Happiness & Public Policy

Economists Andrew Oswald and Andrew Branchflower begin a very interesting new NBER paper [$$$] on the relationship between levels of self-reported happiness and blood levels with this dubious claim:

For effective social and economic policies to be designed, it is necessary for policymakers to be able to measure human well-being.

They better hope they’re wrong, because if they’re right, then effective social and economic policy cannot be designed! Oh no! 

Why? Two reasons:

(1) Human well-being, as opposed to the several dimensions or components of well-being, is pretty much impossible to measure.

Why? Because the specific nature of human well-being is relative to the individual and the components of well-being are diverse and must often be traded against one another. 

What does this mean? Let’s start with the relativity of well-being. The achievement of valued aims (meaningful goals, important personal projects, whatever you’d like to call it) is a component of human well-being if anything is. However, the content of valued aims varies from person to person. It follows pretty straightforwardly that the specific requirements of well-being vary from person to person.

(For those of you on the lookout for the scourge of “post-modernist relativism,” please note that this kind of “relativism” is in fact a kind of relativism, and is also completely innocuous, entailed by the uncontroversial fact that different people have different personalities, different tastes, and different “callings.”)

Next, consider the diversity of the components of well-being and the potential conflicts between them. Health and longevity are components of well-being if anything is. But so is the individual achievement of valued aims. Some people’s perfectly reasonable aims  may be incompatible with maximizing their health and longevity. Imagine a cholesterol-saturated gourmand who would rather die than give up his foie gras, or an adventurer who draws profound meaning from facing down life-threatening challenges. So… how much weight do we give to one component of well-being —  health and longevity, say – relative to another — for example, the achievement of valued aims that conflict with maximal health and longevity? The answer is that there is no answer — no answer science and empirical evidence compels us all to agree on, at any rate.

The upshot, then, is that while we can measure various dimensions or components of well-being — whether it be health and longevity, the experience of pleasure, a sense of self-efficacy and control, the development of basic human capacities, or the achievement of valued aims — we cannot measure well-being as a whole because Mother Nature has nowhere posted a table of exchange rates between the various values that compose individual welfare. It’s simply not out there for the scientist to find.

Now, there may be a rough cultural consensus at any time and place about the relative weight to place on competing individual welfare-constituting values. But this consensus, to the extent that there is one, has to be discovered, and changes as time goes by. So, at this point, we’re not “measuring well-being” so much as attempting to find some bit of overlap if people’s conceptions of well-being. We can use the overlap to base a few general principles of mutually beneficial social interaction almost everyone will be willing to affirm. But the larger and more diverse the society, the smaller and more general the overlap. There are always broad swathes of often heated disagreement in pluralistic societies. And that’s what principles and institutions of liberal neutrality are for: to peacefully accommodate the inevitable lack of consensus about questions of value in open, cosmopolitan societies.

Would you say that a set of policies were “effective” if it peacefully and stably coordinated the behavior of millions of individuals in pursuit of their valued aims, and constantly increased their capacity to to realize them, despite the fact that there are as many conceptions of well-being as there are people?  Would you consider such a set of policies “effective” even if we didn’t know how to measure human well-being scientifically? 

(2) Policymakers have no incentive to accurately measure human well-being – even if it was accurately measurable — or to appoint, or take counsel from, those who do.

Lucky for them, Branchflower and Oswald begin their paper with a monumental falsehood. Their introductory proposition implies, among other things, that effective social and economic policy never has been designed! Their general idea, I take it, is that in order to design something effective, you have to be able to measure “effectiveness.” This may well be, but it

But this is also false. There are many things that work well without most of us knowing how or why — without know the meaning of “well.” And there are ways of “designing” through trial and error that delivers results without delivering knowledge of the mechanisms.  

I think my considerations (1) and (2) imply that not only does effective policy not require that policymakers are able to definitively measure well-being, but that effective policy is much more likely if we fully grasp the indisputable empirical facts that conceptions of well-being (and of “effective”) are plural (and this is so whether or not I am right on the philosophical point that the constitution of well-being for each individual requires trade-offs between different dimensions of well-being) and that policymakers are neither scientists nor reliable consumers of science. 

Maybe it is disappointing to social scientists — frustrating even! – to face up to the fact that no interest or competence in social science whatsoever is required for a hugely successful career as a policymaker, which is to say, as a politician or bureaucrat. This is even the case in places where social science flourishes most! Disappointing as that fact may be, social scientists may want to take it into account when  thinking about the design of effective policy.  

There’s an interesting, but rather strangely house-size obsessed article (the author has written a book on building your own house) on happiness in last week’s Washington Post to which Robin (and my Cato boss, David Boaz) alerted me. The author interviews economist Luis Rayo, who has written a fascinating theoretical paper [pdf] with Gary Becker formally modeling, among other things, the way an idealized process of natural selection would fit organisms with a strong desire for good feelings while also ensuring that the good feelings don’t last very long. In an analogical nutshell: satiation just can’t last long; we’ve got to get hungry all over again to be motivated to get off the couch and look for the next meal. The way I interpret the paper, they nicely show that the process of psychological “adaptation” or “habituation” — the alleged basis of the so-called “hedonic treadmill” — is more a precondition for running at all (like friction) than a way of running in place. Anyway, in the Post article, Rayo points out that not all satisfactions are subject to adaptation.    

More important, [Rayo] went on to say, the psychology literature and surveys clearly show that not all happiness is ephemeral and geared to endlessly moving targets. With nonmaterial things, the target does not move.

“Exercise will absolutely make you feel better. Your social network, family and friends can bring permanent happiness. Longtime relationships can bring long-term satisfaction.”

The claim here is… what? Satisfaction from money is hit hard by adaptation, but satisfaction from health and social embeddedness isn’t?

It’s truly hard to know what to make of the claim. Because I’m certain Rayo knows what he’s talking about, I’m sure he didn’t say “nonmaterial things” are not subject to adaptation. I assume the author intends something like “non-pecuniary,” since exercise is a material thing, as are our friends and family members (to be pedantic about it). And, of course, money can buy both gym memberships and the leisure to nurture our emotionally sustaining relationships. “Material things” and “things money can buy” are not well-defined categories about which one can make useful psychological generalizations.

Suppose tomorrow a Swiss bank account was opened in my name and one billion dollars was deposited in it — but I didn’t know it. It would be pretty surprising if this had any effect on my feelings or my satisfaction with life. Having money and knowing it does affect “happiness” (as construed by survey research) by providing a sense of security and control; we gain something simply in knowing we could convert our cash to consumption. But money affects happiness mostly through actual consumption. No doubt some patterns of consumption are more subject to adaptation than others. Sadly, happiness research has fixated almost entirely on income levels, and almost not at all on consumption levels, much less on differently composed patterns of consumption at different levels. It is safe to say that we know almost nothing about this.

A number of happiness researchers are souring on the strong adaptation thesis popularized by Brickman and Coates’ famous paper on lottery winners and amputees. Richard Easterlin claims to show that the fairly stable level of average self-reported happiness over the life cycle (rises slowly and slightly from about 18 to 45 and then declines slowly and slightly) is a function of offsetting changes in life-domain satisfaction, and not so much adaptation. So, for example, average satisfaction with health declines sharply from middle age. But satisfaction with finances rises sharply. Strangely, Easterlin takes declining health satisfaction as evidence that we do not adapt fully to changes in health, but he does not take sharply rising financial satisfaction as evidence that we do not adapt fully to gains in financial resources. Here is what he says about the latter:

While people’s incomes typically rise during their prime working years, and then level off and decline, satisfaction with their financial situation is, on average, fairly constant until almost age 40, after which it begins to rise, with the largest increase in late life. What must be happening is that conceptions of material needs are being readjusted as actual life circumstances change. Relative to income these needs are lowest in late life, and financial satisfaction correspondingly greatest.

It strikes me that there is an obvious hypothesis Easterlin neglects. Financial satisfaction shoots up right about the time in the life-cycle when income plummets — retirement from the work force. You can see the perversity here in looking primarily at income as a proxy for material well-being. On average old people have relatively small incomes, because they are retired, and relatively huge stores of wealth, because of compound interest. And wealth increases non-linearly due to compound interest, with the biggest gains coming later in life. Forty-something is about when expenses on children fall sharply and the compounding effects of interest starts to get good. And retirement provides the leisure time to enjoy the consumption of accumulated wealth. I conjecture that experience helps us figure out what we really like, and so old people are more likely to consume in patterns that are truly enjoyable.

Click here for an image of the charts from Easterlin’s paper. Financial satisfaction is the only thing keeping us from being miserable in old age! The lasting satisfactions from friends and family all plummet! Now, it seems to me pretty arbitrary to interpret the permanent negative effect of declining health satisfaction as disconfirming the adaptation-setpoint hypothesis but to interpret the permanent positive effect of increasing financial satisfaction in terms of some kind of complicated story about shifting conceptions of material needs. Both explanations should have the same form: Declining health makes us less happy, and we don’t get used to it. Increasing wealth, and the increased leisure and consumption it enables, make us more happy, and we don’t get used to it either.

[Cross-posted from Overcoming Bias.]