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===== Economics - Wellbeing as Something Money Still Can't Buy =====

| <WRAP>
Economics is surprisingly, or perhaps quite logically, one of the richest sources of research on wellbeing. Most notably, it has provided rigorous methods for measuring levels of wellbeing across populations. For example, the Handbook on the Economics of Happiness (Bruni & Porta, 2007) is a compendium of research at the intersection of economics, public policy, and psychological wellbeing. Well-Being: The Foundations of Hedonic Psychology (Kahneman, Diener, & Schwarz, 1999) is an earlier volume that supported much of the growth in this field. In the chapter “Objective Happiness,” Daniel Kahneman provides one of the best introductions to wellbeing measurement techniques available, a topic we discuss in greater detail in chapter 5 on methodologies.

Economics may also help to explain the recent growth of lay interest in wellbeing psychology. Richard Ryan and Edward Deci (2001) have identified two periods of peaking interest in wellbeing in the history of psychology: the 1960s and the 2000s. They note that these two periods coincide with times of affluence.

Despite the recent global financial crisis, those in industrialized Western society are still in general relatively wealthier than we ever have been before?gross national product per capita has tripled since the 1960s (Helliwell, Layard, & Sachs, 2012). This wealth has also come with great progress in the development of digital technologies?we are certainly more immersed in technology than we ever have been before. And yet for the so-called industrialized world neither increased technification nor continued increases in wealth have led to much greater psychological wellbeing according to the statistics.

A seminal study by Richard Easterlin (1974) famously provided early evidence that the link between wealth and happiness is weaker than popular culture would have us think. Easterlin found that wealthier people within a country do tend to be more satisfied with their lives at any given point in time, but that happiness does not increase with economic growth over time (a finding henceforth dubbed the “Easterlin Paradox”). In other words, the increased happiness that money can provide is relative and seems to adapt as economies grow. Therefore, using economic growth measures, such as gross domestic product, as proxy measures for a nation's wellbeing is ineffective.

It's also worth noting that, according to Easterlin's research, the impact that wealth has on wellbeing is significant up to the point at which basic needs are met. After that point, the impact is small. Easterlin's results suggest that relative increases in happiness are influenced not only by an individual's state of wealth, but also by how it compares to others. The powerful impact of comparison on wellbeing is echoed in psychological research on happiness and self-esteem, which we look at in more detail in part II.

As Easterlin himself noted, his original work had some limitations. The study combined data from 29 Gallup Poll?type surveys and produced a single measure of self-reported wellbeing on a scale from 1 to 10. Forty years later, approaches to measuring wellbeing have evolved significantly. Researchers such as Felicia Huppert and Timothy So have studied such measures seeking multidimensional approaches for greater validity and explicatory power. We look more closely at these measures in the methodologies chapter. But for now we consider how findings in economics have influenced change in public policy.

Easterlin's work has been the focus of dozens of studies and remains hotly debated. The United Nations' first World Happiness Report (Helliwell et al., 2012) provides a summary of the sometimes contradictory literature on this topic. In general, it is understood that economic growth does not automatically increase the average wellbeing of a population. But both wellbeing and economic status need to be unpacked further. For example, the impact of income comparison is significant. When people are asked, “How important is it for you to compare your income with other people's income?” the greater the importance they report, the less satisfied they are with their lives (based on the European Social Survey, as cited in Helliwell et al., 2012).

Furthermore, employment (and presumably its concomitant benefits, security and self-esteem) is a core component of the economic equation. There is no doubt that higher levels of employment have a positive effect on wellbeing. But economic booms often produce inflation, which has a negative effect. In the end, stability seems to be a good target, especially considering evidence that loss aversion (losing x dollars) has a bigger impact than an equivalent gain (receiving x dollars).

It's hard to avoid speculation that the growing interest in wellbeing in the Western world is at least in part due to a gradual societal realization that money doesn't, after all, bring reliable happiness. But this is probably not the whole picture. Significant advancements in our ability to research, evaluate, and operationalize wellbeing are also at the heart of this trend.

For instance, after a seminal study published in Science (Golder & Macy, 2011) showed that social media data could be used to study moods over time, many other studies plundering the wealth of publically available social interaction data have followed in aid of better understanding the human experience. One such study (Mitchell, Harris, Frank, Dodds, & Danforth, 2013) combined geotagged tweets (80 million words in total) with demographic and health information from annual surveys. They used the data to build taxonomies that describe the happiness of states and cities across the United States, to correlate demographic information with wellbeing, and to correlate linguistic features to levels of education and even obesity rates. These studies provide evidence that public social media data can be used to investigate communities' overall wellbeing levels in real time?an incredible opportunity for nonintrusive methods to inform research and even policy.
</WRAP>  | <WRAP>
Economics is surprisingly, or perhaps quite logically, one of the richest sources of research on wellbeing. Most notably, it has provided rigorous methods for measuring levels of wellbeing across populations. For example, the Handbook on the Economics of Happiness (Bruni & Porta, 2007) is a compendium of research at the intersection of economics, public policy, and psychological wellbeing. Well-Being: The Foundations of Hedonic Psychology (Kahneman, Diener, & Schwarz, 1999) is an earlier volume that supported much of the growth in this field. In the chapter “Objective Happiness,” Daniel Kahneman provides one of the best introductions to wellbeing measurement techniques available, a topic we discuss in greater detail in chapter 5 on methodologies.

Economics may also help to explain the recent growth of lay interest in wellbeing psychology. Richard Ryan and Edward Deci (2001) have identified two periods of peaking interest in wellbeing in the history of psychology: the 1960s and the 2000s. They note that these two periods coincide with times of affluence.

Despite the recent global financial crisis, those in industrialized Western society are still in general relatively wealthier than we ever have been before?gross national product per capita has tripled since the 1960s (Helliwell, Layard, & Sachs, 2012). This wealth has also come with great progress in the development of digital technologies?we are certainly more immersed in technology than we ever have been before. And yet for the so-called industrialized world neither increased technification nor continued increases in wealth have led to much greater psychological wellbeing according to the statistics.

A seminal study by Richard Easterlin (1974) famously provided early evidence that the link between wealth and happiness is weaker than popular culture would have us think. Easterlin found that wealthier people within a country do tend to be more satisfied with their lives at any given point in time, but that happiness does not increase with economic growth over time (a finding henceforth dubbed the “Easterlin Paradox”). In other words, the increased happiness that money can provide is relative and seems to adapt as economies grow. Therefore, using economic growth measures, such as gross domestic product, as proxy measures for a nation's wellbeing is ineffective.

It's also worth noting that, according to Easterlin's research, the impact that wealth has on wellbeing is significant up to the point at which basic needs are met. After that point, the impact is small. Easterlin's results suggest that relative increases in happiness are influenced not only by an individual's state of wealth, but also by how it compares to others. The powerful impact of comparison on wellbeing is echoed in psychological research on happiness and self-esteem, which we look at in more detail in part II.

As Easterlin himself noted, his original work had some limitations. The study combined data from 29 Gallup Poll?type surveys and produced a single measure of self-reported wellbeing on a scale from 1 to 10. Forty years later, approaches to measuring wellbeing have evolved significantly. Researchers such as Felicia Huppert and Timothy So have studied such measures seeking multidimensional approaches for greater validity and explicatory power. We look more closely at these measures in the methodologies chapter. But for now we consider how findings in economics have influenced change in public policy.

Easterlin's work has been the focus of dozens of studies and remains hotly debated. The United Nations' first World Happiness Report (Helliwell et al., 2012) provides a summary of the sometimes contradictory literature on this topic. In general, it is understood that economic growth does not automatically increase the average wellbeing of a population. But both wellbeing and economic status need to be unpacked further. For example, the impact of income comparison is significant. When people are asked, “How important is it for you to compare your income with other people's income?” the greater the importance they report, the less satisfied they are with their lives (based on the European Social Survey, as cited in Helliwell et al., 2012).

Furthermore, employment (and presumably its concomitant benefits, security and self-esteem) is a core component of the economic equation. There is no doubt that higher levels of employment have a positive effect on wellbeing. But economic booms often produce inflation, which has a negative effect. In the end, stability seems to be a good target, especially considering evidence that loss aversion (losing x dollars) has a bigger impact than an equivalent gain (receiving x dollars).

It's hard to avoid speculation that the growing interest in wellbeing in the Western world is at least in part due to a gradual societal realization that money doesn't, after all, bring reliable happiness. But this is probably not the whole picture. Significant advancements in our ability to research, evaluate, and operationalize wellbeing are also at the heart of this trend.

For instance, after a seminal study published in Science (Golder & Macy, 2011) showed that social media data could be used to study moods over time, many other studies plundering the wealth of publically available social interaction data have followed in aid of better understanding the human experience. One such study (Mitchell, Harris, Frank, Dodds, & Danforth, 2013) combined geotagged tweets (80 million words in total) with demographic and health information from annual surveys. They used the data to build taxonomies that describe the happiness of states and cities across the United States, to correlate demographic information with wellbeing, and to correlate linguistic features to levels of education and even obesity rates. These studies provide evidence that public social media data can be used to investigate communities' overall wellbeing levels in real time?an incredible opportunity for nonintrusive methods to inform research and even policy.
</WRAP>  |