Notes from talk by Dr. Betsey Stevenson.

I attended a talk by Dr. Betsey Stevenson, about her research on the effects of income on happiness, and on the declining happiness among women. She also gave a brief talk about how she got where she is, and about grad school. below are my notes.

Do not choose grad school based on one person. All good people have one eye on the door. Harvard: policy oriented, how do public policies change people’s life? Gender, family issues. Divorce laws change incentives for domestic violence? For people to invest in marriage? How does the setup for legal contract of marriage change marriage/divorce?

Title 9: couldn’t treat men/women differently in education, crafted by crafty female legislators. It applied to sports, even though it wasn’t stated. Passed in 1972. Spent the next 6 years fighting over whether it applied to sports. 1975: passed that it applies to sports, including football. So how did that change sports? Boys sports grew most in states that expanded girls sports the most. Gap between girl/boy play sports predicted by opinion about public issues: abortion, women in politics. People believing in rights/equality à more sports playing equality.

What makes people well off? What does increased well being mean? Don’t ask people, look at their actions, their revealed preference. Maybe there’re things other than purchases? People make mistakes in their actions. People have tendencies to make the same mistakes. Underestimate high probability, overestimate low probability events. In addition, there should be no difference to you whether you have opt in/opt out of organ donation for the sticker, so behavioral bias. People save a lot more w/ opt out than opt in savings plan.

Best example: Harvard/MIT paper. Are people better off by increasing cigarette taxes? Make people worse off because revealed preference, they want to smoke. So we could make people better off by pricing people out of cigarettes. Patronizing? People don’t know what’s good for them, make them better off by intervening in their behavior. Think about it as externality of the self now against the self in the future. So tax the now self. If government going to have these policies, how do we evaluate them? Can’t use subjective data.

Got involved in happiness research by reviewing a lot of papers that used subjective well being data. Lots of papers found that women were made worse off by policies for equalities. Took step back, showed that there’s an overall trend in declining female happiness. Looking before and after intervention doesn’t tell you much about your change because everything else not held constant. Took advantage in state variation in title 9 binding. So 50 time series experiments.

How can we trust subjective well being data? There’s no good in sending money to poor people in Africa, skeptical of lack of trend between national income and happiness. Easterlin found statistically insignificant results, not no relationship between subjective well being and GDP. Looked at bigger sample size, gallup world poll, found different coefficient for GDP. None of the old data sets could reject 0 or the coefficient we found. Showed importance of careful research.

US census, discovered coding error in disclosure technique, messed a bunch of people up. Saw that at age 65, there was a 25% reduction in marriage. Turns out swapped ages w/ 85 year olds. Looked at age ratios in public version, there are more men than women in late 60s, early 70s. looked at official population counts, there are more women than men.

In world value survey, done in waves. Ex. 80-84. To get average of the country, which years GDP compare to? Look at survey, tells which year in field. For most of the countries observed, the GDP doesn’t change much from year to year. Becomes harder to figure out GDP for countries like Iraq. Their results don't change much if include all the countries

Rise in married men/women’s happiness, but men rise more than women. Marriage makes people happier, or happy people much more likely to get married in next year. People who are first asked about their marital happiness answer higher to question about their actual happiness. GSS was very clever and did split sample: ½ people got it the new way and ½ the old way.

Subjective well being and income.

1974: Easterlin, launched econ research into use of life satisfaction research. Looked at econ growth and subjective well being. Happiness, life satisfaction, satisfaction ladder. Idea of what the best possible and worst possible life doesn't vary much across the world. These questions ask you to evaluate your life, not how happy you are at the moment. These evaluative measures correlate well w/ GDP per capita. Subjective well being correlated w/ brain scans, genuine smiles, so good measure of actual happiness.

Behavioral bias may make revealed preference a bad indicator of well being. Smoking. Can be difficult to elicit people’s valuation of public goods. Evaluate well being before and after policy change, like putting in public parks. As policy maker, should my only goal be to maximize happiness? People who have children are less happy. That means we shouldn’t have children?

How is subjective well being related to overall happiness? To GDP per capita? Money associated w/ subjective well being?

Easterlin: getting more money isn’t going to make people happier except as a function of increasing social rank. People who work on subjective well being people were leftists, didn’t like the idea that giving money to poor wouldn’t make them better off. 1990s view: belief that it helps absolutely in poorest countries because richer countries satiated. Income satiation romantic wonderful idea.

Since rich people are happier than poor people, and rich countries are equally happy as poor countries, then only relative dependence pressures matters. Policy implications: when people work, they’re only improving their social rank so imposing cost on other people, so wealthy people should be taxed for their externality.

New view: Gallup World poll shows GDP per capita and average happiness across countries highly correlated; income matters for subjective well being beyond changing social rank. Absolute income matters in addition to relative income.

	Stylized:	Stevenson/wolfers
Within countries:	big effects	Big effects
Between country:	small effects	Big effects
National time series:	no effects	Big effects
International panel: fast vs strong growth:	no effects.	Big effects

Different studies measured happiness on 4 point, 10 point, and 11 point questions: Create cardinal measure. Ordered probit: think of mean as 0 all countries. All 35 years of GSS data, average happiness for given year, given category.

Real family income for one year: no correlation w/ happiness because not representative of lifetime income. In top 25 countries, household income correlates w/ happiness.

Easterlin: compared USA, Canada, and France.

Stevenson and Wolfers: look at gallup world poll. Ask people questions about their lives, in a consistent way. Across countries, See slope of 0.4 when income on log scales.

1% increase in GDP has 3x larger effect in rich countries, but $1 rise has 3x larger effect in Jamaica, 20x larger in Burundi than USA.

National time series data:

Japan. Life in Nation survey. Easterlin showed that Japanese didn't get much happier postwar. Most other countries doesn't get wealthier that fast. Stevenson looked at codebook: none of the western researchers spoke Japanese, or looked at codebook. Found that the questions changed dramatically. Started by asking “how happy is your life at home?” before 1964, the happiest you could be is “although I’m not innumerably satisfied, I’m generally satisfied w/ my life now” after, it became “I am completely satisfied w/ my life right now” when completely satisfied, 20%-->4% picked top box. Break into periods of time when questions consistent.

China: changed sample population from 100% Beijing university students to 80% rural population. In India, only surveyed in Hindi until 2004, only 40% speak Hindi, nonspeakers different from speakers.

In United states, happiness trends flat, somewhat declining. We don’t really know why. If we break apart, women become slightly less happy, men happier. Difference between Log (average income) and average (log income). US is puzzle for why women have become less happy absolutely and relative to men. Also in Europe relative to men, but not absolutely. European men happier, but women equally happy.

Movement towards evaluating people’s mood during day: people dislike commuting.

People higher income happier because they in place to be treated w/ respect. Wealthier because buy better food, so happier.

Women haven’t all become less happy, but they’ve all become less happy relative to men, no matter how you cut data. Teenage girls less happy relative to teenage boys.

Capability approach: measure economic endpoints. Best measure of capabilities is income. People make choices to live best life they can when they have capabilities.

Difficult to know how much permanent income: theory isn’t that happiness is function of lifetime income so if people are consumption smoothing, current income shouldn’t matter. Look at cross section: permanent income and transient income. All college students poor, day you get a job you’re not going to become much happier. Wish had way to measure permanent income. Actually want to measure earnings capability. Research doesn’t say that choosing highest paying job makes you happiest. People who earn more on average, have greater abilities on average. If you and best friend have equal abilities, and one chooses B school and other chooses to represent domestic abuse victims, she could be more happy. She consumes more leisure, consumes more fulfilling job. She wouldn’t be happier if she went to a big law firm and earned more. Could be that their current income is insufficient to measure lifetime potential income. Particularly this year, people will say no, but next year maybe they will say yes. Fluctuates w/ business cycle.

If I can consumption smooth, can I happiness smooth? If people can income smooth, then happiness smooth. Right now lot of uncertainty, so less good at predicting earnings. People who get unemployed change lifetime earnings trajectory. Permanent hit to happiness. People feel stress of bad economy.