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Electing Happiness

There is so much to say about the continuing research into happiness and other indicators of wellbeing. I’m so excited that smart economists like Justin Wolfers and Robert Frank are devoting time to it. Over at the Aspen Ideas Festival they have a must-watch discussion on the latest data. Wolfers collapsed any remaining support for the “Easterlin paradox” and provided completely compelling evidence for a correlation between raising income and rising happiness/life satisfaction. Here’s a graph the New York Times made using Wolfers’ and Stevenson’s research.

Given that high correlation of happiness and rising wealth along with the fairly strong predictive power of the change real disposable income for presidential vote percentage I couldn’t help but wonder if the rate of change in happiness would be even more predictive of presidential elections.

It’s plausible to think that an individual’s change in life satisfaction would be even more highly correlated than income changes since it picks up more factors that might influence someone’s vote. I’m skeptical of any single metric to predict an election, but think my hypothesis has potential to have a higher correlation than many other measures. In contrast, the unemployment rate and change in gross federal debt presumably don’t necessarily have an obvious and direct effect on a particular voter. What could be more direct and encompassing of how issues effect voters than change in subjective wellbeing?

It’s important to look at the change in happiness for voters, not, for example, average happiness. If you look at page 57/figure 20 of Happiness and Income over Time in the United States (average happiness) we see a slightly downward sloping line, but that’s most likely due to the fact that income gains haven’t spread evenly. Similarly, I imagine that’s why GDP growth isn’t as predictive as some might expect.

I don’t have enough data myself to test my hypothesis, but I’d be very curious of the results if any interested political scientist wants a project. Any readers have any thoughts or critiques?

[update: July 18th]: John Sides of The Monkey Cage helpfully clears up some of my questions on this topic. Here’s his email response to me in full:

Dan,

The challenge is that, as far as I know, there aren’t good indicators of happiness going back very far.  A typical economic forecasting model for presidential elections will start in 1952 or so.  The Stevenson-Wolfers paper reports on a handful of early studies, but most of the data is much more recent.  The General Social Survey goes back to 1972, so encompasses 10 elections — still relatively few on which to base inferences.  (This is Silver’s critique of the forecasting models, obviously.)

In general, though, I am sympathetic to the notion that subjective well-being might tap some politically relevant feelings that aren’t captured by GDP or income growth.

Best,
John

I suspected that might be a problem; we’ll have to wait for more data to see if my hypothesis is confirmed. It has some potential though. More frequent measures of subjective satisfaction may be necessary as well.

I strongly recommend everyone to read John Sides and the other contributors at The Monkey Cage – an essential resource for anyone interested in political science.

Growth Domestic Prosperity

June 23, 2011 5 comments

I’m always happy to gain new readers, even the ones that challenge me. In a way, the dissenters are the most useful; recently, Lauren Sheil questioned one of my premises.

“Why does everyone assume the perpetual economic growth is not only possible but even a good thing?”

I tried to answer that under the original post, but our short back-and-forth in the comments got me thinking further about what economic growth means and how that applies to today’s policy disputes. Many of my posts focus on the problems our world faces, but our discussion reminded me of the importance of stepping back and noticing just how good we actually have it. Let’s take a look at some graphs that provide some perspective on our current situation.

(source)

Even if you conclude that most of this growth went to the richest Americans that doesn’t mean everyone wasn’t gaining from this remarkable increase in wealth. For example, as Matt Ridley explains in The Rational Optimist, even today’s poor are substantially better off from even a short time ago.

Today, of Americans officially designated as ‘poor’, 99 per cent have electricity, running water, flush toilets, and a refrigerator; 95 per cent have a television, 88 per cent a telephone, 71 per cent a car and 70 per cent air conditioning. Cornelius Vanderbilt had none of these. Even in 1970 only 36 per cent of all Americans had air conditioning: in 2005 79 per cent of poor households did.

Someone might counter that this all well and good for fat-cat Americans, but what about the rest of the world: how has economic growth benefited them? Let’s take a look at another graph.

Today, more than half the world is middle class. Economic growth made this possible. With economic growth comes better health, longer lives, more choices, more happiness, and much more. Expressing cheerfulness at our relative prosperity to ages past doesn’t mean we can ignore the pernicious effects of inequality, contemporary poverty, or any other problems still with us. It should remind us exactly why economic policy should focus on growth. People are suffering economically now precisely because growth is weak. Here’s the GDP data I grabbed from the St. Louis Fed.

FRED Graph

Growth has mostly been trending below 2.5%. In other words, all those unemployed people aren’t making new things like air conditioners or better homes and aren’t providing services that make our lives more comfortable. As policymakers lose focus on getting the unemployed back to work they aren’t just failing those individuals, they’re depriving everyone of more wealth and better lives. A stagnant economy that doesn’t produce more things means less for everyone – today’s growth is hardly enough to keep up with the population increase. If we hope to look back with memories of how only 65% of Americans had broadband access or any other good someone enjoys today remember that we need to grow to prosperity.

Categories: Economy Tags: , ,
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