The Economist recently published a nice graph comparing countries by placing log GDP per capita (in PPP terms) on one axis and average life satisfaction on the other. (h/t Art Robson) It appears that the data is from Angus Deaton at Princeton, who has worked a lot on this issue from the economics perspective. This is a topic I’m particularly interested in and one which will hopefully get a longer discussion in a future post (perhaps on my own blog… one day soon…).
In the meantime, if you’re interested, you should check out the insta-classic paper by Stevenson & Wolfers (at Wharton). I’m afraid it’s rather long, but don’t miss the invited comments by others appended to the end. Suffice to say that I think they have added greatly to the debate, but I disagree with their interpretation of the numbers.
6 Responses
Thanks for the input everyone – good thoughts. I really do hope to address this topic more fully at some point. It is important for development, and for economics as a profession, since we talk about utility a lot more than we think about it. Note that I was not endorsing the Economist’s conclusions – just raising the topic and agreeing with them insofar as: why GDP rather than log GDP or something else entirely? As we all know, GDP was never designed to be the catch-all indicator of a country’s status that it is now so often used as. Also worth keeping in mind that their graph is obviously for the countries as a whole, whereas the above/below 15k split (which was a little artificial to begin with) makes more sense at an individual level. See the article that Dan Sacks links to (updating Stevenson/Wolfers) for data along that dimension as well.
After a certain level it is relationships, experiences, and gratitude that matter most in determining Happiness.
Thanks,
Gregory Barsh, Esq.
Chief Happiness Officer
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I’m curious as to why economists focus on averages, when the more interesting lessons seem to be in the outliers. Specifically, The Economist’s lovely graphs seem to suggest that if America and China were to become more like Venezuela, the biosphere would be saved.
I’d like to see a table rank-ordering the well-being efficiency of every country: average life satisfaction divided by PCI adjusted for PPP. Shouldn’t we then learn from the most efficient producers of life satisfaction, and dismiss the poor producers as “uneconomic”?
Julian,
With Stevenson and Wolfers, I’ve written a follow-up to the Brookings paper, which is shorter and (hopefully) more accessible while presenting the same facts. Here’s the link: http://bpp.wharton.upenn.edu/jwolfers/Papers/SWBIncomeEconomicGrowth.pdf.
Dan Sacks
Contrary to the Economist’s writeup, the graph doesn’t tell you anything new about what’s happening over $15K GDP capita. The correlation between happiness and GDP per capita above $15K is low. Likewise, the correlation between happiness and log GDP per capita above $15K is low.
My comments come from the context where I have been. Raised in semi-urban India, lived most of my adult life in urban India, and exposed to a large extent to rural India.
Happiness is definitely not a linear function of economic growth. Till you reach a level which takes care of your real and perceived needs, this article may have the right conclusions. However, after that level, happiness depends on many other factors, and would by and large be inversely proportional to the wants of the individual.
The ladder of life as a questionnaire tool is biased towards the results the authors wanted, since it only takes care of the part of life mentioned above where happiness is a linear function of the economic level of the individual, and does not really address the non-linear part. Of course, what I do not know is how many in the sample were in the linear part. If that number is high, then the conclusion is inaccurate for the larger humanity across the world.
Even within the linear section, a self-estimation of where on the ladder one is depends not just on the income, but his or her own perception of what is the happiness reachable by him if he had a higher level of income. So results will vary regardless of an absolute factor of income level, and it is also debatable how much influence income level in isolation has on the overall happiness, and thereby a lot on the socio-cultural context.
So, maybe, the conclusion is right in certain ‘overall-developed’ countries of the world like US, but not in countries like India which is a very huge eco-system by itself economically, and where the factors towards happiness are multifaceted and heavily dependent on each of these factors, and not just on the income level.