Income and Happiness

How are income and happiness related?

Income and Happiness: An Imperfect Link, by Robert H. Frank, Economic View, NY Times: ...This week, Senator Byron Dorgan, Democrat of North Dakota, will ... hold a hearing exploring whether traditional economic measures like per-capita income accurately capture people’s sense of well-being.

This has long been a contested issue. ... The debate is not just of philosophical interest; it also has important policy implications. Recent research findings offer support for specific arguments on both sides. Mounting evidence suggests, however, that per-capita income is a less reliable measure of well-being when income inequality has been rising rapidly, as it has in recent decades. ...

[The problem is]... the assumption, traditional in economic models, that absolute income levels are the primary determinant of individual well-being.

This assumption is contradicted by consistent survey findings that when everyone’s income grows at about the same rate, average levels of happiness remain the same. Yet at any given moment, the pattern is that wealthy people are happier, on average, than poor people. Together, these findings suggest that relative income is a much better predictor of well-being than absolute income.

In the three decades after World War II, the relationship between well-being and income distribution was not a big issue, because incomes were growing at about the same rate for all income groups. Since the mid-1970s, however, income growth has been confined almost entirely to top earners. Changes in per-capita G.D.P., which track only changes in average income, are completely silent about the effects of this shift.

When measuring the economic welfare of the typical family, the natural focus is on median, or 50th percentile, family earnings. Per-capita G.D.P. has grown by more than 85 percent since 1973, while median family earnings have grown by less than one-fifth that amount. Changing patterns of income growth have thus caused per-capita G.D.P. growth to vastly overstate the increase in the typical family’s standard of living during the past three decades.

Some economists have advanced an even stronger claim — that there is no link, at least in developed countries, between absolute spending and well-being. Recent work suggests that this is especially true for spending categories in which the link between well-being and relative consumption is strongest. For instance, when the rich spend more on larger mansions..., the apparent effect is merely to redefine what counts as adequate.

Evidence also suggests that higher spending at the top instigates expenditure cascades that pressure middle-income families to spend in mutually offsetting ways. Thus, when all spend more on interview suits, the same jobs go to the same applicants as before.

Yet in many other categories, greater levels of absolute income clearly promote well-being, even in the richest societies. The economist Benjamin Friedman has found that higher rates of G.D.P. growth are associated with increased levels of social tolerance and public support for the economically disadvantaged. Richer countries also typically have cleaner environments and healthier populations than their poorer counterparts.

That per-capita G.D.P. is an imperfect index of economic welfare is not news. The lesson of recent work is that its weaknesses are more serious than we previously realized.

And it is an especially uninformative metric when income inequality has been rising sharply, as it has been in recent decades. A society that aspires to improve needs a better measure of what counts as progress.

This would be a good place to note this from Will Wilkinson:

Better to Be Richer, The Fly Bottle: I just ran across Angus Deaton’s latest summary of his happiness findings at the Gallup website:

As the graph indicates, life satisfaction is higher in countries with higher GDP per head. The slope is steepest among the poorest countries, where income gains are associated with the largest increases in life satisfaction, but it remains positive and substantial even among the rich countries; it is not true that there is some critical level of GDP per capita above which income has no further effect on life satisfaction. ...

Please share this fact with friends at your next cocktail party. Here’s the graph:

Deaton conjectures that the consistent relationship between income and life satisfaction has to do with some kind of shared global standard for self-reporting — the Danes know how good they have it relative to the folks in Togo, and the folks in Togo know how bad they have it relative to Danes. I don’t know about that.

Here's more from Angus Deaton:

The link between money and contentment has been a question of considerable interest to researchers since Richard Easterlin noted in a seminal 1974 paper that average national happiness does not increase over long spans of time, despite large increases in per-capita income. ...

It is far from clear why questions of life satisfaction should be so closely related to national incomes. Much of the literature on the topic emphasizes the relative nature of such responses; when people answer such questions, they must surely assess their life satisfaction relative to some benchmark, such as their own life in the past, or the lives of those around them. Indeed, a recent study by Andrew Clark, Paul Frijters, and Michael Shields found that life satisfaction is sensitive to respondents' income relative to those with whom they most closely associate, which implies that there should be no relation between average national life satisfaction and national income, unless there is some other aspect of national income that raises everyone's life satisfaction together.

A simpler interpretation of the Gallup World Poll findings is that when asked to imagine the best and worst possible lives for themselves, points 10 and 0 on the scale, people use a global standard. Danes understand how bad life is in Togo and other poor places, and the Togolese, through television and newspapers, understand how good life is in Denmark or other high-income countries. ...

If this interpretation is correct, it would be an indication of how much the globalization of information has affected the perceptions of populations worldwide -- because the consistently high correlation between income and satisfaction could not have existed in its absence.

Comments

[Fred]

What drivel! Measurements of happiness are inherently subjective. One person's 5 on a scale of 0-10 may be another person's 3 or 7. There are also all sorts of other problems with these "studies": subtle differences in phrasing of the question in different languages, different desires among differents cultures to modify responses (up or down) so as to make a desired impression upon the questioner, etc, etc. Most importantly, thoughts and words only count when they are backed by deeds. Just because someone thinks or says they are happy means nothing. I want to see deeds.

One way to measure deeds is to measure immigration and attempts at immigration. No one is immigrating to North Korea. Lots of people trying to immigrate to Europe and the United States. Are there more attempts to immigrate from Europe to the United States or vice-versa? Is there a difference between rich versus middle-class versus poor with respect to Europe to/from US immigration? Now that is useful information.

[SanFranciscoJim]

I sure would like to know what those small circles are that have a higher happiness than the US with slightly lower incomes. Anyone know where I can get a copy of the source data?

[Darren]

Fred, the problem I have with this argument is that immigration attempts between countries with different cultures and languages are a poor proxy for the actual desirability of living in those countries. Let's say I'd be happier if I lived in a country with socioeconomic characteristics like Japan. Problem 1: I don't know a soul in Japan. Problem 2: I don't speak Japanese. Problem 3: The Japanese don't allow immigration. So I make no attempt to move to Japan. Does this imply that cet par I prefer the socioeconomic system of the United States? I think not. I would guess that such a measure would overstate the apparent quality of life in countries with a) open immigration policies b) which speak a relatively common or easily learned language.

Granted, the lack of action at the North Korean border posts is suggestive, but hardly anybody suggested that income per head was *entirely* irrelevant.

There aren't a lot of other proxies for international comparisons of happiness, and it's not obvious to me that simply ASKING people is inherently a less reliable method... in spite of the problems you raise (which in many cases could be rectified by careful design of the studies, I would think). Every other social science has been doing surveys since the beginning of time.

[Darren]

Fred: "Most importantly, thoughts and words only count when they are backed by deeds. Just because someone thinks or says they are happy means nothing."

Are you suggesting that you don't believe someone when they say they are happy, or are you saying that their happiness is *irrelevant* unless it leads to some tangible behaviour? The former is excessively rigid when there are a dearth of good proxies, and the latter is just mean and weird, IMHO.

Richard Layard went over these arguments in his book "Happiness". (And yes, he's an economist too, I'm sure he's heard the criticisms before).

[jefff]

Hmm it would be cool if www.gapminder.org had happiness survey data in their tool (click the "Go to the graph" link near the center of the page).

I would be interested to see this plotted against, for example, life expectancy at birth.

I would guess that that unlabeled cluster near the UK is mostly Europe. France, for example, has a similar population so might be the one intersecting the UK.

I agree with Darren. Immigration, or even attempted immigration, would be profoundly confounded by geography, policy, culture, and probably many other less obvious factors. Complaining that a measure of happiness is subjective strikes me as being similar to complaining that a measure of mass is physical. Happiness IS subjective, so all measures of it will be subjective.

[jefff]

"...so all measures of it will be subjective."

Well, rather the most obvious measures will be subjective. I suppose you could come up with some objective measure based on brain chemistry or something... though really the crazy schemes I can think of to do that would be more accurately described as measures of mental stress (maybe you could measure Cortisol in the blood).

[Fred]

Measurements of brain chemistry are possible, but an operational definition of happiness is better. Here is an example: given a choice between two or more possible courses of action, the course of action which we choose is that which gives the maximum expected happiness. This is an operational and objective definition of ex-ante expected happiness. Ex-post realized happiness can be measured by observing sequences of choices, especially where subsequent choices reverse or otherwise modify previous choices.

Observing immigration is an example of using this operational definition. Barriers to immigration means immigration doesn't give the full story, especially for countries which have no immigration, but it does say something and it says so objectively. There is quite a bit of immigration in the world, and it is usually unbalanced, in case you haven't noticed. With a little bit of common sense, you can draw conclusions from that.

Social scientists have been using surveys for a long time and that is why social science is a lot of drivel for the most part.

[odograph]

Wilkinson is careful to say that "it is not true that there is some critical level of GDP per capita above which income has no further effect on life satisfaction"

That might be true even as increases to wealth led to declining returns. At what point should we shift our energies then? Never as long as wealth increases? Or might there be opportunity costs in terms of time and effort?

Maybe getting out for a hike, or a game of frizbee, helps at some point more than decimals in a bank account.

Good diet and exercise count too, and they are often sacrificed (in affluent societies).

[James Killus]

To try to be happy is to try to build a machine with no other specification than it should run noiselessly. -- J. Robert Oppenheimer

I said something recently about keeping regression packages out of the hands of some researchers that may also apply here. Denmark, Finland, and Puerto Rico seem to be driving an awful lot of the slope variance in the upper part of the curve, and it really looks like there's a contrary lesson to be learned from India and China, were I to believe that the "happiness indicator" is really cross-cultural, which I don't think I do.

[cm]

Where I'm coming from, we say "better to be rich and healthy than poor and sick".

Aside from that, I would be wary of any comparisons of GDP and dollar-equivalent based measures between the US and any other economy.

[Lafayette]

A state of existence

Article: This assumption is contradicted by consistent survey findings that when everyone’s income grows at about the same rate, average levels of happiness remain the same.

What is the "average level of happiness"? Maslow's Hierarchy of Needs depicted best the progression from the states of absolute need (to survive) at the bottom, up to that of the ability to fulfill their potential at the top. At any level along that progression, however, one could be considered to have found "Happiness". But, at only the bottom level is such contentment likely to be directly linked to income.

Let's presume that suicide and unhappiness ARE correlated. (I doubt this regression has been made but correct me if it has.) Does that mean that the rich who kill themselves are "unhappy" and therefore there is no link, really, between happiness and income beyond a certain point. Yes, methinks.

Happiness is a state of existence that comes about by an admixture of very different factors. Of which, yes, income is highly important, especially at the lower levels of needs.

But not throughout.

[Lafayette]

Happiness Economics

From that link: Typically market health measures such as GDP and GNP have been used as a measure of successful policy. However, although on average richer nations tend to be happier than poorer nations, beyond an average GDP/capita of about $15,000 (most of the world's nations have less than this), studies indicate the average income in a nation makes little difference to the average self-reported happiness.

Now, debate.

[ndd]

I don't think the economists here should be so quick to dismiss findings, even subjective findings, of happiness. Why is "utility" and not "happiness" the desideratum?

Suppose I am the president. The country faces a problem. I invite a variety of social scientists to brief me on my choices. The economists stand up, dazzle me with their caclulus and graphs, and tell me policy choice A will most efficiently optimize utility.
When they sit down, the psychologists and sociologists stand up and tell me that based on their extensive experiments and field work, choice B will make a large majority of people in my country happier.

Why on earth would I listen to the economists? (and a conclusory response that other social sciences are "drivel" doesn't count).

[Lafayette]

jefff: France, for example, has a similar population so might be the one intersecting the UK.

In fact, the missing significant data-point is that of Germany. The EU, in terms of statistics, can be (if rushed) reasonably reduced to five countries: France, Germany, Italy, Spain and the UK.

Though not named, I agree that France is probably close to the UK -- which does not explain why the English are jumping ship in such large numbers to come live in France. (But, that's nitpicking. It could be just the weather.)

Had Germany appeared, it would be an even larger circle than the UK, since its population is larger after unification of both halves. It is somewhat astounding, therefore, that it should be missing.

Whatever, it seems that at lower PPP-GDP, the European countries attain about the same level of Satisfaction as the US.

What is the significant difference between the two (the US and the EU countries) as seen by another statistic that could be relevant, called Social Expenditure? For which the EU has at least an 8% larger percentage of GDP (on average) of Social Expenditures than the US. (According to the OECD study, where the US is found at 16.2% of GDP versus 24.3% for the EU - both numbers corrected for population.)

So, is there any relation between the two, that is, "Happiness" and "National Social Expenditure"? Methinks, yes.

Public Services have a direct effect on contentment of the individual. How? Because they reduce the sentiment that one is all alone to counter life's vicissitudes. And, control/reduction of life's risks and hazards go a long way to contributing to contentment.

Which is a fundamental reason for the sociological phenomenon by which humans have been congregating into first villages, then cities and finally nations. To preserve themselves and their families as well as better their condition.

PS: I would have liked to see a graph between Social Expenditure (the OECD study was also based upon 2003 numbers) and Mean Life Satisfaction.

[Lafayette]

The buck stops here

ndd: Why on earth would I listen to the economists?

Frankly, with this sort of attitude, you don't deserve to be PotUS.

Presidents collects advice and counsel, then implement a policy they think is correct. That advice/counsel is central to their decision making process.

You cannot ask more of a sitting president (who are typically not born geniuses any more than we are). They would be fools not to get as much advice as possible, before taking any decision. (Which is why Truman had a sign on his desk, "The buck stops here".)

Of course, at the end of an administration's tenure there are a good many factors that enter into a consideration of how well it administered its responsibilities. Happiness is not one of them, thankfully, but Satisfaction is a sentiment that typically shows through at the polling booths.

[Fred]

Why is "utility" and not "happiness" the desideratum?

The terms are equivalent. Utility is a neutral term while happiness is loaded with confusing connotations, which is why economists use the term utility rather than happiness.

Whenever we make a choice, the choice is in the direction of increasing happiness and increasing utility. Asceticism doesn't disprove this statement. Rather you have to use a little subtlety to understand the deeper motivations for asceticism.

To the extent that all choices give the same expected utility/happiness (at least to within the margin of error of the mind's powers of calculation) then we have free will. Otherwise there is no free will. For most people most of the time, life is filled with free will, because our utility/happiness really isn't affected by our choices. In other words, most of our life is lived in the mind, which is the world of illusion. Reality is the body and the body only rears its head and takes control of the situation under extreme circumstances. Being poor is not an extreme circumstance, which is why the correlation between wealth and happiness is not perfect. Not having enough air is. You want to understand free will? Pinch your nostrils shut and close your mouth and see how long you can stay like that. For the first few minutes, there is free will--you can choose to breathe or not. Eventually though, the body takes control of the situation, free will disappears and the mind is forced to make the chioce to command the muscles to allow breathing to occur. Don't believe me? Try the experiment yourself. No one can suffocate themselves to death in the way I just described.

[bakho]

More interesting to graph measures of income inequality V happiness.

[robertdfeinman]

I like Robert Frank, but how many times is he going to restate the same thing? He has now written two books and many articles where he puts forth his thesis that happiness is more determined by relative rather than absolute levels of wealth (once you have the basic necessities).

Why is the level of happiness important?

1. If one can show that happiness is unrelated to absolute wealth, then the developed countries can stop worrying about improving the lot of the poor. Why bother, if they are already happy enough?

2. If one can show that happiness is related to absolute wealth, then one can justify the continual rise of wealth imbalance between the rich and the poor.

It's a perfect measure, heads I win, tails you lose. Either way the wealthy states, which are already consuming more than their fair (or sustainable) share are off the hook. I know Frank's objective is to better equalize wealth, but this just shows that positions that depend upon some version of ethics or morality shouldn't be argued using economic/psychological framing.

Having people dying of disease and starvation, while others are living high on the hog is never justifiable, regardless of what arguments are used. That's why world leaders throughout history who have made such arguments have ended up as enemies of the state and suffered the consequences.

Given that the "haves" never freely give up their wealth, the real question is what can be done to make the "have nots" better off while simultaneously lowering world consumption to sustainable levels?

[ndd]

Lafayette:
I am very sorry to say, you have just lost your chance to become my campaign manager (sigh). Of course, I am being rhetorical. I am asking economists to consider whether or not, happiness = utility (as Fred thinks) or not.
If happiness does not = utility (which I think is the correct answer, btw), then we have a real problem, because economic theory may not give society its best measure of well-being. If happiness = utitlity, then to the extent there are studies out there suggesting that happiness is not perfectly correlated or even well-correlated with wealth, and even worse, those socialist Scandinavians are head-over-heels happy, then why doesn't economic theory accurately predict happiness?

[hari]

As an old guy, let me say this is a very, very difficult sociological, and, may be, psychological subject which experts will more than frequently disagree upon its definition.

I once asked my islander-countrymen what made him happy - when I was a gov official. His reply left me speechless:
"...be able to catch fish everyday and snorkel for shell fish (crabs and so on)". He also claimed that money was not important since he could almost grow all the food he needed on his farm. ETC, etc.

I reported this with b/w photos of the citizen in my official dossier. My Minister was dumb founded; he refused to table the document with Cabinet colleagues. So, in all fairness, I did it for him.

The PM was agitated when he saw it...! He called me in and asked what I was upto? My answer also shocked him: I said, Sir, we need to understand what the citizen defines as his concept of happiness, so we can better deliver the goods and services.

Let's say, the South Pacific Islanders were generally a happy lot because their sea was rich with food and adventure; coconuts abounded; breadfruit and tropical fruits like papaya, mangoes, whatnots grew wild.

Modernization...a la IBRD/IMF...has more or less reduced their native life style for various reasons. Govs have implemented policies which reduce freedom of movement and set mangroveland for business development, and so on.

The upshot of all this today is less income stability and a lot of unhappy natives!

[Lafayette]

The real source or sources of happiness

In a paper for the Brookings Institute, Carol Graham has some interesting suppositions regarding the subject. From the paper, titled, The Economics of Happiness is this:

Happiness economics also opens a field of research questions which still need to be addressed. These include the implications of well-being findings for national indicators and economic growth patterns; the effects of happiness on behaviour such as work effort, consumption, and investment; and the effects on political behaviour. In the case of the latter, surveys of unhappiness or frustration may be useful for gauging the potential for social unrest in various contexts.

But not limited to economic matters alone. Happiness is sociologically contextual. And contexts change. It is perhaps a bit too facile for economists to graph Satisfaction (one variable) against PPP-GDP (another variable). Both variables are non-contextual and they are aggregates. Interesting enough, but aggregates nonetheless.

Context depends upon more than just income. It depends upon many factors (sex, career, family, work, religious, individual autonomy, desires, etc.) Marketeers learned long ago that desires were easy to manipulate, even fabricate. If desires are not met, people can indeed be unhappy – even if it is a passing condition.

Which means that a Happiness Index would probably have more than just one version. There could be an Index for Males and another for Females and even a third for age group. Or class of education, which often determines personal potential.

The variations are all highly interesting – in their own context, that is. Which makes for a very complex understanding of what is the real source or sources of happiness.

[ndd]

BTW, Lafayette:
As you have pointed out iirc, economics as practiced in Europe is rather different than economics as practiced in the US. So as people like rdf and myself try to stick our knives into the bull that is Chicago-school economics, people like yourself and our gracious host may feel attacked as well. Please don't!

[lonesome moderate]

I am not surprised to see that many of the outliers are Latin countries. My three years in El Salvador were probably the happiest ones of my life. I couldn't make a living there (nor can most Salvadoreans), but people there do not isolate themselves from one another the way they do here. I wonder if the English moving to France feel something like that.

[Lafayette]

ndd: As you have pointed out iirc, economics as practiced in Europe is rather different than economics as practiced in the US

I think economics is practiced similarly in both the US and EU -- however different economic policy may be implemented in both.

Which is due to both history and cultural identity. Americans need to learn a great deal more about economic policy and its usefulness in making lives both better for more of its population by means of Social Expenditures. (Meaning, necessarily, higher taxes on the rich.)

For the moment, they are stuck in an archaic understanding limited to "higher taxes mean job losses", which is pure drivel intended to keep constituents quiet through indirect menace. There is no economic proof whatsoever of this being the case, but the Idiot Right employs the threat tirelessly.

Social Expenditures must not be exaggerated, admittedly, since they instill an "assistance" syndrome in the population. But neither should they be under-exaggerated by which a select few benefit at the expense of the less fortunate.

Lives are being lost, not just jobs.

[Lafayette]

lm: I wonder if the English moving to France feel something like that.

I dunno. I know a lot of Brits. And the grousing at the French is often unbearably ridiculous.

The English-speaking cultures are significantly different from the Latins. (Go see Geert Hofstede's work if interested, here .) Hierarchy is much more ingrained in Latin countries, and the native English speakers chafe at such bureaucracy by nature.

I have a rule of thumbs. If a foreigner comes to France and live here for three years, they will know whether they can accustom themselves to its lifestyle. Most, in fact, go back to their country of origin.

If there is large immigration from the UK, it is mostly retirees who are willing to put up with the administrative headaches in order to access an excellent National Health Care service. (Which is also a good reason for just about anyone to want to retire here.)

Or, maybe its the cheaper booze and more clement weather? ;^)

Latest case in point of Cultural Diversity: The French have a 35-hour work week. So, an American friend who went into work (at the subsidiary of an American firm) of a Sunday last month was not permitted entry by the Security Guard. He was told it was illegal to work more than 35-hours. He didn't know whether to laugh or cry, or so he told me. So, now he works at home.

[Henry]

For SFO Jim:

Four words, to explain those four budget-level, high-satisfaction circles toward the upper left:

Ticas
Venezolanas
Garotas
Mexicanas

For everyone else, two words:

Diminishing returns

That mansion? You can only be in one room at a time. And you might have to be living next door to some real a-holes. Whatever, probably not worth the extra dinero.

Yes, the utility function is especially a bitch when it goes negative on ya. Double that, if your high-cost war/business machine has driven some of the other countries down to the misery level of poverty.

The price of a bad conscience?

The four I mentioned above are ones "we" (Kemo Sabe?) never managed to squash (as yet), as we did Nicaragua, El Salvador, and quite a few others.

They show how utterly efficient people can be with their first tranches of income, and we (USA) show -- or are about to -- how wasteful humans can be at higher levels, esp. if ill-gotten gains.

The Scandinavians, and other Europeans are showing us white Americans that it's not genetically inbred in us to f#@* up the enjoyment of prosperity. Our cousins "in the old country" might have left a trail of happy "crumbs" for us to follow?

No, no, NO! You MUSTN'T Google "Smedley Butler", on a fine, intellectually-tranquil Sunday morning. After all, we call our "science" "ECONOMICS" now, not "Political Economy" as they did at the beginning...

[Nordic Mousse]

Lafayette:

"Or, maybe its the cheaper booze and more clement weather?"

Maybe. But it's likely they're exploiting the difference between British and French property prices while they still have the chance.

[jefff]

I believe I once read that latin american countries do have unusually high happiness compared with most other statistics on them. This is hypothesized to be because they have unusually strong family ties, and that correlates strongly with happiness.

I am sure there is a large literature on suicide rates. As I recall one of the high correlation factors was latitude. Extreme northern countries have higher suicide rates, perhaps because of seasonally influenced depression.

Hey, but I can do better than that thanks to wikipedia:
http://en.wikipedia.org/wiki/List_of_countries_by_suicide_rate

The thing that does jump out is the former soviet union. The article does mention that this data may not be all that reliable. It is easy to not report a death as suicide, and rates of that misreporting are likely to be culturally influenced.

[btgraff]

"I sure would like to know what those small circles are that have a higher happiness than the US with slightly lower incomes. Anyone know where I can get a copy of the source data?"

i think that they can be guessed based on gdp per capita alone, without knowing the happiness index

the cia factbook has numbers on gdp per capita using ppp - but better yet is http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

some of the sort functions don't work well - copy the data into excel and do a sort.

in the are between the UK and Denmark, I don't know which countries the tiny dots represent (possibly holland, sweden belgium, but of the 3 ones that are half the size of the UK, I would bet that Canada and Australia are 2 of them

[Lafayette]

NM: But it's likely they're exploiting the difference between British and French property prices while they still have the chance

For sure, for sure. I had forgot to add this important "feature". Sell high in the UK, buy cheap in France, pocket the rest in the Money Market, live off the interest.

Or some such. Anyway, they have been coming into some highly neglected areas of France and literally renovating the countryside and living there. I see British plates all over the place ... and 9 times out of 10, they are locals.

(When they get stopped by the Gendarmes for a traffic infraction, they can tell them, "Look, dirt bag, I don't speak your effing language so get bent!" And, they get away with it. ;^)

[Allan]

Envy is either a sin or a highly irrational emotion!

[MI]

the Gallup study is completely unscientific and statistically flawed:
http://sanitygenerator.blogspot.com/2008/03/yaichs-yet-another-incomes-correlation.html

[MI]

if previous link doesnt copy/paste, click this

[Lafayette]

From MI's linked article: To me, it looks like the study demonstrates that happiness is negatively affected when people's right to live is endangered, either through war, or economical or political persecution.

The above is valid justification for positing that the study is "statistically flawed"? OK ... now, pull my other leg.

If, perchance, you have access to the raw data and an explanation of the methodology, then a case may be made. The above, however, is just the poster's interpretive judgment.

[MI]

The plot itself gives you enough data to do a simple regression analysis. Any scientist will confirm that the statistical significance of Gallup's statement:
"Instead, each doubling of income adds about the same amount to life satisfaction, across poor and rich countries alike"
is nearly non-existent.

[Lafayette]

MI: "Instead, each doubling of income adds about the same amount to life satisfaction, across poor and rich countries alike" is nearly non-existent.

That is not the main conclusion of the graphic. The main conclusion, just by observation, is that the higher the GDP, the better off people feel. The higher the GDP, the higher Disposable Income, the more people spend, the better they feel.

Frankly, I don't need a regression to understand that logic. Do you?

What I question is linking Happiness to GDP. Which is why, I think, the graphic y-axis is noted as "Satisfaction" not "Happiness". Satisfaction is supposed to be some function of GDP. Ok, I can buy that. But ...

But, again, I make the argument that without looking at the methodology (and data sets) one cannot objectively call the study "statistically flawed", which was MI's first premise. One must look at the manner in which they measure Satisfaction to have a good idea of the merit of the study.

[Lafayette]

And, to have a look at Angus Deaton's original paper on the subject, one goes here to fetch a copy.

Now, anyone care to insist that the methodology is at fault? Go for it.

---------------------------------------------
PS: Of note, from the paper's abstract is this: The US ranks 81 out of 115 countries in the fraction of people who have confidence in their healthcare system, and has a lower score than countries such as India, Iran, Malawi, or Sierra Leone.

QED ..... ?

[Lafayette]

And, for those too lazy to fetch the paper's abstract, here it is: Income, aging, health and wellbeing around the world: Evidence from the Gallup World Poll


Angus Deaton


ABSTRACT

During 2006, the Gallup Organization collected World Poll data using an identical questionnaire from national samples of adults from 132 countries. This paper presents an analysis of the data on life-satisfaction (happiness) and health satisfaction and their relationships with national income, age, and life-expectancy. Average happiness is strongly related to per capita national income, with each doubling of income associated with a near one point increase in life satisfaction on a scale from 0 to 10. Unlike previous findings, the effect holds across the range of international incomes; if anything, it is slightly stronger among rich countries. Conditional on national income, recent economic growth makes people unhappier, improvements in life-expectancy make them happier, but life-expectancy itself has little effect. Age has an internationally inconsistent relationship with happiness. National income moderates the effects of aging on self-reported health, and the decline in health satisfaction and rise in disability with age are much stronger in poor countries than in rich countries. In line with earlier findings, people in much of Eastern Europe and in the countries of the former Soviet Union are particularly unhappy and particularly dissatisfied with their health, and older people in those countries are much less satisfied with their lives and their health than are younger people. HIV prevalence in Africa has little effect on Africans’ life or health satisfaction; the fraction of Kenyans who are satisfied with their personal health is the same as the
fraction of Britons and higher than the fraction of Americans. The US ranks 81 out of 115 countries in the fraction of people who have confidence in their healthcare system, and has a lower score than countries such as India, Iran, Malawi, or Sierra Leone. While the strong relationship between life-satisfaction and income gives some credence to the measures, the lack of such correlations for health shows that happiness (or self-reported health) measures cannot be regarded as useful summary indicators of human welfare in international comparisons.

[reason]

Why do they measure average happiness (per head) against average GDP when they know that income distribution is so highly and variably skewed. They should have plotted the medians. I'm sure that explains the screwy result for Hong Kong. The result for Bulgaria remains however simply wierd.

[reason]

Any experts on Bulgaria out there. Do Bulgarians perhaps take great pride in being unhappy?

[Missed]

The main conclusion, just by observation, is that the higher the GDP, the better off people feel.

How about this conclusion: countries with happier people are more productive and their GDP is higher as a result? Certainly data does not disprove that.

And I still maintain that once you exclude zero-income countries, data is consistent with both positive and flat slope. Statistical significance of positive slope is a bit higher than that of flat, but not by much.

[reason]

I want to see more disaggregated data! I say this every time. Why do people take things that are obviously non-linear and just add them up!

[cm]

reason: As far as I know, complaining about governmental and general corruption and ineffectiveness is a popular escape valve for frustration in Bulgaria, and for good reason too. Outside the Soviet Union, Bulgaria probably had one of the more corrupt elites in the Eastern Bloc (but it's difficult to tell as there were so many contenders). In terms of standard of living and quality of life they were probably still ahead of Romania. After the fall of "communism", Bulgaria has experienced a huge exodus (in percentage terms) of its working age population and esp. the more educated part. One ingredient in the frustration is probably the sellout of the domestic industries to foreign owners (in good part by way of shady deals, see the corruption part), and a perception that there is no compensation in the form of improved living standards for the broad population, unlike e.g. in East Germany. Now that they are part of "Europe", things may improve within a generation or so.

[cm]

Until recently, organized crime and ineffective rule of law (including protection of property and contract enforcement) have been big problems in Bulgaria, putting a damper on economic development.

[cm]

reason: But wait until TSHTF in the Western world. Then most of your questions about the Eastern Bloc will be answered. Not that I'm looking forward to it, but the signs are pointing there, albeit as a slow-motion phenomenon.

[reason]

cm
So your argument seems to be that the GNP figure shown (putting Bulgaria on a level with Mexico and Cost Rica) is too high. Because their happiness level is on a scale normally reserved for countries with famine or civil war.

[cm]

reason: No, that's not my argument. While a credible case can be made that linear measures of gross economic activity correlate with linear measures of reported well-being (and likewise with material living standards), are you implying there must be a strong proportionality?

[cm]

It has been suggested happiness, or its cousin contentedness, is largely a matter of the perceived degree of control and freedoms individuals have in their affairs. That is not necessarily related very strongly to the volume of economic activity going on. (And when a lot of economic activity is happening that is usually tied to people having to participate in it, often not in ways of their own choosing.)

[Lafayette]

reason: Do Bulgarians perhaps take great pride in being unhappy?

The Bulgarians, unlike the Czechs, did not pass into democratic politics with ease. The country does not have all that many resources and certainly no heavy industry of note, as did Poland, the Czechs, parts of Slovakia and Romania.

They are the odd man out in Middle Europe. When Polish tourists show up in Budapest in their new Mercs, that hurts ... because the reverse is simply not happening.

During the summer, the Bulgarians on the auto-routes in France, 7 to a car, are on their way to Portugal. Stopping to vacation in France is too expensive. Not for the Poles or the Czechs, however. And, as for the Russians, they are all over the Riviera with their millions -- enough to make Karl Marx puke in his grave.

The US got the Russian Mafia and France gets the Russian Snobs.

[Lafayette]

reason: Why do people take things that are obviously non-linear and just add them up!

Because they are trying to do with the data they have.

If one thinks that income data for Singapore has a smaller variance than that of Pakistan, I'll agree. But, I don't think necessarily that such should explain that Singaporeans are happier than the Pakistanis -- and the graphs show that they are not all that much more content.

Especially given the difference in GDP.

[Truxter]

Don’t believe one optimistic word from any public figure about the economy or humanity in general. They are all part of the problem. Its like a game of Monopoly. In America, the richest 1% now hold 1/2 OF ALL UNITED STATES WEALTH. Unlike ‘lesser’ estimates, this includes all stocks, bonds, cash, and material assets held by America’s richest 1%. Even that filthy pig Oprah acknowledged that it was at about 50% in 2006. Naturally, she put her own ‘humanitarian’ spin on it. Calling attention to her own ‘good will’. WHAT A DISGUSTING HYPOCRITE SLOB. THE RICHEST 1% HAVE LITERALLY MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. Don’t fall for any of their ‘humanitarian’ CRAP. ITS A SHAM. THESE PEOPLE ARE CAUSING THE SAME PROBLEMS THEY PRETEND TO CARE ABOUT. Ask any professor of economics. Money does not grow on trees. The government can’t just print up more on a whim. At any given time, there is a relative limit to the wealth within ANY economy of ANY size. So when too much wealth accumulates at the top, the middle class slip further into debt and the lower class further into poverty. A similar rule applies worldwide. The world’s richest 1% now own over 40% of ALL WORLD WEALTH. This is EVEN AFTER you account for all of this ‘good will’ ‘humanitarian’ BS from celebrities and executives. ITS A SHAM. As they get richer and richer, less wealth is left circulating beneath them. This is the single greatest underlying cause for the current US recession. The middle class can no longer afford to sustain their share of the economy..... Their wealth has been gradually transfered to the richest 1%. One way or another, we suffer because of their incredible greed. We are talking about TRILLIONS of dollars. Transfered FROM US TO THEM. Over a period of about 27 years. Thats Reaganomics for you. The wealth does not ‘trickle down’ as we were told it would. It just accumulates at the top. Shrinking the middle class and expanding the lower class. Causing a domino effect of socio-economic problems. But the rich will never stop. They will never settle for a reasonable share of ANYTHING. They will do whatever it takes to get even richer. Leaving even less of the pie for the other 99% of us to share. At the same time, they throw back a few tax deductible crumbs and call themselves ‘humanitarians’. Cashing in on the PR and getting even richer the following year. IT CAN’T WORK THIS WAY. Their bogus efforts to make the world a better place can not possibly succeed. Any 'humanitarian' progress made in one area will be lost in another. EVERY SINGLE TIME. IT ABSOLUTELY CAN NOT WORK THIS WAY. This is going to end just like a game of Monopoly. The current US recession will drag on for years and lead into the worst US depression of all time. The richest 1% will live like royalty while the rest of us fight over jobs, food, and gasoline. Crime, poverty, and suicide will skyrocket. So don’t fall for all of this PR CRAP from Hollywood, Pro Sports, and Wall Street PIGS. ITS A SHAM. Remember: They are filthy rich EVEN AFTER their tax deductible contributions. Greedy pigs. Now, we are headed for the worst economic and cultural crisis of all time. SEND A “THANK YOU” NOTE TO YOUR FAVORITE MILLIONAIRE. ITS THEIR FAULT. I’m not discounting other factors like China, sub-prime, or gas prices. But all of those factors combined still pale in comparison to that HUGE transfer of wealth to the rich. Anyway, those other factors are all related and further aggrivated because of GREED. If it weren’t for the OBSCENE distribution of wealth within our country, there never would have been such a market for sub-prime to begin with. Which by the way, was another trick whipped up by greedy bankers and executives. IT MAKES THEM RICHER. The credit industry has been ENDORSED by people like Oprah, Ellen, Dr Phil, and many other celebrities. IT MAKES THEM RICHER. Now, there are commercial ties between nearly every industry and every public figure. IT MAKES THEM RICHER. So don’t fall for their ‘good will’ BS. ITS A LIE. If you fall for it, then you’re a fool.. If you see any real difference between the moral character of a celebrity, politician, attorney, or executive, then you’re a fool. WAKE UP PEOPLE. THEIR GOAL IS TO WIN THE GAME. The 1% club will always say or do whatever it takes to get as rich as possible. Without the slightest regard for anything or anyone but themselves. Reaganomics. Their idea. Loans from China.. Their idea. NAFTA. Their idea. Outsourcing. Their idea. Sub-prime. Their idea. The commercial lobbyist. Their idea. The multi-million dollar lawsuit.. Their idea. $200 cell phone bills. Their idea. $200 basketball shoes. Their idea. $30 late fees. Their idea. $30 NSF fees. Their idea. $20 DVDs. Their idea. Subliminal advertising. Their idea. Brainwash plots on TV. Their idea... Prozac, Zanex, Vioxx, and Celebrex. Their idea. The MASSIVE campaign to turn every American into a brainwashed, credit card, pharmaceutical, love-sick, couch potatoe, celebrity junkie. Their idea. All of the above shrink the middle class, concentrate the world’s wealth and resources, and wreak havok on society. All of which have been CREATED AND ENDORSED by celebrities, athletes, executives, entrepreneurs, attorneys, and politicians. IT MAKES THEM RICHER. So don’t fall for any of their ‘good will’ ‘humanitarian’ BS. ITS A SHAM. NOTHING BUT TAX DEDUCTIBLE PR CRAP.. In many cases, the 'charitable' contribution is almost entirely offset.. Not to mention the opportunity to plug their name, image, product, and 'good will' all at once. IT MAKES THEM RICHER. These filthy pigs even have the nerve to throw a fit and spin up a misleading defense with regard to 'tax revenue'. ITS A SHAM. THEY SCREWED UP THE EQUATION TO BEGIN WITH. ITS THEIR OWN DAMN FAULT. If the middle and lower classes had a greater share of the pie, they could easily cover a greater share of the federal tax revenue. They are held down in many ways because of greed. Wages remain stagnant for millions because the executives, celebrities, athletes, attorneys, and entrepreneurs, are paid millions. They over-sell, over-charge, under-pay, outsource, cut jobs, and benefits to increase their bottom line. As their profits rise, so do the stock values. Which are owned primarily by the richest 5%. As more United States wealth rises to the top, the middle and lower classes inevitably suffer. This reduces the potential tax reveue drawn from those brackets. At the same time, it wreaks havok on middle and lower class communities and increases the need for financial aid.. Not to mention the spike in crime because of it. There is a dominoe effect to consider. So when people forgive the rich for all of the above and then praise them for paying a greater share of the FEDERAL income taxes, its like nails on a chalk board. If these filthy pigs want to be over-paid, then they should be over-taxed as well. Remember: The richest 1% STILL own 1/2 of all United States wealth EVEN AFTER taxes, charity, and PR CRAP. A similar rule applies worldwide. There is nothing anyone can say to justify that. Anyway, there is usually a higher state and local burden on the middle class. They get little or nothing without a local tax increase. Otherwise, the red inks flows like a waterfall. Service cuts and lay-offs follow. Again, because of the OBSCENE distribution of bottom line wealth in this country. I can not accept any theory that our economy would suffer in any way with a more reasonable distribution of wealth. Afterall, it was more reasonable 30 years ago. Before Reaganomics came along. Before GREED became such an epidemic. Before we had an army of over-paid executives, celebrities, athletes, attorneys, investors, entrepreneurs, developers, and sold-out politicians to kiss their asses. As a nation, we were in much better shape. Lower crime rate, more widespread prosperity, stable job market, free and clear assets, lower deficit, ect. Our economy as a whole was much more stable and prosperous for the majority. WITHOUT LOANS FROM CHINA. Now, we have a more obscene distribution of bottom line wealth than ever before. We have a sold-out government, crumbling infrastructure, energy crisis, home forclosure epidemic, 13 figure national deficit, and 12 figure annual shortfall. ALL BECAUSE OF GREED. I really don't blame the 2nd -5th percentiles. No economy could ever function without some reasonable scale of personal wealth and income. But it can't be allowed to run wild like a mad dog. GREED KILLS. Bottom line: The richest 1% will soon tank the largest economy in the world. It will be like nothing we’ve ever seen before. and thats just the beginning. Greed will eventually tank every major economy in the world. Causing millions to suffer and die. Oprah, Angelina, Brad, Bono, and Bill are not part of the solution.. They are part of the problem. THERE IS NO SUCH THING AS A MULTI-MILLIONAIRE HUMANITARIAN. EXTREME WEALTH HAS MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. WITHOUT WORLD PROSPERITY, THERE WILL NEVER BE WORLD PEACE OR ANYTHING EVEN CLOSE. GREED KILLS. IT WILL BE OUR DOWNFALL. Of course, the rich will throw a fit and call me a madman. Of course, their ignorant fans will do the same. You have to expect that. But I speak the truth. If you don’t believe me, then copy this entry and run it by any professor of economics or socio-economics. Then tell a friend. Call the local radio station. Re-post this entry or put it in your own words. Be one of the first to predict the worst economic and cultural crisis of all time and explain its cause. WE ARE IN BIG TROUBLE.

[cm]

Lafayette: Budapest is in Hungary.

[Patricia Shannon]

Truxter, you're mostly right, but you would be more effective if your comments were shorter and less repetitive, and weren't couched in such an absolutist way.

As an example of what you said, I heard a radio interview a few years ago with a lady who was in PR. She recounted that she had been in meetings where they planned how to make commercials that would teach children to be disrespectful to their parents, so when the parents said they couldn't have the product that the ad showed, the child would nag and nag the parents until they gave in and bought the toy. (She herself thought this was wrong).

[Patricia Shannon]

I've been poor and I've been middle-class, and I'm much happier when I'm not poor. In fact, I was mostly unhappy when I was poor, which is not the case when I'm not poor.

[Lafayette]

Too much Happiness for Too Few?

PS: I was mostly unhappy when I was poor, which is not the case when I'm not poor.

I think we can all sympathize with this sentiment.

We are lucky to have been born into societies that have a high standard of living. However, we know full well that a median-GDP is never an adequate description of how an economy distributes that wealth. We have another statistic for that, called the Gini-coefficient. Which is worthwhile considering.

More so, rich or poor, for as long as a society is not imbued (meaning does not hold dearly) with the notion that no one should be left behind, the that society will never implement the economic measures necessary to reduce/annihilate poverty. Never.

How does a society adopt that Moral Value? Economists keep harping about Income Inequity. Politicians, at election time, keep insisting that the "poor deserve better". And, yet, America has one of the world's worst Gini-coefficients.

In fact, it is a country where 1% of the population earns 50% of the wealth generated (by a free market economy) whilst doing going about their business.

And, yet, this inequality just goes on and on. Look at the Saez data and you will see that it has existed, quite possibly, since the origins of the nation. Something is very wrong in the Land of the Pursuit of Happiness. Too much Happiness for Too Few?

Besides, without a collective effort to change things, it will never happen. What can you do in a country that, more than respecting the ostensible signs of success, people adulate the rich. They are like gods.

[reason]

Lafeyette...
As cm pointed out you meant I think Bucharest.
As for the data they had - I would be surprised if median income figures were not available for many countries.

[reason]

But of course Bucharest is still wrong - Sofia is the capital of Bulgaria.

Still I remain unconvinced, what is special about Bulgaria, the figures are unbelievably low given the reported income. And Bulgaria does have a source of income generation - its Black Sea Coast.

[Lafayette]

reason: And Bulgaria does have a source of income generation - its Black Sea Coast.

Surely, you jest.

[Lafayette]

cm: ... a matter of the perceived degree of control and freedoms individuals have in their affairs.

In mechanical engineering there is a concept of "degrees of freedom" of a mechanism. It applies to its ability to move in multiple dimensions (X, Y & Z). I think it may apply to individuals and what you say above is pertinent.

We don't have "all the freedoms" at our finger-tips at any given time. And, if it appears that riches do allow us to chose in other ways, then we pay for that additional degree of freedom with personal time. [Time is the one inalterable constraint. Money cannot buy one more time.]

The important bit is this: Within a limited degree of freedom (of personal action) people will select options that they perceive better their condition.

So, the question remains: How do we enhance the "degrees of freedom" that allow individuals to pursue expanded alternatives? My response: By enhancing their skill-sets applicable to a given Market Demand for labor.

By and large, methinks, the poor are locked into base (not basic, but base) skill-sets, from which they rarely escape throughout a lifetime of work. (Except by winning a lottery, but chance is the exogenous factor.)

[reason]

Lafayette
No. It may not appeal to you, but that doesn't mean it doesn't have value.

http://reisen.ciao.de/Reiseberichte_Tipps_zu_Bulgarien_614774_4

[cm]

Lafayette: Money can buy you participation in opportunities to let others work for you (i.e. "passive income").

As for "enhancing" skill sets -- I have yet to be convinced that this will create more (musical) chairs in the game. For example, Western companies are not offshoring because of "lack of talent". They are after other desirable features of labor and business landscape, but it's not "skills" by all appearances.

Also domestically, when not unsubstantial parts of the workforce with pertinent skills are not being considered for open jobs (and the first hurdle seems not to be asking wages but being even interviewed), the argument of lacking skills will not get much credibility. That notwithstanding the fact that many others are not qualified for those jobs.

[cm]

Lafayette: As I pointed out a long time ago, I'm not saying enhancing skills has no value, it obviously has only advantages, but it will not solve the current issues with labor market and economy.

[Patricia Shannon]

It's like a lottery.
Only people who buy a lottery ticket get a prize; if you don't buy a ticket, you don't get a prize.
There are always some people who get the prize(s).
That does not mean that all people who buy a ticket will get a prize.
Actually, the job market is a lottery, one with a higher percentage of winners than the ones we buy tickets for.

[Patricia Shannon]

http://www.sciencedaily.com/releases/2008/03/080311081149.htm

Life Expectancy Rises For The Educated; The Less-educated Reap No Benefit

ScienceDaily (Mar. 12, 2008) — It's no secret that over the last few decades, life expectancy in the United States has been rising. However, recent data shows that not everyone has benefited from this encouraging trend. New findings from Harvard Medical School and Harvard University demonstrate that individuals with more than 12 years of education have significantly longer life expectancy than those who never went beyond high school.
...The researchers found that much of the mortality gap can be attributed to smoking related illnesses. Just two diseases usually caused by smoking, lung cancer and chronic obstructive pulmonary disorder (which comprises chronic bronchitis and emphysema), account for 20 percent of growing mortality differences in the 1990s. Many other illnesses like heart disease and other types of cancer, also count smoking as contributing factors. The importance of smoking is not surprising, since other data has shown that the less educated have not given up smoking to the same extent that those with more education have. (Other causes of death examined were diseases of the heart, non-lung cancers, stroke, and unintentional injuries.)

[Lafayette]

Why?

PS: New findings from Harvard Medical School and Harvard University demonstrate that individuals with more than 12 years of education have significantly longer life expectancy than those who never went beyond high school.

Darwin would have sympathized immediately with the findings.

He espoused natural selection (that only the fittest survive). And, if you've been hit by the sub-prime mess, then the notion becomes starkly real. 8^(

My point: Either we feel Natural Selection was ordained by God as an absolute rule throughout, or society understands that all the people cannot fend for themselves all of the time. At some point, the state must intervene to guaranty birthright privileges or, failing that, last resort.

And, if the latter is true, then Education should be free, gratis or for as little personal cost as possible -- cradle to grave. Like Health Care. Why not? No civilization merits the appellation otherwise.

Why is Defense a National Priority, but not Education or Health Care? Why?

[Lafayette]

cm: it obviously has only advantages, but it will not solve the current issues with labor market and economy.

Yes, Ok. And, I am saying nothing else will.

So, what do you propose? Concretely.

[Real Person from the Real World]

CM on Layfayette:
"As for "enhancing" skill sets -- I have yet to be convinced that this will create more (musical) chairs in the game. For example, Western companies are not offshoring because of "lack of talent". They are after other desirable features of labor and business landscape, but it's not "skills" by all appearances.

Also domestically, when not unsubstantial parts of the workforce with pertinent skills are not being considered for open jobs (and the first hurdle seems not to be asking wages but being even interviewed), the argument of lacking skills will not get much credibility. That notwithstanding the fact that many others are not qualified for those jobs.'

Right on. Offshoring and outsourcing to imported talent is not about skills.

As for getting jobs: Aren't we continually told we have to "sell" ourselves? Not everyone is a born sales person. Often first contact is a resume, hence all the reams of advice on resume tweaking, and all the lies many people put on them.

Back in the 60's Gov't tried to mandate non-discrimination. So now we have politically correct lip wagging, while the layer of HR has grown, and with it, the pseudo psych sales of tests, and weird employment questions that trap the unprepared and unwary rather than a "better" or higher quality candidate.

Sales jobs and marketing jobs too, are booming, and for those with rubber consciences and able to lie convincingly, can be quite lucrative. But all the aggressive competitiveness that we are building into the systems just makes people meaner and more willing to cheat the other guy for a quick buck.

As for happiness, to paraphrase Charles Dickens, Happiness is only owing $18 when you have $20, misery is when you owe $20 and only have $18.

[Marc Salup]

This proves the old adage: whomever told you you can't buy happiness was shopping in the wrong place

[sarah]

Money sure does buy happiness. But the question is for whom does it buy?? There is no doubt that money can do lots especially for those who are struggling to make ends meet. And i mean struggling!!!

Well i am richer than before but it doesnt seem like i am happier(more satisfied) than before.My happiness or satisfaction i draw in life is still the same. I am ever as happy as i was then and still going strong.

So if we talk about happiness and that too in terms of money I still believe in the saying that "happiness does not lie in Gold" but it sure comes handy.