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The Measurement and Validity of Well-being

The Measurement and Validity of Well-being. Andrew E. Clark (Paris School of Economics and IZA) http://www.parisschoolofeconomics.com/clark-andrew/. Economics and Psychology Masters Course. What Do You Want from Life?. We all want to live a good life

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The Measurement and Validity of Well-being

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  1. The Measurement and Validity of Well-being Andrew E. Clark (Paris School of Economicsand IZA) http://www.parisschoolofeconomics.com/clark-andrew/ Economics and Psychology Masters Course

  2. What Do You Want from Life? We all want to live a good life And we all want to live in a Society that is doing well. But how do we know if we are?

  3. Social Science agrees that these are important questions What it doesn’t agree on is how to measure the good life. Very broadly speaking, there are three approaches. Each associated with a different discipline. 3

  4. Three concepts of well-being Economics: Preference satisfaction / desire fulfilment Revealed preference: one allocation is better than another if it is chosen when the other one could have been. Individuals get what they want (emphasis on the role of resources, preferences and prices) But we would need to know preferences to make SWB statements – the same choice can be associated with different preferences (see Fleurbaey and Blanchet, “Beyond GDP”). 4

  5. Three concepts of well-being Sociology: Let’s make lists! These lists include the elements of success But which elements: how do we know that we have included everything that matters? And which weights? 5

  6. Three concepts of well-being Psychology: Let’s actually ask people how they are doing ‘Subjective’ well-being: this is democratic and not paternalistic These accounts provided by individual can be evaluative/cognitive: how has my life gone so far? Or they can be a series of how I feel from moment to moment: experienced utility There are many versions of both: are they all picking up the same thing? 6

  7. Objective lists haveoften appeared in Macro debates about performance – how well a country as a whole is doing GDP. The misery index AKA the Okun index (unemployment rate plus inflation) Widely used in policy debates unemployment rate; suicide rate; education level; access to green space; income inequality; etc Of the kind HDI/HDI+ Or Community Health Indicators

  8. Which is not to say that there are no concerns about such nice “list” measures: What should be on the list? How can the items be compared? Are the weights the same for everyone? Paternalism: who decides? 8

  9. Capabilities as a list Amartya Sen’s “capability approach” A challenge to consequentialist utilitarianism, and the Pareto criterion Start from a conception of what makes a good human life: people, not goods Capability Approach: what people are free to do as well as what they actually do. opportunities result from ‘capabilities’ – what you can do. these are distinct from ‘functionings’ – what you do: role of responsibility

  10. One example: Nussbaum’s list of capabilities 1. Life: not dying prematurely 2. Bodily health: good health; adequately nourished; shelter 3. Bodily integrity; mobility; free from violence; choice in sex and reproduction 4. Senses, imagination, and thought: education, religion, art 5. Emotions: attachments, love 6. Practical reason: form conception of the good, planning of life 7. Affiliation: social interaction; respect and dignity 8. Other species: concern and relation to animals, plants, nature 9. Play: laugh, play, enjoy recreational activities 10. Control over one’s environment: political participation; property, employment.

  11. Human Development Index (HDI) Based on Sen’s idea of capabilities, added to Macro measures of performance Rationale: GDP per capita gives an incomplete picture of development and well-being can be supplemented by information on the opportunities people have UNDP has published the HDR every year since 1990; this includes the HDI by country.

  12. United Nations Development Report 1990 “Human development is a process of enlarging peoples choices. The most critical of these wide ranging choices are to live a long and healthy life, to be educated and to have access to resources needed for a decent standard of living.” “No one can guarantee human happiness, and the choices people make are their own concern. But the process of development should at least create a conducive environment for people, individually and collectively, to develop their full potential and to have a reasonable chance of leading productive and creative lives in accordance with their needs and interests”

  13. The Human Development Index

  14. To calculate each dimension index …

  15. Each indicator index …

  16. Each dimension is equally weighted • Within education, the adult literacy rate is weighted 2/3, and school enrolment 1/3. • Income is expressed in logs, so that an extra dollar has a larger HDI “hit” for poorer countries • = (lnY – ln(Ymin))/(ln(Ymax) – ln(Ymin))

  17. HDI data from UNDR

  18. The last column shows that the ranking of countries by GDP per capita is not the same as that by HDI Some countries do better than their GDP would imply (the Scandinavians, Madagascar) Others do worse The HDI adds new information to answer the question of how well a country is doing Despite their relatively high incomes, none of the oil-producing countries has a high HDI

  19. Gender-related Development Index: HDR 1995 UNDP acknowledges key role for gender equality development per se may not contribute to gender equality HDI measures average achievement GDI adjusts to reflect male/female inequalities Calculate dimension indices by gender Use inequality-sensitive aggregation Then combine into GDI.

  20. Contruction of the GDI

  21. Gender specific values …

  22. “Inequality-sensitive” aggregation average well-being of men and women: Dm, Df proportion of men and women : pm, pf aggregate population well-being: W equity-neutral aggregation: W1 = pmDm + pfDf equity-sensitive aggregation: W2 = [ pmDm-r + pfDf-r ] -1/r if r = -1, then W1 = W2, and thus equity neutral if r > -1, then inequality aversion; GDI uses r = 1.

  23. GDI data from UNDR

  24. GDI Map

  25. Main findings of HDR 95 Benefits of development do not trickle down to everybody; it is not gender neutral Most of men’s work is paid; most of women’s work is unpaid: this impacts on social status (employment confers status) GDP per capita alone, or HDI, does not explain rank of country in GDI. In 2010, both the variables used to construct the HDI changed somewhat. And the GDI was replaced by the Gender Inequality Index. A new index was introduced that takes into account inequality in the dimensions of the HDI over the whole population (Inequality-adjusted HDI).

  26. Ravallion calls such indices “mashup indices of development” • 20th Human Development Report (UNDP, 2010) changed the measures used for these core dimensions, and how they are aggregated. • Gross national income (GNI) has replaced GDP, both still at purchasing power parity (PPP) and logged. • Education now measured by mean years of schooling (MS) and expected years of schooling (ES) • Three core dimensions on a common (0, 1) scale.

  27. LE HDI bounds changed to 20 years and 83.2 years (Japan’s LE). • GNI per capita is bounded by $163 (Zimbabwe in 2008) and $108,211 (UAE in 1980). • The new education variables have minimum of zero, and MS upper bound of 13.2 years (US in 2000) and that of ES of 20.6 years (Australia, 2002).

  28. Aggregation used to be arithmetic mean. • Starring from income of $20K, an extra year of LE worth around $2000. • Now geometric: introduces additional concavity • The new HDI has lowered the weight on longevity for all but five countries • Liberia has an HDI value of $5.51 per year or a year of LE. The value tends to rise with income and reaches about $9,000 per year in the richest countries. • Longevity has been devalued

  29. The HDI is one “top-down” way of weighing objective lists. Although as we have seen, weights are controversial. Another is the Misery index: a percentage point of unemployment equals a point of inflation. Says who? In Table 1 of Di Tella et al. (2001), unemployment has an estimated coefficient of -2.8 and inflation of -1.2: in happiness terms, inflation matters only about 40% as much as unemployment.

  30. An alternative is to not use weights at all, but simply provide a list of things that we would all like to see.

  31. United Nations Millennium Development Goals 32 http://www.undp.org/

  32. Alternatively, we can restore consumer sovereignty (as it were), and let individuals assign their own preferred weights to the posited various different dimensions of the Good Life.

  33. Preference satisfaction accounts Well-being the more you satisfy your preferences and fulfil your desires the higher your well-being is considered to be. In line with utility theory preferences inferred from the choices people make Concerns: Do people want/know what is good for them? What to do about “anti-social” preferences? How do we price public goods then?

  34. Mental state accounts Well-being how individuals feel / think Self-reported mood, emotions happy / sad / excited / bored Self-reported evaluation “how satisfied are you with your life?” Concerns: Adaptation and changing aspirations: hedonic treadmill Personality traits These mean that objective and subjective may not “match”.

  35. Adaptation is not universal We do not fully adapt to some circumstances and experiences Positive e.g. friendships Negative e.g. pain, noise, unemployment, poverty Important differences in degree and speed of adaptation and some evidence that baseline levels of SWB can change over time (for example, following unemployment)

  36. BHPS Well-being questions The British Household Panel Survey (BHPS). See <http://www.iser.essex.ac.uk/ulsc/bhps/> Annual panel (longitudinal) survey since 1991. Wave 18 in September 2008 Wide range of variables from same individuals and households each year. E.g. in Wave 12 (2002): N = 17,339, aged 18-85

  37. The General Health Questionnaire 12 (GHQ-12) Have you recently: 1. been able to concentrate 2. lost much sleep over worry 3. felt that you were playing a useful part in things 4. felt capable of making decisions 5. Felt constantly under strain 6. felt you could not overcome difficulties 7. been able to enjoy normal activities 8. been able to face up to problems 9. Been feeling unhappy and depressed 10. been Losing confidence 11. been thinking of yourself as worthless 12. been feeling reasonably happy

  38. Satisfaction Questions Here are some questions about how you feel about your life. Please tick the number which you feel best describes how dissatisfied or satisfied you are with the following aspects of your current situation. Your life overall [ 1 ] [ 2 ] [ 3 ] [ 4 ] [ 5 ] [ 6 ] [ 7 ] not satisfied at all   completely satisfied This question is also asked about domains of life: e.g. health, income, house, partner ...

  39. These “behave” the way we think that they should:

  40. BBC News Website 24 Feb 2011www.bbc.co.uk/news/uk-12566965 • ONS Happiness Survey Questions Revealed • After becoming Conservative leader in 2005, David Cameron said gauging people's feelings was one of the "central political issues of our time". • "It's time we admitted that there's more to life than money and it's time we focused not just on GDP but on GWB - general well-being," he said. • The ONS will add the subjective questions to its next annual Integrated Household Survey • The questions will include: • Overall, how satisfied are you with your life nowadays? • Overall, how happy did you feel yesterday? • Overall, how anxious did you feel yesterday? • Overall, to what extent do you feel the things you do in your life are worthwhile? www.bbc.co.uk/news/uk-12566965

  41. Does subjective well-being mean anything? (1) Concern: Does it make sense to treat the happiness or life satisfaction scores as if they were cardinal and interpersonally comparable? Reality: Econometric models assuming cardinality and ordinality give roughly same results Meaning: people “split up” verbal labels into roughly equal blocks

  42. Does subjective well-being mean anything? (2) Concern: Are the life satisfaction or happiness questions reliable? Are they valid? Can people recall? Reality: Sensitive to wording, and question ordering. Can be experimentally manipulated (Schwarz’s dime on the photocopier: but hard to replicate) But correlate well with proxies of well-being. People are not good at recalling their own experiences.

  43. Does subjective well-being mean anything? (3) Concern: If happiness and life satisfaction became the policy maximand, one effective intervention might be to dampen peoples’ expectations; or give out happiness pills. Reality: People care about the causes and processes of higher/lower life satisfaction.

  44. What is “experienced utility”? “Experienced utility”: an economists’ interpretation of life satisfaction and happiness a mental state account the level of utility that is actually felt cf. “decision utility” (preference satisfaction) the level of utility that people think they will feel utility inferred from observed choices People often mis-want, or get it wrong. So that satisfying preferences won’t bring well-being

  45. Measuring experienced utility (1-1) Experience sampling method (ESM) Participants carry palm top instrument. Random selection of times of day as participant goes about daily life. Rating of various feelings such as “happy” or “frustrated/annoyed”. Record what they are doing. Aggregate each ‘moment’ to obtain time profile of affect.

  46. Measuring experienced utility (1-2) Advantages of ESM Real, experienced utility, as life events are lived. No bias and distortion due to recall Disadvantages of ESM Costly Possibly disruptive (eg. while driving)

  47. Measuring experienced utility (2-1) Day reconstruction method (DRM) Reconstruct previous day into a series of episodes Where, doing what, with whom Rating of various feelings such as “happy” or “frustrated/annoyed”. U-index: proportion of time in negative emotion.

  48. Measuring Well-being: The Day Reconstruction Method Respondents reconstruct the previous day: like a retrospective TIME USE DIARY Day is split into a sequence of episodes. Respondents report the key features of each episode, including (1) When the episode began and ended (2) What they were doing (3) Where they were (4) Whom they were interacting with, and (5) how they felt on multiple affect dimensions

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