Objects and Arrows

In Angus Deaton’s study of the relationship between increases in wealth and levels of happiness, [pdf is here] Denmark stands out as a case which supports his argument that increasing the GDP of a country increases the happiness of its people. Having recently spent some time in Copenhagen, I’m a bit suspicious of the outrageously high level of self-reported happiness among the Danes.

Now if you want to see some happy people, come to El Paso. Back in 2001, after moving here from Boston and right after 9/11 I was freaked out to by the phenomenon of people driving alone with big smiles on their faces. What the hell is wrong with them? Don’t they know that we’re supposed to be terrified, depressed and mean-spirited. I suspect I’m one of those smiling freaks now. And no, just because the students laugh at your jokes and smile and write nice things about you on the internet, it doesn’t mean you’re a great teacher, it just means that you’re in El Paso. In spite of the growth in the city in recent years, you can still tell the new arrivals to El Paso by their bitchy attitudes in the stores and the fact that they aren’t smiling all the time. This is definitely one of the happiest places I’ve ever seen. As is commonly noted, we have unusually high levels of lithium in our water supply, (see this story from the 70s here) but according to more recent studies you’d need to drink 600 glasses of water to get the equivalent of a medically significant dose.

However, in spite of all this smiling, I’d be willing to bet that for all kinds of complicated reasons, people here would under-report their happiness. In surveys of this kind, self-reporting, as Sen and others have pointed out for years, is a bit suspect.

By contrast with El Paso, people in Copenhagen seem content enough, but (at least in my experience) there’s definitely not as much smiling and there is virtually zero complaining… they are consistently chipper and hardy in their self-reports… oh yes, just a little bit of cancer, nothing to worry about, let’s not make a fuss.

In any event, Deaton’s study makes good sense in general terms and contradicts the fashionable notion that wealth and happiness are not strongly correlated. So, in spite of reservations I buy the main conclusion. As the Economist notes:

here is a damning snippet from Mr Deaton’s abstract:

Average happiness is strongly related to per capita national income, with each doubling of income associated with a near one point increase in life satisfaction on a scale from 0 to 10. Unlike previous findings, the effect holds across the range of international incomes …

And this is so even though happiness research is marred by the error of relating a variable on an unbounded scale (income) to a variable on a bounded one (self-reported happiness), which is sure to have muted the effect.

Needless to say, this is yummy delicious news for the anti-anti-globalizationists as you can see from that same Economist blog entry [here] with the tirade against anti-globalization continuing here.

In the second piece the Economist argues predictably that increased income inequality is not such a terrible thing given the fact that the poor are getting a bit richer as the result of increased trade. This, in spite of the fact that personal happiness looks like it’s strongly tied to one’s standing relative to one’s peers. As I discussed elsewhere on this blog, according to Glenn Firebaugh and Laura Tach, one’s reported level of happiness correlates strongly with one’s relative place within one’s age/peer group. They have a nice paper on this effect (here).

Deaton’s analysis is relatively straightforward as far as I can tell. However, one of the factors which (one a very superficial review of the final results) also seems to play a role here is the effect of income inequality on the overall standing of a country adjusting for income. Even with their new wealth, Denmark is still a highly egalitarian country while countries with bigger income gaps and higher GDP seem to have lower standing with respect to happiness. See the figures at the end of Deaton’s paper. So, I bet that income inequality would have some detectable effect here.

Having said that, The Economist has a strong point when they say that worries about income inequality should be subordinated to worries about poverty. Obviously the more morally pressing concern is how to make the poor richer. We should all be willing to tolerate the existence of more multi-billionaires if that turns out to be a by-product of pursuing that goal. The Paul Krugman’s of the world would likely agree. [his blog is here]What The Economist misses(or ignores) in Krugman’s worries concerns the political implications of a weakened middle-class in the US, rather than income inequality per se. While I regularly read the Economist and its blogs, I’m almost at the point where I can predict the argument of the article by looking through the table of contents. If you read it, you know what I mean…Organic farming… guess what, it’s bad for the environment… etc. Maybe there’s an algorithm for writing Economist articles. In any event, they reveal their nasty side in their criticism of Krugman here.