Wednesday, July 30, 2008

How did changes in attitudes to inequality affect happiness in Poland?

This post continues my ruminations about the effect that beliefs about income inequality may have on the happiness of people who hold those beliefs. Previous posts can be found here.

In order to study this it would be nice to have a natural experiment in which the population of a country began with fairly positive beliefs about inequality and then changed those beliefs radically over a couple of years. In order to draw conclusions we would need survey information to document the change in beliefs that occurred, together with information on happiness levels, income inequality and per capita income levels.

It just so happens that such information is available for Poland. A study by Irena Grosfeld and Claudia Senik shows that a change in attitudes toward inequality, which occurred around 1997, was associated with a sharp decline in satisfaction with the current economic situation and some decline in satisfaction with personal living standards despite continued economic growth (‘The emerging aversion to inequality: evidence from Poland 1992-2005’, Discussion Paper 3484, IZA, 2008, here).

Around 1997 there was a sharp drop in the proportion of people agreeing with the statement that inequalities of income are necessary for economic progress and a rise in the proportion agreeing that inequalities of income are too large in Poland.

The statistical analysis actually suggests that income inequality (as measured by the Gini coefficient) had a positive effect on satisfaction with the economic situation and satisfaction with personal living standards in the period from 1992 to 1996. The authors argue that inequality was initially interpreted as “an opening of new opportunities” following the fall of communism. It is somewhat easier to understand how this might occur in the light of the results of other research by Claudia Senik (discussed here) which suggests that in transition countries (Russia, Hungary, Poland and three Baltic countries) the life satisfaction of individuals tends to rise, rather than fall, when the income of their reference group -people with the same skills and occupation - increases. Her explanation is that in these countries people consider that their own future prospects to be better when the income of their professional peers rises.

Why did the change in attitudes toward inequality occur? Grosfeld and Senik suggest that “the turning point in tolerance for income inequality seems to come with the increasingly wide perception that the process that generates income distribution is itself unfair” (p17).

That suggests to me that a change occurred from a situation where the economic system was commonly viewed as a positive-sum game – potentially providing benefits to all participants - to one in which it was viewed as a zero-sum game – where the enrichment of some was perceived as being at the expense of others. Interestingly, the perception of an economy as a zero sum game can be an accurate perception when the distribution of income is influenced to a large extent by political favouritism.

All this leads me to wonder whether there is any survey evidence that people who perceive life as a positive sum game are generally happier that those who view it as a zero-sum game.

Monday, July 28, 2008

Do good decisions always make us happy?

This may seem like an odd question. Many people would say that it must be true by definition that when we make good decisions we are happier. It seems to me, however, that this view is too simplistic.

In order to bring the discussion down to earth consider the case of a person who decides to devote more of her time to earning income and less to leisure. If you ask an economist whether she has made a good decision there is a fairly high probability that his response would be that along the lines of that suggested by Irving Fisher (1892) namely that individuals reveal their utility through their actions. He might say: “It is reasonable to presume that the combination of work and leisure that she has chosen makes her happier than the available alternatives”.

An alternative approach, favoured by psychologists and an increasing number of economists, would be to actually ask the person how happy (or how satisfied with life) she was both before and after she had made the decision to increase her hours of work. If her responses implied she was less happy – after the researcher had made allowances for other changes in her life in the intervening period – this approach would suggest that she had made a bad decision. In this instance this approach seems to suggest that the economist’s presumption of rational choice is wrong.

However, before rushing to judgement, consider a slightly different situation. In this case, rather than deciding to take on more paid work, the person concerned decides to have a child. Our conventional economist’s response would be the same – her decision to have a child implies that she is happier with this option than with the alternatives available. Our psychologist’s survey is likely to show that she is less happy (or less satisfied with life) than she was before giving birth. (There is evidence from many surveys that people who have children living at home are usually less happy than those in similar circumstances who do not have children.)

So, does this mean that our decision-maker made a bad decision by deciding to have the child? It could mean that, but I think that interpretation would usually make no sense at all. When women choose to have children they rarely regret their choices even though the sacrifices they make in looking after their “little bundles of joy” are sufficient to cause them to report lower happiness. By commonly accepted standards these are usually good decisions – they are sensible and rational.

Other examples can be cited of sensible and rational decisions that do not add to happiness, or only add to happiness for a short time. In the case of marriage, there is typically an increase in happiness for only a year or two before and after the event and then happiness returns to its previous level. Apparently cohabitation usually results in a smaller temporary increase in happiness than does marriage. Since separation and divorce have negative effects on happiness the whole idea of entering into relationships would seem problematic if viewed purely in terms of the happiness that people can reasonably expect based on the experiences of others.

My point is that there is more to life than self-reported happiness or life satisfaction. In his little book, “Happiness” (2005), Daniel Nettle identifies three levels of happiness: momentary feelings; judgements about feelings; and quality of life (flourishing or fulfilling one’s potential). Surveys of happiness and life satisfaction reflect the first two elements, but they usually fail to take account of the third element.

We seem to have been bombarded over the last year or so by arguments that the decisions people make cannot necessarily be presumed to make them happy. See here, here, and here for my discussion of books pushing such arguments. I think it is about time there was more recognition that good decisions do not always make people happy.

This point can be illustrated by returning to my first example of the person who was less happy after deciding to increase her hours of work. Isn’t it possible that this decision might have been a good one? How do we know that the person concerned had not decided to make some sacrifices in the short term in order to promote some longer term goal such as being able to afford to have children or to being able to give her children a better education? Happiness and life satisfaction indicators do not tell us the extent to which people are fulfilling the goals that are important to them.

Wednesday, July 23, 2008

Why is happiness related to political attitudes?

This post provides some further thoughts on the question of why people who label themselves as being on the right of the political spectrum tend to be happier than those who label themselves as on the left.

In my last post on this subject (here) I discussed some research by Jaime Napier and John Jost which suggests that some of the association between political orientation and subjective well-being is accounted for by beliefs about inequality. The authors conclude that liberals tend to be less happy than conservatives because “they lack ideological rationalizations that would help them frame inequality in a positive (or at least neutral) light”.

Andrew Norton commented on his blog: “I think there is a better theory, one that is more consistent with the subjective well-being literature, which explains this result: that both lower average happiness and leftism have a common link to a weaker sense of personal control and optimism. Both these attributes are strongly correlated with happiness; and one of the tasks of the ‘positive psychology’ movement (the clinical side of subjective well-being research) is to try to enhance these senses” (here).

I responded:
“My first thought was that a weak sense of personal control is likely to be more of a problem for low-income earners and the non-religious. Beliefs about inequality seem to be shown up as significant even in studies that control for both income levels and church attendance.
However, I am attracted to James Buchanan’s argument that the strongest motivation for big government these days is that people are afraid to be free (references here). It seems to me that may be just another way of saying that a lot of people lack a sense of personal control.It is possible that beliefs about inequality and a sense of lack of personal control could both be relevant in explaining why those who self-identify as left are less happy. Arthur Brooks seems to combine both factors (see ‘Gross National Happiness’, pp 30-33). It would be interesting to see research which seeks to identify their relative importance.”

Having thought about this further I now doubt whether it would be possible to disentangle the effects of the relative importance of beliefs about inequality and feelings of lack of personal control to assess their relative importance as determinants of happiness. It might be more appropriate to view these factors as components of a syndrome – a combination of opinions, behaviour etc. .

I have come to this view after re-reading a section of “Gross National Happiness” in which Arthur Brooks discusses links between beliefs about upward mobility, feelings about inequality and happiness (pp 140-151). There is strong evidence that people on the left do tend to be pessimistic about upward mobility. In the case of people on below average incomes it makes sense that such beliefs would tend to result in feelings of lack of personal control (e.g. that nothing that they do makes any difference) and relatively low satisfaction with life, combined with leftish political views.

It is more difficult to see why pessimism about mobility should affect the happiness of people on above-average incomes. They might see lack of mobility as a social problem but they are not personally affected. Arthur Brooks suggests that these people tend to make themselves unhappy by repeating depressing messages about the perceived unfairness of income inequality. I suppose that is possible, but I have some difficulty in accepting that concerns about income inequality would, by themselves, have significant adverse effects on the happiness of people who have above-average incomes.

One possible explanation is that pessimism about income mobility might be just representative of a collection of beliefs (including for example beliefs about the environment) that would tend to reduce the happiness of people with above average incomes who have leftish views. When asked how happy they are these people might be inclined to think about the problems of the world and their perceived inability to do anything about those problems.

Monday, July 21, 2008

Why are conservatives happier than liberals?

I have written on this subject before in comments on the book “Gross National Happiness” by Arthur Brooks (here) and in relation to some quick-and-dirty research I have undertaken myself.

To recap briefly, survey data show that Americans who label themselves as conservatives are nearly twice as likely to say they are very happy as are those who label themselves as liberals. This gap has persisted for 35 years and apparently cannot be explained in terms of income differences. Religion and marriage account for some but not all of this happiness gap. My research suggests that the finding that conservatives are happier than liberals also applies to other countries: a higher proportion of the population are satisfied with life in countries where people tend to position themselves toward the right of the political scale (here). It also suggests that differences between the happiness of high and low income people is influenced by differences in their political beliefs and in their beliefs about the importance of money and material things (here).

An article by Jaime Napier and John Jost (kindly brought to my attention by Andrew Norton) seems to me to shed light on the reasons why political beliefs influence happiness (‘Why are conservatives happier than liberals?’, Psychological Science, 19 (6), 2008). The study suggests that some of the association between political orientation and subjective well-being is accounted for by beliefs about inequality. The authors examined the effect of introducing ideological variables - relating to beliefs about inequality and meritocracy- in regression analyses explaining life satisfaction in the U.S. and nine other countries. They found that when the ideological variable was introduced into the analysis it took some of the explanatory power away from the political variable. The authors also report on a study which suggests that the gap in happiness between conservatives and liberals in the U.S. tends to become wider when the degree of income inequality rises.

The authors conclude that “inequality takes a greater psychological toll on liberals than on conservatives, apparently because liberals lack ideological rationalizations that would help them frame inequality in a positive (or at least neutral) light”. What they presumably mean is that people who label themselves as conservatives are less likely to worry about income inequality and this partly explains why they are happier than those who label themselves as liberals.

What are the implications of the finding that beliefs about income inequality influence happiness levels? It seems to me that when concerns about inequality are apparently having an adverse effect on happiness of large numbers of people we need more research to know more precisely what these people are concerned about and whether their concerns have a factual basis.