Income vs happiness

[Stephen vJ]

Got this yesterday. One of the most significant articles I've seen in years. Read the executive summary to my 11-year old, who promptly said: "But isn't that obvious ?". Sadly, no. Grown-ups often lose sight of the obvious in rather fundamental ways, so this moves us back to what should have been obvious all along, but was not.

S.

[Stephen vJ]

Darnit ! Meant to paste the link, not the actual document. Sorry to all who are on a slow or limited internet connection.

S.

Sent from an electronic device located somewhere on earth...

On 02 May 2013, at 18:22, Stephen vJ <sjaar...@gmail.com> wrote:

> Got this yesterday. One of the most significant articles I've seen in years. Read the executive summary to my 11-year old, who promptly said: "But isn't that obvious ?". Sadly, no. Grown-ups often lose sight of the obvious in rather fundamental ways, so this moves us back to what should have been obvious all along, but was not.
>
> S.
>

> <subjective well being income.pdf>
>
>
>
> Sent from an electronic device located somewhere on earth...

[jacos...@gmail.com]

No worries, even my BlackBerry had no problem downloading it....
Sent from my BlackBerry® wireless device

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[Trevor Watkins]

With all due respect, this is not new or news. I suggested that Happiness=log(delta(Income)) in my talk at Libsem last year, and in various emails on this forum. I grant you I did not consider whether extremely rich people ever reach a point of satiation. In what I would describe as the "Versaille effect", your cited paper confirms that there is no immediate limit to the excess that money can buy. Whoopy twang! How deeply frustrating that you can only drive one Ferrari at a time.

Whats to learn from this? Same lesson as before, the returns to happiness on increasing wealth beyond a certain limit are marginal, but not zero.

Trevor Watkins - Base Software
bas...@gmail.com 083 44 11 721 - 042 293 1405 - (fax)0866 532 363
PO Box 3302, Jeffreys Bay, 6330

On 2 May 2013 18:22, Stephen vJ <sjaar...@gmail.com> wrote:

Got this yesterday. One of the most significant articles I've seen in years. Read the executive summary to my 11-year old, who promptly said: "But isn't that obvious ?". Sadly, no. Grown-ups often lose sight of the obvious in rather fundamental ways, so this moves us back to what should have been obvious all along, but was not.

S.

[Frances Kendall]

Stephen did you take note of this in the conclusion?

To be clear, our analysis in this paper has been confined to the sorts of evaluative measures of life satisfaction and happiness that have been the focus of proponents of the (modified) Easterlin hypothesis. In an interesting recent contribution, Kahneman and Deaton (2010) have shown that in the United States, people earning above $75,000 do not appear to enjoy either more positive affect nor less negative affect than those earning just below that. We are intrigued by these findings, although we conclude by noting that they are based on very different measures of well-being, and so they are not necessarily in tension with our results. Indeed, those authors also find no satiation point for evaluative measures of well-being.

The question remains how do you measure well-being/happiness?

 

On 02 May 2013, at 6:22 PM, Stephen vJ <sjaar...@gmail.com> wrote:

[Stephen vJ]

There has been a lot of effort expended by many economists in the last few years in trying to show at what exact point an increase in wealth can no longer buy you additional happiness, or put differently, at what point things like equity will become more important than growth. Now you know from my LibSem presentation that I don't subscribe to the view that there is a trade-off between the various macro-economic goals of growth, stability, equity and full employment of resources, but have shown that you can have all of them simply by setting people free. Yet, most economics textbooks still say that there is such a trade-off and many economists believe it. They concede that growth brings happiness, but say only up to a certain level of wealth, after which they say other things become more important contributors to happiness than more money does. This is significant for us, because if that hypothesis is true, there could be an argument for socialism beyond a particular point of capitalist development. This paper shows that the hypothesis, which has become rather widely accepted of late, is not true. Yay for us.

S.

Sent from an electronic device located somewhere on earth...

[Stephen vJ]

Yes, I did. Rather stupidly obvious disclaimer that... Note the words "just below". So what they are saying is that, a person earning $75100 is not much happier than a person earning $74900, and that this result could be explained by the fact that the 2nd guy's happiness was measured in a different way. Wow. The substance to word ratio for that bit is infinite.

S.

Sent from an electronic device located somewhere on earth...

[Frances Kendall]

Well it's worth checking out what Kahneman says, he is looking at "positive affect" ie emotion rather than an intellectual assessment of well being. And of course not talking about $100 difference.

Sent from Frances iPhone

[Stephen vJ]

I'm a notoriously bad Googler. If I search for Kahneman, I am sure to find the wrong thing. Can you maybe help with a link or a summary of his position ?

S.

Sent from an electronic device located somewhere on earth...

[Stephen vJ]

Oh, you mean the article referenced below ? I'm on it...

S.

Sent from an electronic device located somewhere on earth...

[Stephen vJ]

I love the Internet.

From Kahneman and Deaton: "When entered in multiple regression model to predict well-being along with other aspects of life circumstances (marital status, age, education), the effects of household income are almost invariably both statistically significant and quantitatively important. We report that household income matters for both emotional well-being and life evaluation, and that there are circumstances under which it matters for the latter when it does not matter for the former."

I'm still reading, but this is all good stuff. There goes my productivity for today.

S.

Sent from an electronic device located somewhere on earth...

[Frances Kendall]

I read it in Fast & Slow Thinking, when I get home I'll look it up.

Sent from Frances iPhone

[Frances Kendall]

It's "Thinking, Fast and Slow", chapter 37, p 391 "Experienced Wellbeing", Kahneman and Associates attempted to measure mood and emotional well-being which he points out fluctuates all the time depending on situational factors.

He concludes "the satiation level beyond which experienced well-being no longer increases was a household income of about $75000 in high cost areas...the average increase of experienced well-being associated with incomes beyond that level is precisely zero...

There is a clear contrast between the effects of income on experienced well-being and on life satisfaction. Higher income brings with it higher satisfaction, well beyond the point at which it ceases to have any positive effect on experience...Life satisfaction is not a flawed measure of their experienced well-being, as I thought some  years ago. It is something else entirely."

have a look, it's interesting.

[Stephen vJ]

This is like discovering an un-opened gift under the tree while packing it all in at New Year. The depth of it excites me.

S.

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