Transcript dondenamilan2009 - University of Warwick

Happiness, Money, and
Your Heart
Andrew Oswald
Warwick University
* I would like to acknowedge that much of this work is
joint with coauthors Nick Powdthavee, David G.
Blanchflower, and Rainer Winkelmann.
Economics is changing
Economics is changing
Researchers are studying
mental well-being.
Economics is changing
Researchers are studying
mental well-being.
We are drawing closer to
psychology and medicine.
Using random samples from
many nations:
Researchers try to find what
influences the psychological
wellbeing of
(i) individuals
(ii) nations.
Today I would like to ask
four questions.
#1
#1
st
21
In the
century, should
our society’s goal be
happiness rather than GDP?
#2
#2
What actually happens to a
person when they get a lot
of money (say by winning
the lottery)?
#2
What actually happens to a
person when they get a lot
of money (say by winning
the lottery)?
#3
#3
Could physiological
measures, like heart rate
and blood pressure, be used
as proxies for well-being?
#3
Could physiological
measures, like heart rate
and blood pressure, be used
as proxies for well-being?
#4
#4
How should we think about
the causes of the current
financial crisis?
• A fundamental
question:
Is modern society going in a
good direction?
Is modern society going in a
good direction?
Are we getting happier?
Possibly not…..
The Easterlin Paradox
2.2
1.8
15000
2
18000
21000
Mean Happiness
2.4
24000
2.6
Average Happiness and Real GDP per Capita
for Repeated Cross-sections of Americans.
1975
1980
1985
Year
Real GDP per Capita
1990
1995
Mean Happiness
Life-Satisfaction Levels in European Nations
Italy
Ireland
Germany
Netherlands
3.8
3.6
3.4
3.2
3
2.8
2.6
1974
1982
1990
1998
2.4
2006
So, could we learn how …
..to make whole countries
happier?
Preferably not like this…
Italy 6 England 0
What kind of data do we use in
research on well-being?
The types of sources
British Household Panel Study (BHPS)
German Socioeconomic Panel
Australian HILDA Panel
General Social Survey of the USA
Eurobarometer Surveys
Labour Force Survey from the UK
World Values Surveys
NCDS 1958 cohort
Various statistical methods
Some cheery news:
Some cheery news:
In Western nations, most
people seem happy with
their lives
Some cheery news:
In Western nations, most
people seem happy with
their lives
The distribution of life-satisfaction levels
among British people
35
Percentage of Population
30
25
20
15
10
5
0
1
2
3
4
5
6
Self-rated Life Satisfaction
Source: BHPS, 1997-2003. N = 74,481
7
But obviously life is a mixture of ups
and downs
Statistically, wellbeing in
panels is strongly correlated
with life events
..good and bad.
Big effects
Unemployment
Divorce
Marriage
Bereavement
Friendship networks
Health
[No effects from children]
Much of the new research
follows people through time.
eg. Andrew Clark’s work
The unhappiness from
bereavement
So people adapt
So people adapt
But that has a downside….
The happiness from marriage
And should you invest in a
baby?
Happiness and children
An important question in a
modern society is the
impact of divorce.
Divorce eventually makes
people happier
Divorce eventually makes
people happier
• Other findings
Happiness is also U-shaped
over the life course
The pattern of a typical person’s
happiness through life
Average life satisfaction score
5.6
5.5
5.4
5.3
5.2
5.1
5.0
4.9
15-20
21-30
31-40
41-50
Age group
51-60
61-70
This holds in various settings
This holds in various settings
For example, we see the same
age pattern in mental health
among a recent sample of
800,000 UK citizens:
[Blanchflower and Oswald, Social Science & Medicine, 2008]
New
Perspectives
The
probabilityon
ofJob
depression by age
Satisfaction
Well-Being
Males, LFS data and
set 2004-2006
0.02
DTI’S FOURTH
LABOUR MARKET RESEARCH CONFERENCE
ORGANISER: EMPLOYMENT MARKET ANALYSIS & RESEARCH (EMAR)
Regression coefficient
0.015
0.01
0.005
0
-0.005
-0.01
1938
1942
1946
1950
1954
1958
1962
1966
Year of birth
1970
1974 1978
1982
1986
1990
New
Perspectives
onamong
Job females: LFS data
Depression
by age
Satisfaction
and Well-Being
2004-2006Q2
DTI’S FOURTH
LABOUR MARKET RESEARCH CONFERENCE
0.002
ORGANISER: EMPLOYMENT MARKET ANALYSIS & RESEARCH (EMAR)
Regression coefficient
0
-0.002
-0.004
-0.006
-0.008
-0.01
-0.012
-0.014
1942
1946
1950
1954
1958
1962
1966
Year of birth
1970
1974
1978
1982
1986
1990
Now what about money?
Now what about money?
The data show that richer
people are happier and
healthier.
But in particular
Relative income is what
seems to matter to humans.
(consistent with Easterlin’s
paradox)
In terms of economic theory:
u = u(y/y*)
where y* is what other people earn.
For example
Di Tella et al REStats 2003,
Blanchflower and Oswald
JPubEcon 2004, and Luttmer QJE
2005 show income is monotonic in
happiness equations for 11
industrial countries.
But is there really good
causal evidence?
One recent attempt (Gardner-Oswald, Journal of Health Economics
2007):
Studying windfalls is
one approach:.
So what happens to someone
who gets a largish lottery win?
Remarkably
There is no immediate effect on
well-being as measured by
happiness or financial
satisfaction.
In our data
Strikingly, even the person who
receives the equivalent of 1 million US
dollars reports a fall, in time t1, in
financial satisfaction (ie. satisfaction
with the household’s income).
But, after three years, a large effect
on satisfaction suddenly becomes
apparent.
Lottery wins raise mental well-being
But the puzzle remains
But the puzzle remains
There is a delay.
But the puzzle remains
There is a delay.
The longitudinal lottery work
finds the effect of a win takes at
least two years to show up in
mental well-being scores.
Where will research head
in the future?
An interesting border is between
happiness and medicine
An interesting border is between
happiness and medicine
•
Is it possible that we can find
physiological correlates with human
well-being?
•
Perhaps to broaden the standard
policy goal of GDP?
Some of our latest work:
Statistical links between the
heart and income and
happiness.
To clinicians
High blood pressure is
potentially a sign of mental
strain and low well-being
Some regression evidence
Some regression evidence
When we estimate a life-satisfaction equation
LS = f (high blood pressure,
control variables)
Hypertension enters negatively in a 10,000
sample from NCDS cohort and a 15,000
sample from Eurobarometers
But how about high blood
pressure as a national
measure of well-being?
(Blanchflower and Oswald, 2008 Journal of Health Economics)
Figure 2.
The Inverse Correlation Between Hypertension and Life
Satisfaction: 16 European Nations Aggregated into Quartiles
50
Percentage of citizens very satisfied with their lives
Percentage of citizens very satisfied with their lives
Across nations, hypertension and
happiness are inversely correlated
40
30
Ireland
Denmark
N'Lands
Sweden
Spain
France
Lux
UK
20
10
Austria
Italy
Belgium
Greece
E. Germany
W. Germany
Portugal
Finland
0
Countries in the
lowest quartile
of blood-pressure
Countries in the
highest quartile
of blood-pressure
Some of our latest work:
It is known that heart rate
rises under stress.
Stress comes in different forms
Stress comes in different forms
Stress comes in different forms
Stress comes in different forms
Stress comes in different forms
Stress comes in different forms
Stress comes in different forms
Stress comes in different forms
Stress comes in different forms
Stress comes in different forms
Stress comes in different forms
Stress comes in different forms
We draw a random sample
of 80,000 British individuals,
and study their resting heart
rates.
Pulse: Average heart rate is
about 75 beats per minute.
Pulse and Money
We find that for every extra
40,000 Euros a year, heart
rate is 1 beat a minute
slower.
Heart-Rate Equations
(joint work with David G Blanchflower)
There are deep connections
between happiness, money
and the behaviour of the
heart.
Finally
Happiness, herds and
the financial crisis
Why did we get into the crisis,
and how will human happiness
be affected?
The evidence suggests that when a
person is made unemployed:
The evidence suggests that when a
person is made unemployed:
• 20% of the fall in mental well-being
is due to the decline in their
income
• 80% is due to non-pecuniary things
(loss of self-esteem, status..).
Countries are happier if they have
low unemployment and inflation,
and generous welfare benefits.
‘Fear’ depresses happiness.
R. Di Tella, R. Macculloch, A.J. Oswald American Economic Review, 2001.
In a recession
there is a widespread decline in
mental well-being, we think
because of the generalized
insecurity.
Herds and keeping up
with the Joneses
• "Men … think in herds; they go
mad in herds, … they only
recover their senses slowly,
and one by one."
C. Mackay
Extraordinary Popular Delusions
and the Madness of Crowds, by
Charles MacKay, published in
1841.
Extraordinary Popular Delusions
and the Madness of Crowds, by
Charles MacKay, published in
1841.
Far from the Madding Crowd, by
Thomas Hardy, published in 1874.
Why does it happen?
Why does it happen?
We know that people care about
relative things.
On a technical note
To economists and any
mathematicians here:
On a technical note
To economists and any
mathematicians here:
I have in mind a class of
problem where utility
depends on relative actions.
Imagine a person is choosing an
action a to solve:
Maximize u(a) + v(a – a*) – c(a)
where a* is what everyone else is
doing.
Then if v is concave (convex) in
status, it is rational to act similarly
to (deviantly from) the herd.
Subconsciously, humans are
frightened of falling behind:
Subconsciously, humans are
frightened of falling behind:
• Bank lenders and brokers felt they had
to match rivals.
• Home buyers paid extraordinary prices
in order to keep up.
• Money managers -- rewarded on
relative performance against other
managers -- copied what the others did.
When rewards depend on your
relative position
it will routinely be
When rewards depend on your
relative position
it will routinely be
(i) dangerous to question whether the
whole group’s activity is flawed
(ii) rational simply to compete hard
within the rules that govern success.
When rewards depend on your
relative position
it will routinely be
(i) dangerous to question whether the
whole group’s activity is flawed
(ii) rational simply to compete hard
within the rules that govern success.
Correct dotcom analysts were fired.
The pressures for
conformity are strong.
Herd behaviour is very often
natural and individually
rational. But it has the potential
to be disastrous for the group.
To any students here
These psychological forces are
powerful and will come around
again, a number of times, in
your lifetime.
• Now to the housing market,
which started our problems.
Real house prices in the United
States over a century
Real house prices in the UK 1975-2006
So all the historical data
suggested that house prices
were unsustainable.
Yet -- even two or three years
ago near the peak -- few people
spoke about the apparent
likelihood of a crash.
Yet -- even two or three years
ago near the peak -- few people
spoke about the apparent
likelihood of a crash.
…another kind of herd action.
Unfortunately, we do have to have
some lean years
Some ideas to end:
Conclusions
#1 In the next century, new
measures of human well-being
will be required.
Conclusions
#2 As social scientists, we
need to understand better the
connections between mental
and physical health.
Conclusions
#3 Heart-rate and blood
pressure data have particular
potential in policy design.
Conclusions
#4 Social scientists will, I
believe, collaborate more with
doctors and epidemiologists.
Conclusions
#5 Economists need to
incorporate herd behaviour
more fully into standard
models.
More broadly on well-being
More broadly on well-being
Policy in the coming century
may need to concentrate on
non-materialistic goals.
More broadly on well-being
Policy in the coming century
may need to concentrate on
non-materialistic goals.
GNH not GDP.
Thank you.
Happiness, Money, and
Your Heart
Andrew Oswald
Warwick University
Papers downloadable at www.andrewoswald.com
* I would like to acknowedge that much of this work is
joint with coauthors Nick Powdthavee, David G.
Blanchflower, and Rainer Winkelmann.