Is life satisfaction mainly about comfort?

‘Contrary to both those who say money is not associated with happiness and those who say that it is extremely important, we found that money is much more related to some forms of well-being than it is to others. Income is most strongly associated with the life evaluation form of well-being, which is a reflective judgment on people’s lives compared with what they want them to be. Although statistically significant, the association of income with positive and negative feelings was modest’ (Ed Diener, Weiting Ng, James Harta and Raksha Arora, ‘Wealth and happiness across the world ...’, Journal of Personality and Social Psychology, (99:1), 2010, p. 60. Media reports: here and here.)

In my view this recent article makes an important contribution to understanding of the relationship between wealth and emotional well-being by attempting to disentangle the determinants of life satisfaction and positive feelings. The article, based on data from the Gallup World Poll, suggests that while satisfaction with standard of living has a substantial impact on satisfaction with life as a whole it has little impact on positive or negative feelings (emotions experienced ‘yesterday’).

The study uses satisfaction with standard of living and a measure of whether people own luxury conveniences (TV, computers etc) as proxy measures of fulfillment of material desires. The basic idea is that people learn to desire material goods because of their social situation (including the influence of advertising) and the fulfillment of these desires leads to feelings of well-being. Some groups (e.g. the Amish) seem to be reasonably happy without much income because they have relatively low aspirations for material goods.

The authors link their findings to the distinction that Tibor Scitovsky made between comfort and pleasure (‘The Joyless Economy’, 1978). They suggest that ‘it may be that’ comforts increase life evaluations whereas pleasures increase reports of positive feelings:

‘Comfort comes from having one’s needs and desires continuously fulfilled, whereas pleasures come from fulfilling unmet needs and from stimulating and challenging activities. One source of pleasure according to Scitovsky is social stimulation, which he suggested lies largely outside the realm of economics. Novelty and learning can be sources of pleasure too. Thus, Scitovsky’s reasoning is in accord with our findings that wealth predicts life satisfaction, and social relationships and learning new things predict positive feelings’ p.59 .

I found that passage fairly challenging, but reading it didn’t give me positive feelings. I don’t have too many problems with the idea that being satisfied with your standard of living is closely related to comfort, but there are other factors related to economic activity - such as a sense of achievement - that may also make an important contribution to life satisfaction.

A couple of years ago I attempted to identify how necessary various domains of quality of life are to high satisfaction with life as a whole using data compiled by the Australian Centre on Quality of Life (reported here). The criterion used was the percentage of respondents with high satisfaction with life as a whole among those with low ratings on particular domains of quality of life. The percentages were follows (ranked in order of importance of each domain): personal relationships 10.8%, achieving in life 11.8%, standard of living 12.8%, future security 15.6%, health 15.9%, community connectedness 19.0% and safety 20.3%. The results suggest that ‘achieving in life’ at least as necessary to high life satisfaction for Australians as is ‘standard of living’.

I do not claim that working for money is the only way that people can obtain a strong sense of achievement, but it would be very surprising if this feeling is unrelated to economic activity.

Postscript:
I could also have mentioned the neurological evidence that humans (and rats and presumably other animals as well) get more satisfaction from actively working for a reward than from getting it without doing anything to earn it. (See: Gregory Burns, 'Satisfaction', 2005, pp. 43-45.)

How large a role does luck play in our lives?

‘Let’s return to our touchstone: identical twins growing up together. They share their genes, they share their family environments, and they share their peer groups, at least on average. But the correlations between them are only around 50 percent. Ergo, neither genes nor families nor peer groups can explain what makes them different’ Steven Pinker, ‘The Blank Slate’, 2002, p.396.

The correlations that Pinker is referring to relate to intelligence, personality and life outcomes.

I read that passage for the second time a week ago and I have thought about it a few times since. The first time I thought about it was not long after I put my last post, Does parenting make a difference?, on my blog. In that post I neglected to mention that Pinker ended his discussion of parenting by talking about the important role that luck plays in our lives.

The next time was when I stumbled across a post I wrote last year, What determines whether we have successful lives? , in which I discussed Malcolm Gladwell’s book, ‘Outliers’. Gladwell seems to be arguing that exceptional performance can always be attributed to something other than good luck. I think he is probably wrong about that, but his book is a good read in any case.

The most recent time I thought about Pinker’s paragraph about identical twins was when I read Bill Easterly’s post, ‘How skill beats luck in the world cup of development’. Easterly’s point is that the World Cup uses a tournament of five matches to make skill beat luck. He calculates that the probability that a weak team that only wins 15 percent of the time will win the tournament is only 0.0076 percent. By contrast, a strong team that wins 85 percent of the time has a 46 percent probability of winning the tournament. I find it reassuring that despite the large random element in outcomes of low-scoring games (at least that’s how it appears to me as a fan of Aussie rules football) there is a high probability that one of the stronger teams will win the tournament.

Easterly translates his observation to economic policy as follows:

‘As this blog likes to frequently point out, economic growth has a lot of random variation. Over a short period of time (metaphorically equivalent to one game), a country with bad policies and bad institutions still might have a good growth rate. But over a long period of time (equivalent to playing many successive games), the consistent winners are very likely to be countries with good policies and good institutions. So in deciding whether a particular set of policies and institutions are good or bad, you need to look at long periods (tournaments) and not at short ones (single games). How long the long periods have to be will depend on how important luck is in the short term; the evidence we have on economic growth is that short term luck is very important, and the periods have to be pretty darn long for proper analysis.’

I thought that was well worth quoting, but patient readers who have got this far might wonder how it relates to the finding that luck plays a large part in determining outcomes at an individual level. The link that occurred to me is that whereas the ancients saw everything as being in the lap of the gods, these days there is a tendency to say that just about everything that happens at both individual and society levels is a result of human action.

When I hear people say, "You make your own luck", I tend to nod in agreement. But what does this mean? A glance at some of the things personal development professionals write about this on the internet suggests that it involves adopting strategies that tend, on average, to produce better outcomes. When countries make their own luck they adopt economic strategies that tend, on average, to produce better outcomes. In neither case does this eliminate the strong influence of luck on short-term outcomes. Making our own luck just moves the odds in our favour.

Does parenting make a difference?

Bryan Caplan wrote a provocative article in The Wall Street Journal a few days ago (‘The Breeders’ Cup’, June 19, 1010) in which he presented some selfish reasons for people to have more children. In brief:

• While happiness research suggests that modern parents are less happy than their childless counterparts, ‘happiness researchers rarely emphasize how small the happiness gap is’. Beyond the first child, ‘additional children are almost a happiness free lunch’.
• The costs of having kids are front-loaded and the benefits are back-loaded. The more kids you have the more grandchildren you can expect.
• There is some evidence that few people who have children regret that decision. Gallup poll data suggests that most childless adults over the age of 40 say they would have children if they had to make the same decision over again.
• Parenting can be less work and more fun than many people think. The long-run effects of parenting on children’s outcomes are small. Once you realize that your kids’ future largely rests in their own hands you can give yourself a guilt-free break.

Most of Bryan’s article is about the last point. Before discussing this, however, I want to comment briefly on the relevance of happiness research to the decision to have children. Bryan seems to be implying that happiness researchers argue that if having kids doesn’t make people happier, then they shouldn’t have kids. I have read a fair amount of the happiness research literature but I haven’t ever actually seen any researcher put that view. Researchers seem to be almost silent on this issue. I hope this is an embarrassed silence in the case of those happiness researchers who have been quick to suggest that people are making poor decisions when they do other things that do not make them much happier such as working longer hours to earn more income. The point that needs to be remembered, as I have discussed in previous posts (e.g. Do well-being surveys measure utility? and Do good decisions always make us happy?), is that happiness surveys measure current emotional well-being (or something similar) and people often sacrifice some happiness in the short term in order to have greater happiness in future, or to pursue other objectives.

I think that Bryan is probably right that in the modern world there may be a tendency for people to limit the size of their families because they believe that the quality of parenting has a huge impact on children’s futures and they assume that there is no way that parenting could be less work and more fun. He points to fairly strong evidence from research on twins and adoption that supports the view that parenting makes little difference to the way kids turn out.

However, I think Bryan may be at risk of under-stating the importance of good parenting. It seems to me that there are a lot of people whose parenting is so poor that it does damage the future prospects of their children. I don’t claim to know much about this topic, but it is hard to accept that there are no important links between child neglect and antisocial and criminal behaviour.

Steven Pinker discusses some relevant research by Judith Rich Harris in ‘The Blank Slate’ (2002). Harris argues that the main environmental shaper of personality is the child’s peer group. In Pinker’s words:

‘Children do not spend their waking hours trying to become better and better approximations of adults. They strive to become better and better children, ones that function well in their own society. It is in this crucible that our personalities are formed’ (p. 390).

I imagine that would appear as a blinding insight to very few parents. Most people would know already that it is important for their children to choose their friends wisely, but they would also know that they can’t choose their friends for them. Perhaps the most important way that parents can make a difference is through decisions about where they live and what schools their children attend.

Is there a crisis of capitalist democracy?

Richard Posner’s recent book, ‘The Crisis of Capitalist Democracy’, is mainly about the global financial crisis, how it came about in the US, the lessons that the author thinks we should have learned from it and what governments should do to prevent similar crises in future. According to this distinguished author the crisis came about because of lax regulation; we have learned from it that the financial system is inherently fragile and that Keynes is still relevant; and the way to avoid similar crises in future is to introduce regulatory reform in the financial sector.


To be fair, Posner condemns some of the knee jerk responses of governments introducing tighter financial regulation and acknowledges that he is not entirely happy with his own suggestions for regulatory reform. He views the only ambitious proposal that he discussed sympathetically – the separation of commercial banking from other forms of financial intermediation – as ‘fraught with problems’ (p.362).

It is arguable that the global financial crisis was a crisis of capitalism. A milder financial crisis might still have occurred if central banks had not previously acted in ways that led major financial institutions to expect that they would be bailed out if their excessive risk-taking resulted in major losses. It is even possible to entertain the idea (as I did here) that the financial crisis has highlighted a fundamental problem in that laws governing the financial system currently permit financial intermediaries to make promises that they can’t always keep. But why view this economic crisis as a crisis of democracy?

The title of the book arises from Posner’s view that while the American political system can react promptly and effectively to an emergency, it ‘tends to be ineffectual’ in dealing with longer term challenges:

‘The financial collapse and the ensuing depression (as I insist we must call it) have both underscored and amplified grave problems of American public finance that will not yield to the populist solutions that command political and public support. The problems include the enormous public debt created by the decline of tax revenues in the depression, the enormous expenses incurred by government in fighting the depression, and the boost the depression has given to expanding the government’s role in the economy. These developments, interacting with a seeming inability of government to cut existing spending programs (however foolish), to insist that costly new programs be funded, to limit the growth of entitlement programs, or to raise taxes, constitute the crisis of American-style capitalist democracy’ (p.387-8).

Unfortunately, the quoted passage appears in the final paragraph in the book rather than the introduction. There is not much discussion in this book about this supposed weakness of the US democratic system. The author implies that it is largely a problem of political culture. Republicans favour low taxes but they have been reluctant to reduce government spending. Democrats favour high levels of government spending but they have been reluctant to raise taxes. As a result:

‘From the standpoint of economic policy we have only one party, and it is the party of profligacy’ (p.384).

As a person living in a democratic country in which a large part of the electorate has come to equate responsible economic management with budget surpluses and minimal public debt (to the dismay of some left wing economists who would like to see more public sector investment) I find it difficult to take seriously the idea that the current political culture in the United States involves a crisis of capitalist democracy. I am confident that before too long Americans will insist that their governments balance their books in order to avoid the problems currently being experienced in Greece and other European countries.

However, the picture might look a lot different from within the US. Before a change in political culture can occur in the US it will be necessary for a lot more Americans to become concerned about the future implications of current fiscal policies. Richard Posner claims that he has no idea how to solve the problem of America’s political culture (p.385) but I think he is contributing to the solution by merely raising awareness of the problem.