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Life Cycle Happiness and Its Sources Intersections of Demography, Economics and Psychology (May, 2007)

Life Cycle Happiness and Its Sources Intersections of Demography, Economics and Psychology (May, 2007). Richard A. Easterlin University of Southern California. Questions. 1. On average, at what stage of life are people happiest? On the threshold of their adult lives? At mid-life?

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Life Cycle Happiness and Its Sources Intersections of Demography, Economics and Psychology (May, 2007)

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  1. Life Cycle Happiness and Its SourcesIntersections of Demography, Economics and Psychology(May, 2007) Richard A. Easterlin University of Southern California

  2. Questions 1. On average, at what stage of life are people happiest? • On the threshold of their adult lives? • At mid-life? • In their golden years? 2. What factors principally determine the life cycle pattern of happiness? • personality and genetics? • Life circumstances (work, family, health, aspirations etc.)?

  3. Part I. Background (30 slides) Part II. Life Cycle Happiness (17 slides) A. Nature B. Causes Part III. Conclusions and Implications (10 slides)

  4. PART I. BACKGROUNDHow is happiness measured? Present study: Taken all together, how would you say things are these days - would you say that you are very happy, pretty happy, or not too happy?

  5. How measured? Variations: Scaling: 0 to 10 ladder, etc. Related concepts: • General life satisfaction • Positive Affect • Negative Affect Single vs. multiple item constructs

  6. Can We Believe Self-Reports of Well-Being? (1) Economics: No. Can’t trust what people say. “Economists, as a rule, are not concerned with the internal thought processes of the decision maker or in the rationalizations that the decision maker offers to explain his or her behavior.  Economists believe that what people do is more relevant than what they say" (Fuchs, 1983).

  7. Can We Believe Self-Reports of Well-Being? (2) Economics: No. “[A] large experimental literature by and large supports economists’ skepticism of subjective questions [and] … cast[s] serious doubts on attempts to use subjective data as dependent variables….”. (Bertrand and Mullainathan, 2001) But see: Jonathan M. Gruber and Sendhil Mullainathan (2005) “Do Cigarettes Make Smokers Happier”, Advances in Economic Analysis & policy: Vol. 5: No. 1.

  8. Economics’ View of Self-Reports

  9. Can We Believe Self-Reports of Well-Being? (3) Psychology: Yes. Not perfect, but meaningful. 1. Reliability: test – retest studies

  10. Can We Believe Self-Reports of Well-Being? (4) 2. Validity: consistency with - external observer ratings (spouse, family, friends, professional therapist) - physical, neurological evidence (facial expressions, brain waves, stress hormones) - theoretically related evidence (psychological counseling, symptoms of anxiety and worry (headaches, sleeplessness, suicide attempts))

  11. Can We Believe Self-Reports of Well-Being? (5) 3. Comparability: the things people say are important for their happiness (living conditions, family, health, work, personal traits)

  12. Why Study Happiness? Happiness measures embody a different conception of the nature of well-being than that commonly accepted in economics Economics: Objective Well-being Psychology: Subjective Well-being

  13. Economics: Objective Well-being (OWB) Revealed preference: Well-being is evidenced by a person’s choices and can safely be inferred from objective measures such as household income or, more generally, GDP per capita. Example: Growth of GDP per capita in Japan, China.

  14. Psychology: Subjective Well-being (SWB) The effect on well-being of objective circumstances is mediated by psychological mechanisms such as • Hedonic Adaptation (Brickman et al, 1972) • Social Comparison

  15. Psychology: Skepticism of OWB “I cannot feel satisfied that the correspondence between such objective measures as amount of money earned, number of rooms occupied, or type of job held, and the subjective satisfaction with these conditions of life, is close enough to warrant accepting the one as replacement for the other” (psychologist Angus Campbell, 1972)

  16. Does It Matter (1)? GDP per Capita and Mean Satisfaction, Japan, 1958 - 1987 500 Satisfaction 300 GDP per capita (1958 = 100) GDP per capita 100 Source: Easterlin (1995)

  17. Does It Matter (2)? GDP per Capita, Per Cent Satisfied, and Per Cent Dissatisfied, China, 1994 - 2004 Satisfied GDP Dissatisfied Source: Kahneman and Krueger (2006)

  18. Economics’ View of Well-Being

  19. But if people adapt to circumstances, as psychologists assert, then what determines SWB? The Setpoint Model: Individual happiness fluctuates around a setpoint given by: personality, genetic heritage

  20. The setpoint model: • “No one doubts that making the team, being promoted at work, or winning the lottery tends to bring about an increment in happiness, just as flunking out, being laid off, or a disastrous investment would be likely to diminish one’s feelings of well-being…. [H]owever, the effects of these events appear to be transitory fluctuations about a stable temperamental set point or trait that is characteristic of the individual.” (Lykken and Tellegen, 1996)

  21. Well-being in the Setpoint Model

  22. The setpoint model: Are you kidding?(1) • “Objective life circumstances have a negligible role to play in a theory of happiness.” Richard Kammann (1983) • “Objective circumstances appear to be limited in the magnitude, scope, and particularly duration of their effects on psychological well-being, which, in the long run, is likely to reflect instead stable characteristics of the individual.” (Costa et al, 1987)

  23. The setpoint model: Are you kidding?(2) • “Each individual may be on a personal treadmill that tends to restore well-being to a predetermined setpoint after each change of circumstances.” (Kahneman, 1999) • ”Our human capacity for adaptation… helps explain a major conclusion of subjective well-being research, as expressed by the late Richard Kammann (1983): ‘Objective life circumstances have a negligible role to play in a theory of happiness’” (Myers 2000, p.60)

  24. The setpoint model: Are you kidding?(3) • Chance events like personal tragedies, illness, or sudden strokes of good fortune may drastically affect the level of happiness, but apparently these effects do not last long.” (Csikszentmihalyi and Hunter, 2003)

  25. The setpoint model: Representative? (1) • “The assumption that happiness setpoints exist has guided much of the current theory and research on SWB…” (Lucas et al 2004, p.8)

  26. The setpoint model: Representative? (2) • Media Reactions • Time (The Science of Happiness, Jan. 17,2005) • “Circumstances don’t seem to have much effect on happiness” (Kahneman, p.A32) • NY Times Magazine Section, Sept. 7, 2003 • “The Futile Pursuit of Happiness” by John Gerstner (based on interviews with psychologists Gilbert, Wilson, Loewenstein, Kahneman)

  27. The setpoint model: Representative? (3) Policy (1): The “Iron Law of Happiness” • “The influence of genetics and personality suggests a limit on the degree to which policy can increase SWB… Changes in the environment, although important for short-term well-being, lose salience over time through processes of adaptation, and have small effects on long-term SWB.” (Diener and Lucas, 1999)

  28. The setpoint model: Representative? (4) Policy (2): The “Iron Law of Happiness” • “According to the hedonic treadmill model, good and bad events temporarily affect happiness, but people quickly adapt back to hedonic neutrality. The theory, which has gained widespread acceptance in recent years, implies that individual and societal efforts to increase happiness are doomed to failure.” (Diener, E., Lucas, R. E., & Scollon, C. N.  (2006).  Beyond the hedonic treadmill: Revisions to the adaptation theory of well-being.  American Psychologist, 61, 305-314)

  29. The setpoint model: Becoming less representative? (1) • Misread of Brickman et al, 1972: quadraplegics and paraplegics significantly less happy. • Adaptation is not always complete (noise, cosmetic surgery) Frederick and Loewenstein, 1999.

  30. The setpoint model: Becoming less representative? (2) • Retreat on the policy front: Diener and Seligman, 2004, proposal for governmental measurement of SWB. • Retreat on complete adaptation: Diener, Lucas, Scollon, 2006. “Happiness can and does change” (p. 309)

  31. Implications for Economics View of Well-Being Economics is not allowing for any subjective processing of objective circumstances How sizeable are hedonic adaptation and social comparison? Enough to invalidate inferences based on objective measures? Perhaps we ought, at least, to look at data on Happiness

  32. Recent Research on Economics of Happiness Books: • L. Bruni Civil Happiness (2006) • R. Layard, Happiness: Lessons from a New Science (2005) • L. Bruni and P. Porta,eds. Economics and Happiness (2005) • B.M.S. van Praag and A. Ferrer-i-Carbonell, Happiness Quantified (2004) • C. Graham and S. Petinato, Happiness and Hardship (2002) • R.A. Easterlin, ed. Happiness in Economics (2002) • B. Frey and A. Stutzer, Happiness and Economics (2002)

  33. Recent Research on Economics of Happiness Symposia, Surveys: Journal of Economic Perspectives, 2006 (Kahneman and Krueger, DiTella and MacCuuloch) Journal of Economic Literature, 2002 (Frey and Stutzer) Journal of Economic Behavior and Organization, 2001 (five articles) Economic Journal, 1997 (Oswald, Frank) New Palgrave, forthcoming (Carol Graham)

  34. PART II. Life Cycle Happiness 1. On average, at what stage of life are people happiest? • On the threshold of their adult lives? • At mid-life? • In their golden years? 2. What factors principally determine the life cycle pattern of happiness? • personality and genetics? • Life circumstances (work, family, health, aspirations etc.)?

  35. Life Cycle Happiness: What do we know? (psychologists in italics) Constant:David Myers (2000) Costa et al (1987) Easterlin and Schaeffer (1999) Rising:Argyle (2001) Carstensen et al (2000) Mroczek and Kolarz (1998) Charles et al (2001)

  36. What Do We Know? (psychologists in italics) Inverted U:Mroczek and Shapiro (2004) U-shaped: Blanchflower and Oswald (2004) Frey and Stutzer (2002), etc.

  37. Nature of Life Cycle Happiness: Present Study – Source and Measure Data: US General Social Survey, 1973-1994 • HAPPY: Global happiness (scaled from 3 down to 1) (one among many questions)

  38. DemographySynthetic Panel Method: The Ideal Record the Reported Happiness of a random sample of persons born in a given year (birth cohort) as they age year by year from 18 to 89. Problem:  Requires 71 years of data

  39. Synthetic Panel Method: Actual Piece together the full life course from segments of experience of single year birth cohorts (n=23,1119) 52 cohorts, born 1905-55 21 yrs. of data for each 42 cohorts, born 1884-1904 and 1956-1976, average 10.5 yrs. of data each

  40. Method of estimating Life Cycle Pattern (Ordered Logit Regression) Dependent Variable: Happy Independent Variables (5): Age,with controls for Year of BirthRaceGenderEducation

  41. Life Cycle Happiness

  42. Causes of Life Cycle Happiness: Conceptual Framework • SWB is the net result of Satisfaction with various Life Domains (goods, family, work, health, etc.) • Domain Satisfaction depends on the extent to which Attainments (objective conditions) match Goals, Aspirations, Needs (subjective norms)

  43. Causes of Life Cycle Happiness: Conceptual Framework: Antecedents Psychology:Angus Campbell et al (domain satisfaction) Social Indicators:Alex Michalos (multiple discrepancy theory) Economics: Simon and March (aspirations and attainments) de la Croix (norm achievement model) Duesenberry, Modigliani, Ng, Pollak (relative income, habit formation) Kahneman and Tversky (adaptation)

  44. What domains?: What people say is important for their happiness

  45. Causes: Measures of Domain Satisfaction (4) in Present Study • SATFIN: financial situation (3 to 1) • SATJOB: work including keeping house (4 to 1) • SATFAM: family life (7 to 1) • SATHEALTH: health (7 to 1)

  46. Causes: Analytical steps (3) • Each domain: Estimate life cycle pattern (same method as for Happy) • From individual data: Estimate Happy as function of 4 domains • Predict Life Cycle Happy from Life Cycle Domain Patterns obtained in step 1, using regression of step 2.

  47. Causes: step 1: Life Cycle Happiness and Domain Satisfaction

  48. Step 1 (cont): Life Cycle Happiness and Domain Satisfaction

  49. Causes: step 2: How Happiness Varies with Domain Satisfaction (Ordered Logit Regression) Each domain has significant positive effect on Happy. Order of importance: family, financial, work, health

  50. Causes: step 3: Life Cycle Happiness, Actual and Predicted

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