Unresolved Issues In Happiness Economics From The Conference Honoring The Retirement Of The Field’s Founder

Unresolved Issues In Happiness Economics From The Conference Honoring The Retirement Of The Field’s Founder

That would be Richard A. Easterlin, age 92, retiring this spring from the U. of Southern California after being there since 1981, following an earlier stint at U. of Penn, where he got his PhD under Simon Kuznets.  Kuznets in turn got his from Wesley Clair Mitchell, who was in turn the student of Thorstein Veblen, and it was mentioned (by me actually) at this conference that happened over this past weekend at USC that Easterlin’s work has emphasized the issue of social comparisons that was strongly developed by Veblen in his 1899 Theory of the Leisure Class.  This applies not only to his famous Easterlin Paradox, the starting shot shown in his long ignored 1974 book chapter that started happiness economics, but also in his earlier Easterlin Hypothesis on demography in economic history.  As it was, this conference focused on happiness economics, with several leading figures in the field present.  I shall note some matters that were disputed at the conference and remain open.

Probably the most hotly disputed is the matter of the relationship between age and happiness (more frequently labeled “social well being” or “life satisfaction”).  The current more or less conventional  view is that this is on average a U-shaped relation, at least in the US, with people happy at 20 but with this declining to about 45 or so, and then rising after that.  There are serious problems with measuring this, especially the fact that we do not have full panel data following individuals throughout their lives so as to avoid the bias induced by the fact that happier people tend to live longer than unhappy ones, which skews results at the upper age end for simple cross-section studies.  A more recent finding from European nations suggests this may be more of an M-shape, with happiness actually rising a bit from 20 into the late 20s or so, declining to about 45, rising to about 70, but then either plateauing or even declining slightly after that.

However, looking across nations one finds apparently more diverse findings, with some showing patterns that simply decline from youth on.  This seems more prevalent in poorer nations where there may not be old age pension systems.  Another matter is that there may be changes in the shapes of this pattern across nations based on kinds of employment systems, family relations, and community patterns, with supposedly “nicer” systems leading to some smoothing out of that midlife crisis dip.  This argument, put forward by John Helliwell at the conference, lead author of the recent UN study on happiness, was sharply challenged by Andrew Oswald in the most heated exchange of the conference.  This matter is definitely an open and unresolved question that can get people worked up.

On the matter of old age pensions possibly playing a role in improving happiness for older people, a general theme not seriously disputed, although details were, is that better social safety nets seem to  be associated with higher levels of happiness in nations (along with greater income equality).  This was a major theme in Easterlin’s own closing remarks, who claimed that in general social safety nets are spreading or improving around the world, despite some setbacks here and there, leading him to take an ultimately optimistic view of the future of the world.  A particular case discussed in several of the 24 presentations by some of his former students involved China (not all presentations were by his former students).  There reported happiness levels were declining from about 1990 to 2005, with them rising since then.  Easterlin and his students identify as a likely important factor in this a collapse of the social safety net during the declining happiness period, with a reinstitution of it since supporting the increase in happiness.  This has involved both health care and old age pensions, with the introduction of an old age pension system in rural areas between 2009 and 2013 important for the turnaround and recent increase in happiness.

The other major area of disagreement, although people were less vigorous in arguing about this as it is a central view of Easterlin’s himself, involved his famous Paradox.  The Easterlin Paradox is that at any point in time in a nation, happiness is positively correlated with income, but over time, rising income does not increase happiness.  People seem to view themselves relative to others, the central Veblenian argument. The poster boys for this from his 1995 JEBO paper were the US, where measured happiness peaked in 1956 (and is falling sharply now) and Japan.  However, many, especially Justin Wolfers and coauthors (none of them at the conference), have sharply challenged this argument.  In a paper, “Paradox Lost,” in the special issue honoring him that Easterlin wrote and I published in the journal I edit, Review of Behavioral Economics(ROBE), he responded to his critics and argued that his paradox holds in some disputed nations (especially in Eastern Europe) if one examines the data carefully and properly enough.  He did not address this himself at the conference, but several papers did.  According to several, some nations clearly fit the paradox, with US, Japan, China, and most of Northern Europe doing so.  Some others clearly do not (with rising incomes apparently being associated with rising happiness levels), with Southern Europe and parts of Latin America fitting that, with others up in the air, including Eastern Europe.  This is a complicated matter clearly open to further research and debate.

Regarding the US, a presentation by Carol Graham was very pessimistic about the near term future of the US, with a collapse of happiness among poor whites the main theme, with declining life expectancies and the opioid epidemic major themes.

In any case, I was honored to be invited to participate, and I look forward to future research on this and other related matters in the future (with the relation between gender and happiness also an open question, although less discussed at the conference than these others).

Barkley Rosser