Happiness around the World: The Paradox of Happy Peasants and Miserable Millionaires

1. Happiness around the World: The Paradox of Happy Peasants and Miserable Millionaires Carol Graham The Brookings Institution April 2010

2. What We Can Learn from Happiness Surveys from Around the World Have been studying the determinants of happiness in countries around the world, as diverse as the U.S. and Afghanistan, Chile and China Happiness economics a new tool in economics Allows us to study the determinants of well being as well as to answer questions like what are the unhappiness effects of unemployment, divorce, commuting time, and smoking; are Republicans or Democrats happier (and why)? Are happier people healthier? Do they earn more money? What are the (un)happiness effects of the current economic crisis in the U.S.? Departs from traditional economics in its emphasis on expressed versus revealed preferences � e.g. can we believe what people say? (no consequences�) Many questions that revealed preferences cannot answer well, such as the welfare effects of institutional arrangements individuals are powerless to change and the explanation of behaviors that are driven by norms, addiction, or self control problems

3. What we can learn, continued Most recently, a lot of talk about policy; national well being indicators; the Sarkozy commission, the CDC, the Whitehall office; should we be pursuing happiness rather than economic growth? Indeed, happiness studies have gone from the fringes of economics to the mainstream; well over 1000 articles in respected, peer reviewed journals, including the flagship publications of the profession Have also sparked a renewed and major debate over a key relationship in economics: that between happiness (or welfare) and income Easterlin paradox, 1975 and now (figure)

4. Happiness and Income per-capita (1990s)

5. Happiness patterns across the world Happiness and age (figure) Income Health Employment Friendships Gender (less clear) Because of these consistent patterns, we can then explore the �happiness� effects of things that vary, such as commuting time, environmental quality, the inflation or unemployment rate, the nature of governance, obesity rates, crime and corruption rates, cigarette smoking, exercise, and more To some extent, the world is our oyster! BUT there is also one major complication

6. Happiness in Latin America: Age-pattern conforms!

7. The Fly in the Ointment: Adaptation Aghans are happier than the world average and as happy as Latin Americans, despite objective conditions (smiling yesterday versus best possible life) Guatemalans are more satisfied with their health care than Chileans, and Kenyans are as satisfied with their health as Americans are Obese people are less happy than the average, but they are much less unhappy when there are more obese people around them; same goes with unemployed people � people adapt to different weight and other norms Crime and corruption make people less happy, but the unhappiness effects are much lower when there is a lot of crime and corruption Freedom and democracy make people happier, but they matter more to the happiness of those that have more of these things Perhaps adaptation is good from an individual psychological perspective, but may lead to collective tolerance for bad equilibrium

8. Uncertainty Uncertainty is one of the things that people have a hard time adapting to; they seem to prefer unpleasant certainty to uncertainty, even if it is associated with progress Health: mobility vs epilepsy, pain, anxiety Economics: people adapt very quickly to income gains; at the same time do not seem to like the uncertainty and rewards shifts (and at times inequality) that accompany rapid economic growth; thus the �paradox of unhappy growth�; at micro level, the happy peasants vs the frustrated achievers The U.S. economic crisis � an example

9. Best Possible Life (BPL) & Dow Jones Industrial Average Trend (Jan. 2008 � Dec. 2009)

10. Happiness and policy? Open-ended and undefined nature of happiness surveys is what makes them such a good research tool and allows for comparability across cultures and countries But the definition of happiness DOES matter for policy Happiness as contentment? (Bentham); Happiness as the opportunity to lead a fulfilling life? (Aristotle�s eudaemonia) Do we want happy peasants or frustrated achievers? Cardinality versus ordinality Inter-temporal problems and unhappy objectives (reducing fiscal deficits, reforming health care, overthrowing the Taliban) Unanswered questions - it�s a nascent science!