Tag Archives: Angus Deaton

A Short Blog Post on a Very Big Question: Well-Being and Policy

Here in the UK, a general election looms. Key themes are common to every western democracy, albeit with a few local characteristics; that is, economic growth, prosperity (narrowly defined around income and wealth), inequality (median wage growth or the lack thereof) and, to a degree, well-being (in the UK’s case proxied by arguments over the NHS). Climate change and the environment will be foot-noted at best.

So could we do better? Emphatically, yes.

To commence with, every politician (and, in fact, everyone), regardless of political persuasion, should read the report “Well-Being and Policy” published by the Legatum Institute last year. The executive summary is here and the full report here. Note the report is written by a suite of top-ranked economists including Angus Deaton and Richard Layard.

The report makes a compelling case that the young discipline of ‘well-being and happiness’ has now matured sufficiently to drive policy. Following from this, my recommendation is that every party organises its manifesto around the three major types of happiness set out in the report (and for the last few years in this blog):

  1. Life satisfaction: how we evaluate our lives
  2. Affect: the daily positive feelings (happiness, joy, contentment) and negative feelings (anger, sadness, fear, depression and so on) we experience
  3. Eudaimonia: whether we feel our lives are meaningful

Where does GDP, income and wealth show up in the above trilogy? They show up quite a lot in life satisfaction, but not so much in affect and eudaimonia. So let’s just drill down into life satisfaction a bit more. We can see its principal components here (click for larger image):

Impact of Policy A upon Life Satisfaction jpeg

For simplicity, let us ignore the eudaimonia and affect forms of happiness and presuppose that policy was purely aimed at the life satisfaction and its determinants as detailed above.

Measured against this new metric, a government could embark on a green agenda that made the UK totally fossil fuel free by, say, 2030 as long as sufficient improvements were made with respect to well-being as it relates to employment, education, family, community, environment, physical heath and mental health such that this offsets any loss in well-being from income. If this were possible, then we would have made a net positive policy choice. In short, we can have our cake and eat it: a society with a higher level of well-being and a society that isn’t destroying the well-being of future generations.

Actually, it gets even easier than that. The entire system as it stands is built around valuing consumption as the main driver of happiness. How many adverts over the last month have you seen admonishing you to cultivate an allotment as opposed to buying an SUV? Yet the evidence in the happiness literature is quite specific: engaging in a community recreational pursuit has a far greater impact on happiness than, say, purchase of a new car (on the impact of auto purchases, see here). Indeed, it is somewhat miraculous that non-monetary forms of happiness have survived the onslaught of a system that values nothing that cannot be bought.

Traditionally, economics has gone with the maxim of revealed preference; that is, look at what people do, not what they say. In short, if they are doing it, by definition it is making them happier. But psychological studies (and more recently economic studies) show that the link between what people do and whether what they do makes them happy is far more tenuous.

Let’s take cigarettes. A study by Gruber and Mullainathan demonstrated that by taxing cigarettes, the government made smokers happier by forcing them to cut down or stop smoking. By extension, in a world where we are continually persuaded to consume, we may work excessively and incur too much debt. By constricting our consumption choices, the government could actually make us use our time to secure far superior sources of happiness than those just founded on the acquisition of consumer goods.

In conclusion, what every politician should be peddling is growth in well-being–everything else is irrelevant.

Happiology Comes of Age

For non-Brits, the U.K.  has a strange annual ritual called ‘The Budget’, at which time the Chancellor of the Exchequer (the U.K. minister of finance) unveils his tax and expenditure plans for the year. For two to three days, ‘The Budget’ acts as  a media neutron bomb, destroying any other debate. The odd geopolitical story (Crimea) or human interest (MH370) story may limp on, but nothing much else can survive. Most PR staffers are acutely aware that ‘The Budget’ is a Bermuda Triangle for any press release and take a long weekend off. But not all.

The Legatum Institute (a non-partisan London-based think tank) chose budget day to release an important report called “Wellbeing and Policy“. Not surprisingly, media coverage was meagre, with The Financial Times being a notable exception (here). The report is authored by the great and the good of happiness academics including Angus Deaton, Martine Durand, David HalpernRichard Layard  and  Gus O’Donnell.

In my humble opinion, the burgeoning field of happiness economics is a truly exciting field of the social sciences—whose time has really come; as such, this report is important.

Moreover, as we contemplate a world facing ever greater headwinds to that of the traditional metric of success, GDP, happiness economics provides us with a rare opportunity to have our cake and eat it. That is, it should help us intelligently adapt to low or zero growth due to climate change and resource depletion, but at the same time maintain, or even improve, our level of social welfare.

The Legatum Institute report gives ground for some optimism (which is usually lacking in this blog). For a start, a wave of national statistical offices have started to collect data on subjective wellbeing (click for larger image).

Availability of Official National Statistics on Subjective Wellbeing jpeg

Moreover, the somewhat vague concept of ‘happiness’ has now been deconstructed to the extent we can isolate its three main elements: life evaluation (the remembering self: how do your rate your life), affect (hedonic feelings of pleasure or pain, joy or sadness, stress or relaxation) and eudaimonia (a sense of purpose to one’s life or ‘flourishing’). I’ve posted frequently on this topic, as, for example, here and here.

These three categories provide a very rich metric for measuring differing aspects of happiness, and each of these three categories has its own nuances and idiosyncrasies. Nonetheless, the job of national statistical offices is one of trade-offs: complex questionnaires have a price, both in return rates and the cost to complete and process. The trick is to produce the minimum number of necessary questions that are both simple yet not naive. The Organisation of Economic Cooperation and Development (OECD) has come up with a set of core measures of subjective welling:

OECD Core Measures of Subjective Welling jpeg

A1 relates to life evaluation, A2 covers (very simplistically) eudaimonia and A3 through A5 positive and negative affect.

It is very easy to pick away at the arbitrariness  of these questions. The “Wellbeing and Policy” report references a New York Times article (here) covering the work of Martin Seligman, one of the pioneers of the ‘positive psychology‘ movement, in which Seligman struggles to reconcile the eudaimonia produced by ‘flow’ from that of the satisfaction of just winning.

You might also start to question some of your goals and activities, the way that Dr. Seligman occasionally wonders why he spends so much time playing bridge. It’s brought him some clear achievements — including a second-place finish in the North American pairs championship — but he doesn’t pretend that bridge provides any meaning in life. He says he plays for another element of well-being, the feeling of engagement. “I go into flow playing bridge,” he writes, “but after a long tournament, when I look in the mirror, I worry that I am merely fidgeting until I die.”

Is playing bridge for the feeling of flow any more worthwhile than playing it just to win? Dr. Seligman doesn’t want to judge.

“My view of positive psychology is that it describes rather than prescribes what human beings do,” he says. “I don’t want to mess with people’s values. I’m not saying it’s a good or a bad thing to want to win for its own sake. I’m just describing what lots of people do. One’s job as a therapist is not to change what people value, but given what they value, to make them better at it.”

I am not so sure. In Dr. Seligman’s world, there exist bridge players who evidence no sense of ‘flow’ nor sense of satisfaction in the game they play. But I wonder how they evaluate their life satisfaction or positive and negative affect. Yes, this is all difficult, but just because it is difficult does not mean it lacks depth.

A silent revolution appears in train, where we collect ever more data on happiness and decide what that data means. ‘Happiology’ is not GDP for hippies. I would turn this around: GDP is the measure of success for the educationally subnormal. It’s both simple and stupid. We are just starting to get to grips with what happiness means—and its complicated. But we are adults, and it is time to put  away childish things—such as our obsession with GDP.