Why Measure Subjective Well-being?

Andrew OswaldUniversity of Warwick

I would like to acknowledge that much of this work is joint with coauthors Andrew Clark, Nick Powdthavee, David G. Blanchflower, Eugenio Proto, Alex Weiss, Rainer Winkelmann, and Steve Wu. I thank the ESRC for support.

Reason 1

Reason 1

We need to know if society is going in a sensible direction.

Yet in 1934

Yet in 1934

• “...the welfare of a nation [can] scarcely be inferred from a measure of national income...”

Hug a tree today

Prof. Simon Kuznets

• The originator of the concept of GDP

• “...the welfare of a nation [can] scarcely be inferred from a measure of national income...”

S Kuznets

So even Simon Kuznets knew that we require a different yardstick.

Reason 2

Reason 2

Human beings have feelings.

Reason 2

Human beings have feelings.

Humans have feelings, and feelings matter.

How do I know researchers care about feelings of well-being?

Say we do an electronic search.

Since 2008, approximately 110,000 articles have been published in economics journals.

The most-cited major article in modern economics:

The most-cited major article in modern economics:

Relative income, happiness, and utility: An explanation for the Easterlin paradox and other puzzles

Clark, Andrew E.; Frijters, Paul; Shields, Michael A.

JOURNAL OF ECONOMIC LITERATURE MAR 2008

Reason 3

Reason 3

People’s ‘utility’ depends on income relative to comparison income.

Veblen, Scitovsky, Hirsch, Frank...

Much econometric evidence

Much econometric evidence

• Clark and Oswald “Satisfaction and Comparison Income”. Journal of Public Economics 1996

• Luttmer “Neighbors as Negatives”. Quarterly Journal of Economics 2005

There is other evidence that human beings care about their relative position.

We are now able to see that inside the brain.

• Title: Social comparison affects reward-related brain activity in the human ventral striatum Author(s): Fliessbach K, Weber B, Trautner P, et al.Source: SCIENCE Volume: 318 Issue: 5854 Pages: 1305-1308 Published: NOV 23 2007

Armin Falk et al

Armin Falk et al

While being scanned in adjacent MRI scanners, pairs of subjects had to perform a task with monetary rewards for correct answers.

Variation in the comparison subject's payment affected blood oxygenation level-dependent (BOLD) responses in the ventral striatum.

Variation in the comparison subject's payment affected blood oxygenation level-dependent (BOLD) responses in the ventral striatum. This brain region is engaged in the registration of primary rewards.

Falk et al in Science

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Falk et al in Science

• “The mere fact of outperforming the other subject positively affected reward-related brain areas.”

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Blood-oxygenation equations

• (similar with fixed effects, main variation across Ss)

Table: Activation and Income

Dependent variable: ventral striatum activation(1) (2) (3)

all conditions conditions 2-11 conditions 6-11

Own Income (in 100 Euro) 0.916*** 0.868*** 0.327***[0.109] [0.102] [0.091]

Other's income (in 100 Euro) -0.666*** -0.714*** -0.353***[0.087] [0.086] [0.090]

Constant -0.119 -0.061 0.068[0.144] [0.145] [0.167]

Observations 704 640 384R-squared 0.059 0.063 0.011

OLS estimates; clustering on individuals, robust standard errors in brackets; *** p<0.01, ** p<0.05, * p<0.1

So, inside your brain

So, inside your brain

You simply want to be high up the monkey pack

But then a focus on total national income (GDP) misses the point.

But then a focus on total national income (GDP) misses the point.

The total amount of relative status is fixed.

Say you don’t believe in statistical evidence.

5 euros

500,000 euros

5 euros

500,000 euros

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Reason 4

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

.. but, more broadly, there seem to be deep scientific links from mind to body.

Author(s): Ebrecht M, Hextall J, Kirtley LG, Taylor A, Dyson M, Weinman J

PSYCHONEUROENDOCRINOLOGY    

Volume: 29    Issue: 6    Pages: 798-809    Published: JUL 2004 

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

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

Ebrecht et al 2004

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

In other words, happier human beings heal more quickly.

An early, famous paper

• Title: PSYCHOLOGICAL STRESS AND SUSCEPTIBILITY TO THE COMMON COLD Author(s): COHEN S, TYRRELL DAJ, SMITH APSource: NEW ENGLAND JOURNAL OF MEDICINE Volume: 325 Issue: 9 Pages: 606-612 Published: AUG 29 1991

So we need to understand subjective well-being as a determinant of physical health.

Reason 5

Reason 5

• The intriguing, and worrying, ‘Easterlin Paradox’

Average Happiness and Real GDP per Capita for Repeated Cross-sections of Americans.

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• In the early 70s, 33% of Americans described their lives as very happy, 52% as pretty happy, and 15% as not too happy.

• By the late 2000s, the numbers were 31%, 55%, 14%.

Typical GHQ mental-strain questions

Have you recently:

Lost much sleep over worry?Felt constantly under strain?Felt you could not overcome your difficulties?Been feeling unhappy and depressed?Been losing confidence in yourself?Been thinking of yourself as a worthless person?Been able to enjoy your normal day-to-day activities?

Worsening GHQ levels through time

• Verhaak, P.F.M., Hoeymans, N. and Westert, G.P. (2005). “Mental health in the Dutch population and in general practice: 1987-2001”, British Journal of General Practice.

• Wauterickx, N. and P. Bracke (2005), “Unipolar depression in the Belgian population - Trends and sex differences in an eight-wave sample”, Social Psychiatry and Psychiatric Epidemiology.

• Sacker, A. and Wiggins, R.D. (2002). “Age-period-cohort effects on inequalities in psychological distress”. Psychological Medicine.

Economic growth doesn’t seem to be making us much happier.

The very latest evidence

The very latest evidence

Title: China's life satisfaction, 1990-2010

Easterlin, Richard A.; Morgan, Robson; Switek, Malgorzata; et al.

• Source: PROCEEDINGS OF THE NATIONAL ACADEMY OF SCIENCES OF THE UNITED STATES OF AMERICA  Volume: 109 : JUN 19 2012

Modern China’s happiness has not risen

Reason 6

Innovative recent applications of well-being research

Innovative recent applications of well-being research

• Valuing clean air

Innovative recent applications of well-being research

• Valuing clean air

• Valuing different health conditions (migraine)

Innovative recent applications of well-being research

• Valuing clean air

• Valuing different health conditions (migraine)

• The power of fruit and vegetables

Innovative recent applications of well-being research

• Valuing clean air• Valuing different health

conditions (migraine)• The power of fruit and

vegetables• The happiness of great apes

Reason 7

Reason 7

There is growing evidence for the objective validity of subjective well-being data.

Different subjective well-being measures produce similar patterns.

Across nations, hypertension and happiness are inversely correlated

(Blanchflower and Oswald, 2008 Journal of Health Economics)

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Figure 2.The Inverse Correlation Between Hypertension and Life

Satisfaction: 16 European Nations Aggregated into Quartiles

Countries in the Countries in the lowest quartile highest quartile of blood-pressure of blood-pressure

IrelandDenmarkN'LandsSweden

SpainFranceLuxUK Austria

ItalyBelgiumGreece

E. GermanyW. GermanyPortugalFinland

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We can exploit neo-classical economic theory to show the validity of well-being data.

Oswald and Wu, 2010 in Science

Oswald and Wu, 2010 in Science

“Objective confirmation of subjective measures of human well-being: Evidence from the USA.”

Think not about people but about places.

• New data from the Behavioral Risk Factor Surveillance System (BRFSS)

• 1.3 million randomly sampled Americans

• 2005 to 2008

• A life-satisfaction equation

There is a compensating-differentials literature dating back to Adam Smith, Sherwin Rosen, Jennifer Roback, etc.

The most recent is Gabriel et al 2003.

Gabriel painstakingly takes data on

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

and

• Environmental Regulation Leniency• Commuting Time• Violent Crime Rate• Air Quality-Ozone• Air Quality-Carbon Monoxide• Student-teacher ratio• State and local taxes on property, income and sales

and other• State and local expenditures on higher education,

public welfare, highways, and corrections• Cost-of-living

Then there are 2 ways to measure human well-being or ‘utility’ across space.

Then there are 2 ways to measure human well-being or ‘utility’ across space.

Subjective and objective

Gabriel’s work assigns a 1 to the state with the highest imputed quality-of-life, and 50 to the state with the lowest.

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

• And there is one (at >99% confidence level).

One Million Americans’ Life Satisfaction and Objective Quality-of-Life in 50 States

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Objective Quality of Life Ranking (where 1 is high and 50 is low)

There is a close match between life-satisfaction scores and the implied quality of life calculated using objective information.

Oswald-Wu Science 2010

There is also growing recognition beyond academic researchers:

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

“Statistical offices [worldwide] should incorporate questions to capture people’s life evaluations, hedonic experiences …”

“Statistical offices [worldwide] should incorporate questions to capture people’s life evaluations, hedonic experiences …”

Finally

Finally

on substantive matters:

What seems to contribute to national well-being?

My own judgment of the best current scientific evidence:

What makes countries happy

What makes countries happy

• High social spending as a % of GDP

What makes countries happy

• High social spending as a % of GDP

• Unemployment-insurance generosity

What makes countries happy

• High social spending as a % of GDP

• Unemployment-insurance generosity

• Clean air (eg. low SOx emissions)

What makes countries happy

• High social spending as a % of GDP

• Unemployment-insurance generosity

• Clean air (eg. low SOx emissions)

• Low unemployment and inflation

What makes countries happy

• High social spending as a % of GDP

• Unemployment-insurance generosity

• Clean air (eg. low SOx emissions)

• Low unemployment and inflation

• Low crime and corruption

What makes countries happy

• High social spending as a % of GDP

• Unemployment-insurance generosity

• Clean air (eg. low SOx emissions)

• Low unemployment and inflation

• Low crime and corruption

• Openness to trade

What makes countries happy

• High social spending as a % of GDP

• Unemployment-insurance generosity

• Clean air (eg. low SOx emissions)

• Low unemployment and inflation

• Low crime and corruption

• Openness to trade

• Genes

Why measure subjective well-being?

Andrew OswaldUniversity of Warwick

Downloadable research papers at: www.andrewoswald.com