Happiness & Public Policy

It is shocking to discover just how much of the debate over politics and policy rests on semi-arbitrary government standards for measuring things. For example, if you believe the Consumer Price Index speaks with absolute authority, then you will believe obviously absurd things, like the idea that real wages have stagnated. Virginia Postrel has a nice short essay in Forbes [free reg. req.] on this aspect of the mismeasurement of economic progress. If Bureau of Labor Statistics true-believers are right, then

… you have to wonder who’s buying all those flat-screen TVs, serving precooked rotisserie chicken for dinner or organizing their closets with Elfa systems. “Anybody who thinks things are getting worse should go to Best Buy and notice the type of people who go to Best Buy,” says economist Robert J. Gordon of Northwestern University.

Gordon is the author of a much-cited study showing that from 1966 to 2001 real income kept up with productivity gains for only the top 10% of earners. What the pessimists who tout his study don’t say is that, while Gordon does find that inequality is increasing, he’s convinced that the picture of middle-class stagnation is false.

“The median person has had steadily improving standards of living,” he says. But real incomes have been understated. The problem lies in how the U.S. Bureau of Labor Statistics calculates the cost of living.

Similarly, the American Enterprise Institute’s Nicolas Eberstadt has a terrific essay on the bizarre and inaccurate method by which the government calculates the poverty rate in the new Policy Review. Eberstadt shows that the official poverty statistics often get things backwards, indicating that poverty is getting worse when it is in fact getting better according to a number of other noncontroversial measures of economic well-being:

The official poverty rate is incapable of representing what it was devised to portray: namely, a constant level of absolute need in American society. The biases and flaws in the poverty rate are so severe that it has depicted a great period of general improvements in living standards — three decades from 1973 onward — as a time of increasing prevalence of absolute poverty. We would discard a statistical measure that claimed life expectancy was falling during a time of ever-increasing longevity, or one that asserted our national finances were balanced in a period of rising budget deficits.

Journalists unfortunately tend to take government numbers as gospel, and therefore end up communicating to the public a badly distorted picture of the state of our economy and society. And far too often intellectually savvy commentators who ought to know better repair to government statistics as if they are pure data, untainted by systematic methodological bias. However, far from a neutral picture of empirical economic reality, we get a funhouse mirror. I don’t think there is any intentional bias in these measurement methods. But there sure is ideological resistance to replacing them with more empirically adequate measures. Things really are getting better all the time, but “reality-based” economic measures might get in the way of some people’s pet policies. And we can’t have that! I think we’ll eventually get better official methods for measuring real income and poverty, but not without a fight.

[cross-posted from Cato@Liberty]

I was delighted to see two of my intellectual fixations—the taste for status and the taste for purity—bundled together in the New York Times.

The urge to achieve social distinction is evident worldwide, even among people for whom prominence is neither accessible nor desirable. In rural Hindu villages in India, for instance, widows are expected to be perpetual mourners, austere in their habits, appetites and dress; even so, they often jockey for position, said Richard A. Shweder, an anthropologist in the department of comparative human development at the University of Chicago.

“Many compete for who is most pure,” Dr. Shweder said. “They say, ‘I don’t eat fish, I don’t eat eggs, I don’t even walk into someone’s house who has eaten meat.’ It’s a natural kind of social comparison.”

Awesome. I have a longish essay forthcoming in the Center for Independent Studies’ Policy magazine about the politics of relative position and status competition. One of my main points is that there is an indefinite number of culturally mediated dimensions of status competition, and competition on some dimensions is beneficial or benign, making it impossible to draw determinate policy implications out of the simple fact that we’re motivated by status. Competition for purity among mourning windows strikes me as benign.

And I recently wrote a piece for Reason laying out why Democrats should stop listening to George Lakoff and start listening to Jonathan Haidt, who has done fascinating work on the psychology of purity and disgust, based in part on the work of Shweder.

I think status competition on moral dimensions can be a good thing, as long as the relavant moral emotions and principles are good. But I think it can also be distorting. I’d guess that some Islamist terrorism is motivated by status competition on Haidt’s ingroup and purity dimensions of moral emotion. But this also accounts in part for very successful church charity drives. The way innate dispositions are mediated by culture is almost the whole ballgame.

Bryan Caplan on Gilbert…

“Money itself doesn’t make you happy,” [Harvard psychology professor Daniel] Gilbert says. “What can make you happy is what you do with it. There’s a lot of data that suggests experiences are better than durable goods.”

I’m baffled. Don’t many durables provide a flow of experiences? A nice T.V. is the obvious example; a fine stereo system’s another. My CD collection is my pride and joy - whenever I worry about being robbed over vacation, my first thought is the sorrow of seeing my CD shelves empty.

I don’t share Arnold’s methodological aversion to happiness research, but this sounds like a very hasty generalization.

Two points. (1) Market egalitarianism. Qualitiative differences between  cheap and expensive consumer goods is almost nil. There is almost no experiential difference between a cheap TV and a “nice” TV. If Deadwood is good on a $2000 plasma screen on HBO, it’s 98% as good on your sister’s giveaway used 19″, a $35 DVD player, and Netflix. The extra expenditure buys almost nothing in terms of the quality of experience. Same with the music. For $4.95 a month, I can get I’m guessing 75% of of Bryan’s CD collection on Yahoo. Capitalism make money worth much less when it comes to manufactured non-positional  goods. (2) Adaptation. The mind is a novelty whore — a change detector. Consciousness loses its grip on the added quality of a premium picture, sound system, etc., very fast. The cheap, almost perfect substitute for an expensive stereo is a cheap stereo.  The cheap substitute for an exquisite meal at the best restaurant in Paris is… what? IHOP in Arlington? A great memory and a great story is an ongoing flow of positive experience. Gilbert is right.

An article in yesterday’s Wall Street Journal (sub. req.) discusses the emerging, more nuanced, happiness research orthodoxy on money and happiness: money doesn’t make people happier, though people with more money say they’re happier. We say we’re happier when we have more money, because, upon reflection, it seems satisfying to be higher-status. But having more money doesn’t actually make you feel better when you’re not reflecting on it.

What happens when high-income earners aren’t contemplating their position in the financial pecking order? Consider a June 30 article in Science magazine by Daniel Kahneman, Alan Krueger, Norbert Schwarz, Arthur Stone and Prof. Schkade.

The five professors analyzed data for 374 workers who were asked every 25 minutes during the workday about the intensity of various feelings. Those with higher incomes didn’t report being any happier, but they were more likely to say they were anxious or angry.

The five professors also studied government data detailing how folks divvy up their waking hours. They found that people with higher incomes tend to spend more time working, commuting and engaging in obligatory nonwork activities, such as maintaining their homes. All of these are associated with lower happiness.

“People who are richer aren’t having a better time,” Prof. Schkade concludes. “But if you ask them about their lives, they report being a little more satisfied” than those who are less affluent.

It seems to me that what they mostly showed is that it is not easy to make money, which is not surprising. It is also not surprising that people who went through the trouble of making money are generally glad they did. For the life of me, I can’t get much out of this study other than that working to make more money can be stressful and the astoundingly obvious fact that a backrub, or whatever, won’t feel better just because the terms of your labor contract provide a higher than average salary.

Kahneman, et al., however, insist on attributing the higher than average SWB for wealthy people to a “focusing illusion,” which makes no sense. That life satisfaction judgments do not track the temporal integration of Kahneman’s “moment utilities” is not evidence that there is some kind of illusion. It is just evidence that satisfaction judgments are value laden, and people value things other than utility.

Suppose there is a big marathon going on. There is a guy running the marathon, and there is a guy sitting in a bar drinking beer and watching it on TV. You sample their experience over the course of the event. It turns out that the guy running the marathon is experiencing high levels of stress, near-exhaustion, searing pain, etc. The guy drinking beer feels pretty good. It’s air conditioned, and he’s got a bit of a buzz on. Now, the marathoner wins the race. You ask him how he feels about his life that day: “Fantastic! It’s the best day of my life!” And you ask the guy who spent three hours drinking beer: “OK, I guess. I really should have been doing yardwork. Good race, though.” The runner does not only not subtract the pain of the race from the pleasure of winning, the pain, and his triumph over it, increases his sense of satisfaction. Because, naturally, his satisfaction judgment is based on values other than pleasure and pain, such as self-command, perserverence, drive, and winning. Is he undergoing a “focusing illusion”? Asburd. The problem is Kahneman’s value theory.

2 comments

I’ve just received the full World DB of Happiness on CD from Rotterdam, which is really inexpensive. I’ve also been teaching myself to use R, the open source stats package. There’s a bunch of simple regressions I’d like to see, but which nobody seems to have done. So I shall do them! Again and again my degrees in studio art and philosophy come in handy. But, seriously, the free resources available online for teaching yourself statistics are truly incredible. When you’ve got a computer to do the math, it doesn’t seem to be that hard!

Here are some hypotheses I’d like to test:

• Steady rates of GDP growth keep SWB levels stable.
• Economies that experience one time negative growth shocks in period one, will see lower levels of SWB in period two.
• Countries with more volatile GDP growth will have lower avg SWB.
• If growth is consistently volatile, SWB will not be more volatile, just lower.
• Economies that experience decelerating growth in period one will see lower levels of SWB in period two.
• Places with a higher risk of political and economic instability have lower levels of SWB.

Basically, I’ve had it up to here with the claims that since GDP growth barely has a positive effect on SWB, growth doesn’t matter, and so policymakers can just feel free to screw around with policies that will reduce growth rates. We’ll see!

Oh, and if you know of any studies that test any of these hypotheses, plese fill me in….