolfers paper, Brookings Papers, Spring 2008: 89).


The possibilities curve in this diagram (shown in red) encompasses the various combinations of “current well-being” and “security” that are attainable by the decision-maker. It can easily be seen that points on this curve are superior to all attainable points closer to the origin.

The indifference curves (shown in blue) reflect the preferences of the decision-maker between current well-being and security. The decision-maker is indifferent between the combinations of “current well-being” and “security” on particular curves. She maximizes her utility at the point of tangency between the possibilities curve and the highest attainable indifference curve.

The point I am trying to make is that as a result of the decision-maker’s preferences she views point A, where current wellbeing is at a maximum, as inferior to point B, the point at which utility is maximized.

The obvious implication is that it is foolish to rush into policy recommendations based solely on consideration of how people can improve their well-being as measured in surveys. If happiness surveys suggest that people are behaving in ways that are contrary to measured well-being we should ask ourselves whether we have an adequate understanding of what is motivating their behavior, rather than assuming that it is a result of ignorance (an information problem) or human frailty (predictable irrationality).

Should governments collect subjective well-being data?

The idea of governments collecting data on our subjective well-being might seem slightly Orwellian to many people. It could bring to mind images of officials from the government statistics office knocking at your front door and telling you that they are from the government and they have come to help you by collecting information about what is going on in your mind.

However I don’t think anyone needs to worry a great deal about the implications for their personal liberty of proposals for government collection of subjective well-being data, such as in the recently published book, “Well-being for Public Policy” by Ed Diener, Richard Lucas, Ulrich Schimmack and John Helliwell. As discussed in an earlier post, such data would be unlikely to increase the influence that paternalistic interventionists may have on the policy making process.

The important issue is whether the collection of this additional information is warranted in terms of its potential contribution to discussion of policy issues.

In their concluding chapter the authors ask themselves whether enough is known about subjective well-being for government agencies “to initiate systematic programs for measuring it”. This is how they summarise their reasons for answering “yes”:
“The measures are sufficient to reveal some of the groups in society that are suffering, and they also tell us which groups are thriving. The measures already provide strong clues about the characteristics of nations that lead to the experience of a satisfying life for citizens, along with those that predict the opposite. The measures give clear clues about the activities and circumstances that tend to lead to ill-being and well-being. And when national accounts of well-being are instituted our understanding of these issues will only grow.”

Do we really need systematic programs for collection of information on subjective well-being to tell us about such matters? The measures of subjective well-being generally tend to confirm what we know already from information on incomes and other objective indicators of the quality of life. It seems to me that the important issue is whether collection of more data on subjective well-being would add reliable information that is not available from other sources.

The book discusses the potential contributions of subjective well-being measures in providing new information that could be relevant to discussion of policy issues relating to externalities, non-market goods, taxation, setting fines and compensation for lost welfare. Some specific examples caught my eye. It is possible that information on the extent of misery caused by different diseases could result in better allocation of public funds for medical research (p 134). Some research findings suggest that effects of airport noise on well-being of people in affected areas may currently be under-stated by its effects on residential land values (p 147). Subjective well-being information may help in assessing the value of public facilities such as parks to residents of cities who have access to such facilities (p 155).

The critical issue in considering the contribution that subjective well-being data can make to public discussion is whether this information is reliable (yields consistent results) and valid (actually measures well-being). My assessment of the relevant literature (in my draft paper on Gross National Happiness) is somewhat less optimistic than the view presented in this book. Despite all the noise in this data, however, I think the authors may be correct that enough randomness washes out in large samples to make the responses to single item questions sufficiently reliable for the purpose of creating national indicators (p74). Multiple item questionnaires such as those suggested by Ed Diener and Robert Biswas-Diener to measure “psychological wealth” (in their recent book, “Happiness”) could provide much more reliable information.

I think the authors make a fairly strong case that the surveys are measuring an aspect of well-being although I think it is an over-statement to claim that “the measures behave as they would be expected to behave given widely accepted ideas about what well-being is” (p 93). For example, the measures show a decline in well-being when people have children, despite the widely accepted idea that having children has something to do with well-being.

There is a risk that subjective well-being measures will cloud public discussion of policies rather than shed additional light on relevant issues if they come to be viewed as definitive measures of overall well-being. In interpreting these measures it is important to bear in mind that it is quite possible for people to make rational decisions to sacrifice some of their current satisfaction with life, in order to improve their own future well-being or that of their families.

Is the quality of life in New Zealand over-rated?

Some New Zealanders might say that this is a question that only an Australian could ask, but it seems to me to be a good way to raise the issue that I want to discuss. (I hope that when I look back on this in a few days time it will still seem like a good idea!)

The ratings that I am writing about are the ladder of life ratings from the Gallup World Poll – the top step of the ladder represents the best possible life and the bottom step represents the worst possible life. But I could be referring to any of a range of surveys that ask people to place a numerical rating on how happy they are or on how satisfied they are with their lives.

I do not intend to argue that New Zealanders have a peculiar propensity to over-rate their satisfaction with their lives. The issue I want to discuss is what it means when surveys show that New Zealanders are just as satisfied with their lives as people in the U.S. even though average incomes in NZ are only about two-thirds of the U.S. level. I propose to compare the impact of income differences and other factors on the survey measures of subjective well-being in order to enable readers to consider whether the impacts attributable to income differences provide an accurate measure of its impact on the quality of lives.

It is now possible to make fairly accurate comparisons of the impact of income and other factors on average ratings of subjective well-being at a national level. Recent research by John Helliwell, Christopher Barrington-Leigh, Anthony Harris and Haifang Huang has shown that a high proportion of differences in average life evaluations between countries can be explained statistically by differences in a relatively small number of variables reflecting social, institutional and economic circumstances of life (See Table 3, ‘International Evidence on the Social Context of Well-being’, Working paper 14720, NBER, 2009). The most important variables are income (log of per capita GDP), friends (the proportion of survey participants who have relatives or friends they can count on for help when they are in trouble), freedom (the proportion who satisfied with their freedom to choose what they do with their lives) and corruption ( responses to questions relating to whether corruption is widespread throughout government and business).

In the Figure below I have used these research results to show reasons why average survey measures of subjective well-being in several countries differ from the U.S. ratings.



The net differences from U.S. ratings are shown next to the label for each country. If you focus on New Zealand you can see that the perception of NZers that their country is relatively free of corruption outweighs the negative impact on survey responses of the fact that average incomes in NZ are substantially lower than the U.S. average.

If you consider that corruption is as big a problem in the U.S as, for example, in Greece, you might think that this provides an accurate depiction of the relative impacts of income differences and corruption on the quality of life in New Zealand and the U.S. However, when I look at the expert ratings of corruption levels in Transparency International’s corruption index, the U.S. doesn’t look too bad. The rating of the U.S. in this index (7.3) is lower than Denmark and NZ (both on 9.3) and Australia (8.7) but well above Italy (4.8) and Greece (4.7). (It is also interesting that Greeks do not perceive that their corruption problem to be any worse than that in he U.S. and that NZers do not perceive themselves to be as free of corruption as the Danes).

The point is that the influence of various factors on the survey ratings of quality of life depends on the way they are perceived. The ratings are more like emotional responses than dispassionate evaluations. It seems to me that self-reports of how people feel about their lives tell us about their emotional states - which are an important component of well-being but do not tell the whole story.

One way to test survey ratings is to ask ourselves to what extent we would be prepared to rely on them in making decisions affecting our own well-being. It seems to me that income may be more important to people when they make decisions affecting their well-being than when they answer questionnaires about the quality of their lives. If you were in Europe contemplating a choice between moving your family to either the U.S. or NZ, would you consider the importance of differences in average income levels to be adequately reflected in survey ratings of the quality of life?

Postscript:
Survey ratings can also be tested by comparing them with actual migration patterns where free migration is allowed - as between New Zealand and Australia. Migration statistics for New Zealand show that in recent years permanent and long-term departures to Australia have exceeded arrivals from Australia by a factor of more than 3:1.

What are the links between freedom and flourishing?

I think the best way to summarize the links between freedom and flourishing is by trying to answer the following questions.

1. What is the relationship between happiness, well-being and flourishing?
If happiness is viewed as a positive emotional state (involving, for example, peace of mind, optimism, uncompression, exuberance, flow, joy and cheerfulness) then well-being (utility) cannot be the same thing as happiness. (See: What is happiness? and Do good decisions always make us happy?) Well-being (utility) involves several other factors - including personal security and security of property, health and longevity, access to goods and services – as well as a positive emotional state.

Flourishing can be described as authentic well-being. I am attracted to the idea that flourishing involves self-fulfillment as well as to the idea that it involves a meaningful life and actualization of human potential. It seems to me that the highest level of reflection of a flourishing person would be in harmony with his or her emotional nature, and vice versa (but I don’t claim to know a great deal about this ideal frame of mind or meta-state).

2. What is the relationship between freedom, classical liberalism and rationalistic individualism?

Freedom (liberty) is the condition of society in which the coercion of some by others is reduced as much as possible. It seems to me that classical liberalism is essentially about the rule of law and the protection of freedom. It is the view that people can live together in peace and to their mutual advantage bound only by abstract rules of conduct that protect the life, liberty and property of each person.

It is important to distinguish between rationalistic individualism and classical liberalism. Whereas rationalistic individualism maintains that a person’s wellbeing always increases when he or she has more options to choose from (liberal optimism), classical liberals have a more sober view of human nature. For example, Adam Smith accepted human fallibility but believed that the desire that individuals to better their own condition would generally prevail over their tendency to be prodigal and imprudent. (See: Liberal sobriety plus contextualism equals classical liberalism? and Is freedom a necessary condition for human flourishing?)

Various attempts have been made to measure freedom. The most relevant for present purposes are economic freedom indexes that measure the extent to which economic policies support private property, personal choice, voluntary exchange, freedom to compete etc.

3. What is the relationship between freedom and happiness?

People generally have a passion for control of their own lives. (See: Does inner freedom link liberty with flourishing?) Most people enjoy exercising competence in the face of the challenges that freedom poses. Exercising such competence is no easy matter; people often become unhappy as a result of the poor choices they make. But people whose life stories that are full of challenges, setbacks and triumphs may be happier than those whose lives are uniformly secure, comfortable and tranquil. (See: Does a challenge make us happy?)

The exercise of freedom can result in economic developments that disrupt communities, cultures and lifestyles, and leave many people unhappy. Such problems can be minimized under appropriate constitutional arrangements that decentralize political decision-making (See: Do we have to choose between lifestyles and liberty?)

Inner freedom – the extent to which people feel in control of their own lives – seems to be closely related to the emotional states involved in happiness. The proportion of the population with high levels of inner freedom tends to be higher in countries with higher levels of economic freedom. (See: Is inner freedom related to economic freedom?)

4. What is the relationship between freedom and well-being?
Freedom (as defined above) is inextricably linked to security of persons and property.

The relationship between economic freedom and other aspects of well-being was discussed in my post: What do objective measures of freedom and flourishing tell us?.

Do we have to choose between lifestyles and liberty?

As noted in my last post, Dan Haybron suggests that our prospects for flourishing may depend importantly on living in the right kind of setting, with the right sorts of people (“The Pursuit of Unhappiness”, p 267) . Haybron is concerned that liberal optimism (the presumption that well-being increases when people have more options to choose from) can result in damage to community attributes that are important to the happiness of many individuals.

One of the examples that Haybron gives has to do with a proposal for intervention in the education of Amish children to give them a wider range of options to choose from in their adult lives. Haybron makes the point that “the Amish are not crazy to fear that such a policy would threaten one of their most cherished values, that of community” (p 266). It seems to me that it would be possible for a classical liberal to take a position on either side of such an issue, depending on the facts of the situation e.g. whether a strong case can be made that the rights of the children are being breached and whether it is likely that government intervention on their behalf would actually improve their chances of having a happy life.

Haybron’s example of the possible harm that could be done to community well-being through economic development of an island is worth considering at greater length. The residents of the island are assumed initially to have relatively low incomes but to enjoy, on average, a high level of happiness, due to strong community bonds and a culture that emphasizes the enjoyment of life. It is possible for any one resident to obtain a substantial net benefit by selling land to developers who wish to develop the tourist potential of the island, since the incremental effect of any one sale on the community lifestyle is minimal. But, taken together, many such sales may have an overall negative effect on the average happiness of the island’s long term residents. Should the development be stopped?

A different example, concerning the views of Justus Moser about the impact of global commerce on local culture, might help to clarify the issues involved. Jerry Muller tells us that Moser was a leading citizen in Osnabruck, a self-governing region in western Germany, in the 18th century (“The Mind and the Market” pp 84-103). Moser, like some modern-day opponents of globalisation, was concerned about the effects of trade on local lifestyles and culture. He condemned the growing taste for new, imported commodities, such as coffee, tea and sugar, especially among the lower ranks. He viewed shopkeepers as the local agents of the new international economy who robbed artisans of their customers and their livelihood. He reserved his greatest condemnation, however, for foreign peddlers who were selling small quantities of imported goods to peasants who were largely outside the market economy. According to Moser, these activities were causing the rural population to be “stimulated, tempted, led astray and deceived”. He argued that the public needed to be protected from the temptation of buying products that they didn’t need like leather gloves, wool stockings, metal buttons, mirrors, cotton caps, knives and needles. Women also needed to be protected from local markets where they would chat and waste money on snacks and pleasantries, while ignoring their household duties. Should trade restrictions be imposed to protect local lifestyles and culture?

What is the main difference between these two examples? It seems to me that it is possible that there could be close to a unanimous view among the long-term residents of Haybron’s island in favour of restricting certain kinds of economic development, but it is unlikely that Justus Moser, and the modern day opponents of globalisation, could persuade many of their fellow citizens that they need to be protected from the temptations of international commerce.

Can the legitimate interests of communities in preserving lifestyles of their members be met without making unacceptable encroachments on liberty? Dan Haybron evidently does not think so. At the end of his book he seems to be suggesting that we have to choose between paternalistic interventions that might, or might not, promote happiness and the individual’s right to pursue unhappiness (like the Savage in Aldous Huxley’s “Brave New World”).

I think that view is too pessimistic. Robert Nozick’s concept of a framework for utopia (briefly discussed here) seems to me to provide a good way to begin thinking more optimistically about these issues. People who want the opportunities that economic growth provides should be able to choose to live in communities that provide those opportunities, while those who value a more simple lifestyle should be able to choose to live in communities in which economic development is restricted in various ways. Do you think that idea is too utopian?

Postscript:
I would like to draw attention to Dan Haybron's comment below.

Liberal sobriety plus contextualism equals classical liberalism?

I have now finished reading “The Pursuit of Unhappiness” by Dan Haybron and haven’t modified my view that it usually does people good to take responsibility for running their own lives. (See earlier posts relating to this book: here and here.)

What is more surprising, however, is that I find that the author’s position is in some respects fairly close to my own view. Why am I surprised? I think it is because I originally thought that Haybron’s foreshadowed attack on liberal optimism was shaping up to be an attack on classical liberalism. In the final chapter of the book, however, he defines liberal optimism more specifically as the presumption that a person’s well-being will increase if she/he has more options to choose from. (I think that is the essence of what he is getting at in his lengthy definition on pages 256-8.) In the end it turns out that Haybron’s main target is actually atomistic (or rationalistic) individualism rather than classical liberalism.

Haybron’s conclusion is that the balance of evidence may favour both “liberal sobriety” and “contextualism”. Liberal sobriety initially brought to my mind thoughts about the desirability of respecting the rights of others by being temperate in one’s consumption of alcohol - but it is actually the view that although people should not be presumed to fare better if they have more options to choose from, they usually do fare better under those circumstances (p 263). Contextualism is the view that well-being is better served when individuals’ lives are shaped by an obliging context, i.e. communities, cultures etc. conducive to human flourishing.

Haybron writes: “We should take neither liberal optimism nor individualism for granted. Indeed, perhaps the pursuit of happiness will prove to be mainly a societal matter: our prospects for flourishing may depend less on personal wisdom than on living in the right kind of setting, with the right sorts of people” (p 267). The main problem I see with that statement is that in the modern world a person usually needs considerable wisdom to choose to live in the right kind of setting with the right kind of people. (Haybron implies that there is also another problem, namely that people who consider that they are living in the right kind of community may not be able to prevent economic development that will damage the lifestyle that they value. I will discuss this in my next post.)

Dan Haybron’s position regarding liberal sobriety and contextualism seems close to that of Friedrich Hayek (and Adam Smith). This might deserve some explanation, since there has been a tendency - including by some politicians who should know better - to confuse Hayek’s views about individualism with those of Gordon Gekko.

Hayek supported the classical liberal view that humans are very irrational and fallible beings. In supporting the views of Adam Smith he wrote: “It would scarcely be too much to claim that the main merit of the individualism that he and his contemporaries advocated is that it is a system under which bad men can do least harm. It is a social system that does not depend for its functioning on our finding good men for running it, or on all men becoming better than they are, but which makes use of men in all their given variety and complexity, sometimes good and sometimes bad, sometimes intelligent and more often stupid. Their aim was a system in which it should be possible to grant freedom to all ...”.

Hayek noted that the classical liberal view affirms the value of the family, community groups, voluntary associations and conventions that have evolved for the mutual benefit of community members. He argued that voluntary cooperation enables coercion to be kept to a minimum. He condemned “false individualism which wants to dissolve all these smaller groups into atoms which have no cohesion other than the coercive rules imposed by the state ...”. He even suggested: “It must remain an open question whether a free or individualistic society can be worked successfully if people are too ‘individualistic’ in the false sense, if they are too unwilling voluntarily to conform to traditions and conventions, and if they refuse to recognize anything which is not consciously designed or which cannot be demonstrated as rational to every individual”. (The quotes are from: ‘Individualism: True and False’, a paper written in the 1940s and published in various places including: C Nishiyama and K Leube (eds.), “The Essence of Hayek”, 1984.)

I’m not sure whether Dan Haybron would appreciate any further attempts on my part to associate his views with those of Friedrich Hayek. So, I will end this post with a quote from Haybron’s book:
“Accepting contextualism does not require us to follow communitarians in rejecting liberalism. Contextualists might insist that governments promote substantive goods only when doing so enjoys sufficient popular support, and that they not infringe on individual rights in doing so” (p 265-6).

How close is the relationship between life satisfaction and happiness?

This post is a continuation of discussion of issues raised in Dan Haybron’s book, “The Pursuit of Unhappiness”, and my last post, ‘What is happiness?’

I ended my last post suggesting that Dan Haybron overstates the difference between positive emotional states and being satisfied with one’s life.

My objection relates specifically to an example in which Haybron attempts to separate a person’s emotional condition from her dissatisfaction with her life in order to show that if you take away the former it is not clear that the latter involves unhappiness.

Haybron writes: “Consider a small-town resident, impressed by television depictions of city life, who believes her environs dull and unsophisticated. Dissatisfied with her life she wants to get out. Later, having done so, she realizes that her old life was actually rich and fulfilling with none of the anxiety and loneliness of urban life. She might conclude that, while she had indeed been dissatisfied in her former life, she was nonetheless happy” (p 150).

It seems to me that this attempt to separate the person’s dissatisfaction with life from her emotional state doesn’t work. It seems to me that she was clearly not happy in her former life because she thought she had the option of living a happier life in the city. Her problem was that the comparative judgement that led her to feel dissatisfied with small-town life was made on the basis of inadequate information. If she had followed Dan Gilbert’s advice (“Stumbling on Happiness”) and talked to some of her friends who had moved to the city, she would have been in a better position to know how she would feel after she moved. In possession of this better information it is reasonable to suppose that she would make a more favourable judgement about small-town life and feel happier.

Is it ever possible for individuals to make the judgement that they are satisfied or dissatisfied with life without referring to their emotional states? Perhaps it would be possible for some individuals to judge themselves to be satisfied with life from a purely intellectual point of view, without being happy. But would such people actually feel satisfied with life? I don’t think so.

This still leaves doubt about the relationship between life satisfaction judgements and happiness. Does it make sense to define happiness as “lasting and justified satisfaction with life as a whole”? (Charles Murray adopts this as his working definition of happiness in what I have previously described as the best book about pursuit of happiness and good government). It seems to me, however, that this definition encompasses factors that contribute to human well-being and flourishing that are additional to the positive emotional states involved in Haybron’s definition of happiness.

Perhaps “lasting and justified satisfaction with life as a whole” should be viewed as a definition of well-being rather than as a definition of happiness. Haybron might be right that life satisfaction is a dubious candidate for a major life goal because it is “too easy to come by” (p 99), but I think the requirement for justification meets this objection. The requirement for justification also has the virtue of recognising that human well-being requires the exercise of practical wisdom.

Does self-actualization promote greater rationality in market behaviour?

What is rational behaviour? It seems to me that rational behaviour is simply about making good choices – having the intention to make choices that we are prepared to endorse at a high level of reflection and being prepared to learn from our mistakes.

Economists often assume in their theoretical models that the world is populated by people who are a bit like Dr Spock from Star Wars. In Dan Ariely’s words: “Standard economics assumes that we ... know all the pertinent information about our decisions, that we can calculate the value of the different options we face, and that we are cognitively unhindered in weighing the ramifications of each potential choice” (“Predictably Irrational”: 239). Economists have reasons for making such assumptions in their models, but there are also good reasons why real people don’t behave like this. If we were to attempt to calculate the value of all the options every time we made a decision, the transactions costs (including time required) would be huge. Most of us have better things to do with our lives.

However, some of the evidence that Dan Ariely has presented suggests that humans often fail to make choices that would be capable of passing a much weaker test of rationality. We have predictable tendencies to make mistakes in decision-making and we often tend to make the same mistakes over and over. (I have written previously about Ariely’s book here).

While thinking about the question of whether self-actualization would help people make better choices I decided to revisit “Predictably Irrational” to see if I could find any relevant discussion. My hopes were raised when I found this: “If we all make systematic mistakes in our decisions, then why not develop new strategies, tools and methods to help us make better decisions and improve our overall well-being?” Unfortunately, the discussion that follows is mainly about what governments and employers etc could do to help us rather than about what we can do to help ourselves. However, Ariely does acknowledge that it might be possible for us to help ourselves: “Once we understand when and where we may make erroneous decisions, we can try to be more vigilant, force ourselves to think differently about these decisions, or use technology to overcome our inherent shortcomings” (244).

Why do I think it is worth thinking about whether self-actualization would promote greater rationality in market behaviour? It seems to me that people who rate highly in terms of self-actualization might be more competent in dealing with their own irrational tendencies e.g. in relation to gaps between wanting and liking (discussed here and here) and persuasion techniques used by others (including advertising agencies).

Instruments have been created to measure self-actualization (the POI or personal orientation inventory) and dimensions of personal well-being related to eudaimonia i.e. growth towards achieving the best that is within us and the exercise of practical wisdom. For example, Carol Ryff’s six-factor model of personal well-being covers self-acceptance, autonomy, personal growth, relations with others, purpose in life and environmental mastery (described here). I don’t claim to know much about measurement of such factors, but this model seems to have conceptual coherence. The six factors correspond broadly to the content matrices in Michael Hall’s matrix model (see: “Self-Actualization Psychology”, Chapter 11). (Hall’s matrix model provides a comprehensive framework for considering how the meanings that we attach to self, powers (potential), others, time and the market/environment/context relate to the beliefs, values, understandings, perceptions etc that make up our internal models of the world.)

As far as I am aware research relating to measurement of self-actualization etc. has not yet been used in behavioural economics research. It would be interesting to know whether the aspects of “practical wisdom” being measured in the self-actualization research correspond to enhanced rationality in market behaviour.

Are the world's poor motivated solely by survival needs?

The answer to this question might seem fairly obvious. If people are living on less that a dollar a day, or even on less that two dollars a day, everything they do is likely to be motivated by survival needs. Right?

Actually, a recent working paper by Abhijit Banerjee and Esther Duflo suggests that perception is not correct. The paper is based on household surveys conducted in 13 low-income countries (‘Economic lives of the poor’, MIT working paper 06-29).

Those in poverty typically spend between about half and three-quarters of their income on food. The food they buy is not always the lowest cost way of obtaining nutrition – for example, where millets represent best nutritional value for money they also spend significant amounts on rice, wheat and sugar. They also spend significant amounts on tobacco and alcohol. Most surprisingly, they spend a substantial proportion or their incomes on entertainment e.g. television, religious festivals and weddings, and on funerals.

Does this mean that the world’s poor are eating enough? Not according to standards relating to such things as calorie intake and body mass indexes. The poor frequently suffer from illness related to malnutrition and many say that they often feel so weak that it is difficult for them to carry out daily activities.

Are they happy? The proportions reporting that they are worried, tense or anxious are relatively high. In general, however, the world’s poor are apparently not extremely unhappy, except when they have to go without meals.

Why do they spend on entertainment instead of spending more on food? Banerjee and Duflo suggest that this cannot be attributed to lack of self control because much of the entertainment spending of the poor tends to involve planning and saving. The authors argue that spending on entertainment is a strongly felt need and possibly associated with a desire of the poor to keep up with their neighbours. Whatever the reason, it is clear that the world’s poor do not focus exclusively on satisfying their physiological and security needs.

Why did these results surprise me? It must have been because I had faulty preconceptions about what it means to be very poor. As an undergraduate I learned about Engel’s law that the proportion of income that people spend on food tends to decline as incomes rise. At various times of my life I have also been exposed to Maslow’s pyramid of needs, which implies that people need to satisfy their basic physiological needs and their needs for safety and security before they become motivated by belonging and love needs, esteem needs and self actualization needs. Although Engel’s law and Maslow’s pyramid are broadly consistent with reality, they do not help people to understand that, like the rest of humanity, the very poor are not motivated entirely by physiological needs.

I read the paper by Banerjee and Duflo some time ago, but it has come to mind again as I have been reading Michael Hall’s book, “Self-Actualization Psychology” (Neuro-Semantic Publications, 2008). Hall is respectful of Abraham Maslow’s theories, but suggests that Maslow did not fully appreciate the importance to motivation of the meaning that people give to their circumstances. For example, Maslow admitted that it was a great mystery to him why affluence releases some people for personal growth while others stay fixated at a strictly materialistic level. Hall comments:
“Today, we can answer that puzzle. The experience of affluence is just an event or experience. What it means to any given person determines how that person will regard and feel about affluence” (91).

Hall emphasizes the importance of “meaning” as follows:
“Meaning is the most critical factor in human nature. There’s nothing more essential or core to our nature and experiences. In the end, no experience and no event makes us feel anything. In itself, no experience means anything. Meaning is not inside events” (90).

That provides food for thought. It also seems to me to help explain why very poor people do not focus their efforts exclusively on survival. Even though they are malnourished, living means a lot more to them than just survival.