Posts Tagged ‘happiness’

unemployment, dignity and work

Thursday, December 22nd, 2016

Happiness researchers consistently find that unemployment – loss of a job – has a strong, negative effect on the subjective well-being of workers. Even those who find new jobs with similar pay continue to feel pain from a bout of unemployment. The pain is even greater for discouraged workers who drop out of the labour force.

Transfers of money to the unemployed ease the pain, but cannot restore lost dignity. Economist Noah Smith for this reason calls on government to provide the unemployed with jobs rather than provide handouts conditioned on unemployment. (more…)

Adam Smith on income and happiness

Thursday, July 21st, 2016

Adam Smith (1723-1790) wrote that, beyond some basic amount, money does not buy happiness. “The beggar, who suns himself by the side of the highway,” he wrote, “possesses that security which kings are fighting for.” So much, then,  for greed and profit as the driving force of capitalism.

The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. …. When Providence divided the earth among a few lordly masters, it neither forgot nor abandoned those who seemed to have been left out in the partition. These last too enjoy their share of all that it produces. In what constitutes the real happiness of human life, they are in no respect inferior to those who would seem so much above them. In ease of body and peace of mind, all the different ranks of life are nearly upon a level, and the beggar, who suns himself by the side of the highway, possesses that security which kings are fighting for.

Adam Smith, The Theory of Moral Sentiments (6th edition, 1790), part IV, ch I, paragraph 10.

the mathematics of happiness

Monday, April 27th, 2015

Can happiness be reduced to a single mathematical equation? Dr Robb Rutledge, a researcher at the Max Planck University College London Centre for Computational Psychiatry and Ageing Research, thinks so. Here is the equation that he and his colleagues estimated with results obtained from experiments on human subjects:

http://oecdinsights.org/wp-content/uploads/2015/04/Happiness-equation.jpg

In words, Dr Cobb and colleagues found that happiness depends on three variables: certainty of rewards (CR), expected value of rewards (EV), and, last but not least, a “a reward prediction error (RPE), the difference between the experienced outcome and the expectation”. The three coefficients of interest (w1, w2, w3) are positive and statistically significant.

RPE has a positive effect on happiness, so it might seem reasonable to conclude that low expectations are the key to happiness. Dr Robb warns us, however, that this is not generally true, because low expectations (i.e. low EVs) themselves have a direct impact on happiness. In any event, “being happy all of the time is probably not a good idea”. This last conclusion is one that I did not expect to hear from a happiness researcher!

As a researcher studying happiness, people often ask me how they can be happier. Our equation might make it seem like low expectations are the secret to happiness, but that’s not the case. Low expectations do make it more likely that an outcome will exceed expectations and positively impact happiness, but expectations also affect happiness before we find out how a decision turned out. We often don’t know the outcome of major life decisions for a long time, whether taking a new job or getting married, but our results suggest that positive expectations about those decisions will increase happiness. In general, accurate expectations may be best. …. Although we all want to be happy, being happy all of the time is probably not a good idea. If you were ecstatic after every meal, you would never be able to decide which restaurant to go to. Our happiness tells us whether things are going better or worse than expected, and that may be a very useful signal for helping us make decisions. [Emphasis added.]

Robb Rutledge, “Can we predict happiness?“, OECD Insights, 23 April 2015.

HT Mark Thoma.

material comfort and happiness

Sunday, October 26th, 2014

Three FT columnists – Undercover Economist Tim Harford, psychotherapist Antonia Macaro, and  philosopher Julian Baggini – discuss possible links between happiness and the consumption of material goods. (more…)

happiness, satisfaction, and GDP

Wednesday, October 22nd, 2014

I would like to call everyone’s attention to a superb article written by University of Southern California economist Richard Easterlin, a scholar who, years ago, touched off the booming field of “happiness studies”. I, for one, am not convinced that happiness – even life satisfaction or subjective well being – is something we can usefully measure, aggregate and use for policy purposes. Nonetheless, Easterlin makes a spirited, impassioned case for replacing GDP (Gross Domestic Product) with SWB (Subjective Well Being). He has succeeded in convincing me that SWB, with all its faults, is at least preferable to HDI (the UNDP’s Human Development Index) as a measure of welfare.

Here are two paragraphs from the introduction, and two from the conclusion of the essay. The entire essay (4 pages) can be downloaded, copied and printed without charge, so click on the link below. You will not be disappointed. (more…)

income inequality and economic growth

Friday, September 5th, 2014

Standard & Poor’s recently downgraded its forecast for US growth – and specifically cited fears that rising inequality will lead to political gridlock and distrust, and will therefore sap growth.

This is a novel move in the rating agency world. However, it is an argument that would seem to make sense. And other business voices are echoing these concerns, including on the right; Alan Greenspan, the former US Federal Reserve chairman who calls himself a life-long libertarian Republican, has cited inequality as the “most dangerous” trend afflicting America.

Gillian Tett, “An unequal world is an uncharted economic threat“, Fiancial Times, 5 September 2014.

The blessed Adam Smith also disliked income inequality:

“No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.” (WN, I.8.35)

“The wages of labour are the encouragement of industry, which, like every other human quality, improves in proportion to the encouragement it receives. A plentiful subsistence increases the bodily strength of the labourer, and the comfortable hope of bettering his condition, and of ending his days perhaps in ease and plenty, animates him to exert that strength to the utmost. Where wages are high, accordingly, we shall always find the workmen more active, diligent, and expeditious, than where they are low ….” (WN, I.8.43)

Source: Wealth of Nations (1776).

growth and happiness

Saturday, May 10th, 2014

Will recovery from the Great Recession bring increased happiness? Not necessarily, writes FT columnist Simon Kuper.

If you’re of a certain age, you may recall the boom years. House prices were going to rise for ever. Alan Greenspan, mastermind of the US economy, was a genius. The “international community” was liberating Iraq. And presiding over this nonstop party was the boom’s poster girl, Paris Hilton.

Those glory days may now be returning. ….

One … downside of the recovery: higher income may be losing its potency to make people happier. Historically, more money bought you more stuff and entertainment.

But we increasingly entertain ourselves for free online. Meanwhile, stuff keeps getting cheaper, thanks to robots and underpaid Vietnamese workers. Burglaries have declined partly because it’s no longer worth the burglar’s time to steal your things.

Simon Kuper, “Even boom times get the blues“, Financial Times Magazine, 10 May 2014.

active vs passive fund management

Tuesday, May 6th, 2014

Don Ezra is not a conventional pensioner. The day the FT meets the distinguished global pension investment consultant and author, he is showing no signs of sleeplessness, even though the 70-year-old holds 70 per cent of his assets in equities. The other 30 per cent – the equivalent of five years’ household spending – is in fixed income products.

“People say: ‘you are almost 70! You should have 70 per cent in fixed income and 30 per cent in equities … you are taking far too much risk’,” says Mr Ezra, who … acts as global director emeritus, investment strategy, for US-based Russell Investments. ….

Perhaps surprisingly, given his long career with Russell, he is no great fan of active fund management. “I think the default ought to be passive. “Basically we don’t know what we are paying for,” he says of active managers. “Being in the market is something everyone needs. Active management is probably something not everyone needs.” [emphasis added]

Mr Ezra might be a fellow of the Institute of Actuaries, but his views on retirement strategy are not confined to financial matters. When he meets the FT in London, he is on his way to a conference to give a speech on the subject of happiness. “Finances are not everything,” he says. “There’s a lot of happiness you can have even if you are not wealthy.” ….

Some of his lessons about spending money include “buying more experiences and fewer things”.

Josephine Cumbo, “What’s so scary about equities for your pension?“, Financial Times, 3 May 2014.

Active fund management requires extensive research to ‘pick winners’. Management fees are high. Passive fund management mimics the market. Management fees are very low. On average, active funds perform no better than passive funds – worse than passive funds once the higher fees are factored in.

Mr Ezra’s views, though expressed more cautiously, are similar to those of legendary investor Warren Buffet.

Angus Deaton on “The Great Escape”

Tuesday, November 19th, 2013

This week’s EconTalk podcast is very interesting. Download and listen to the full interview. It is an hour worth your time.

Angus Deaton of Princeton University and author of the Great Escape talks with EconTalk host Russ Roberts about the book–the vast improvements in health and standard of living in recent times. Deaton surveys the improvements in life expectancy and income both in the developed and undeveloped world. Inequality of both health and wealth are discussed as well. The conversation closes with a discussion of foreign aid and what rich nations can do for the poor.

Deaton on Health, Wealth, and Poverty“, hosted by Russ Roberts, EconTalk, 18 November 2013.

At the link, you will also find highlights of the discussion. Here is a sample, from the part on ‘happiness’: (more…)

the science of happiness

Friday, September 6th, 2013

FT columnist Samuel Brittan is not happy to see governments embrace this new science.

We are on particularly slippery ground when it is suggested that governments should promote happiness. If this simply means letting people satisfy their preferences to the maximum feasible extent, it should be uncontentious. But promoters of “the new science of happiness” mean something different. They want to promote activities they believe will make us truly happy, and discourage others. …. Happiness may be subject to ordinal rather than cardinal measurement. But happiness promoters, which include the current British government, go beyond this and have whole lists of activities they wish to promote or discourage.

Happiness policy either refers to preference satisfaction that allows people to promote their interests as they see them or to promoting activities that various politicians and writers believe promote true happiness. Fortunately, these writers disagree among themselves, which gives us a little space to promote our happiness in our own way as implied by the American Declaration of Independence.

Samuel Brittan, “Politics echoes with the sound of quack policies“, Financial Times, 6 September 2013.

Mr Brittan is reviewing Quack Policy – Abusing Science in the Cause of Paternalism, by Jamie Whyte (Institute of Economic Affairs, 21 August 2013).