Poor and happy?

In economics we think that happiness increases with lifetime wealth, albeit at a decreasing rate. But recent research on happiness fails to show a steep gradient between incomes and self-reported life satisfaction. But this work has typically focused on rich countries.  In a recent paper, Angus Deaton uses Gallup poll data for a large number of countries and uncovers--to my surprise, at least--that people in poor countries are indeed less "happy" on average than people in rich countries.

Here is the relationship, broken down by age group.

So much for the romantic idea of the poor but happy peasant, in communion with his natural environment...

But note also some of the interesting anomalies. For example, Indians are a lot happier than the Chinese, despite having lower incomes on average.  Maybe the influence of all those Bollywood movies? And Pakistanis are significantly happier than either. One wonders what they are on.

Comments

[robertdfeinman]

All I see from the fancy mathematics is that using countries as a sample provides too broad a collection.

Within any given society there are groups who differ greatly in the type of lives they live. Lumping a family who shops at Walmart with the Waltons who own it is meaningless. One has an annual income of about $25K and the other about $1.4 billion.

Similar distinctions should be made on the basis of other demographic factors (I did see some discussion of age), but health, education, class standing and ethnic group (minority or majority) all are factors.

I'm sure Mugabe is very content even while the rest of the population is under duress.

You cannot extract good conclusions from a poorly designed poll.

[Per Kurowski]

Just a typical case of response bias. In a poor country you cannot afford as much to say that you are happy and you must weigh your answer more carefully…who knows? You might be questioned by a donor!

[Paul Russell]

Dr. Rodrik, do you consider self-reported "happiness" a reliable indicator of happiness? Personally, I question our ability to know our true happiness.

[Biomed Tim]

Kahneman in Edge:

"The most dramatic result is that when the entire range of human living standards is considered, the effects of income on a measure of life satisfaction (the "ladder of life") are not small at all. We had thought income effects are small because we were looking within countries. The GDP differences between countries are enormous, and highly predictive of differences in life satisfaction. In a sample of over 130,000 people from 126 countries, the correlation between the life satisfaction of individuals and the GDP of the country in which they live was over .40 – an exceptionally high value in social science. Humans everywhere, from Norway to Sierra Leone, apparently evaluate their life by a common standard of material prosperity, which changes as GDP increases. The implied conclusion, that citizens of different countries do not adapt to their level of prosperity, flies against everything we thought we knew ten years ago. We have been wrong and now we know it. I suppose this means that there is a science of well-being, even if we are not doing it very well."

[Per Kurowski]

It might also be that while they are less happy they are also less sad since the time and resources to even reflect on such issues might vary with the GDP

If so the indifference to happiness and sadness must be one of the most tragic faces of poverty.

[stedy]

cultural background may plays a very important role rather than economic factors...

[Doug K]

"Elinor, for shame!" said Marianne, "money can only
give happiness where there is nothing else to give it.
Beyond a competence, it can afford no real satisfaction,
as far as mere self is concerned."

"Perhaps," said Elinor, smiling, "we may come
to the same point. YOUR competence and MY wealth
are very much alike, I dare say; and without them,
as the world goes now, we shall both agree that every
kind of external comfort must be wanting. Your ideas
are only more noble than mine. Come, what is your competence?"

"About eighteen hundred or two thousand a year;
not more than THAT."

Elinor laughed. "TWO thousand a year! ONE is my
wealth! I guessed how it would end."

**

it's tough to be happy, shivering and hungry.. we all need a competence.

[Winston]

In order to ascertain why happiness increases with income, it is necessary to ascertain the causes of happiness and whether those causes are positively related to income.

A popular view seems to be that happiness is the result of one's expectations being met. If that is true, then perhaps globalization has raised the expectations of people in the developing world to levels that cannot possibly be met given their scant material resources. The result? Less happiness.

"The romantic idea of the poor but happy peasant" might have been somewhat accurate in the past, but now, in this era of cross-cultural communication, even the poorest peasants have some idea of what they are "missing out on."

"Familiarity breeds contempt," as the saying goes.

[minny mouse]

Very different than the time series evidence within the U.S.

[inthemachine]

While per capita income is often used as a proxy for overall physical well being, it might be illuminating to break this out and see how "happiness" stacks up against a variety of human development outcomes and/or weather patterns. The arctic circle is not exactly known as a "happy place" regardless of income level.

[terence]

To me, the interesting (and intuitive) thing about this graph is that diminishing returns kick in. Somewhere around Mexico.

[Thorstein Veblen]

The problem is that we should be looking at panel-data -- otherwise this confuses correlation and causality. If you look at just time series data, you won't see this effect at all. In other words, looking at just American happiness surveys, you see no clear trend, even though the US is much richer today than it was 50 years ago (with political rights much more widespread). In japan, you see a decline in happiness with their dramatic increase in wealth. The key point is that the developing world "knows" its not as wealthy as the US, since they can all easily watch hollywood movies starring blond models they can't date driving cars they can't afford... Also, since we certainly have time series data for the US, Japan, and many other rich countries, why didn't the authors just include it in the graph? The answer, of course, is that it would overturn their result.

If time series data were also to show an increase in happiness, then Kahneman's conclusion would be justified... He should be made to cough up his Nobel for such silliness...

[anonymous]

Finally, a compelling reason to fight poverty!

[hari]

Ignorance is BLISS!

[hari]

Ignorance is BLISS!

[Carolyn Kay]

How does this study compare with the 2004 Association for Psychological Science study that found, "Wealth Does Not Create Individual Happiness
and it Doesn't Build a Strong Country, Either"?
http://www.psychologicalscience.org/media/releases/2004/pr040927.cfm

Carolyn Kay
MakeThemAccountable.com

[wjd123]

Let's say we wanted to design a society in which most people could best fulfill their interests. A utilitarian society. We would know how well we succeeded by measuring the attachment people had to society. This is a sociological question and requires a sociological answer. In other words we don't go looking for the answer to social attachment in psychological facts or economic facts but sociological ones.

Fortunately, these are hard facts that can be measured objectively. The suicide rate and the rate of law breaking, for instance, would provide measurements for how well the social conditions under which we live our lives are adding to our happiness.

One could expect that, relative speaking, the more people experience the conditions of their social lives as a boon the more attachment they would have to the society in which they live. Greater attachment would be an indicator that people are more likely to find that society benefits them by adding to their ability to fulfill their interests rather than being a hindrance.

One of the ways we could measure attachment would be how well people follow the laws of their society. If people are so poor that they can't follow the laws of society they would experience society as an unnecessary burden and would feel less attachment to it. If people are so rich that they no longer feel bound by the laws of society they would also experience society as a unnecessary burden and their attachment to society would be weak.

These disconnects would make for a society that didn't work in creating an institutional environment in which most people could fulfill their interests.

Under these conditions one could then ask the economist to design a system of taxation that would attach people to society. One were the poor would have the wherewithal to follow the law, thus increasing their attachment to society, and the rich not enough wherewithal to escape such attachment.

One would think, relatively speaking, that the ability of individuals to benefit from society to the fullest extent would allow them to see society as a handmaid for them to fulfill their interests rather than than see it as a stumbleing block to fulfillment.

Society as a handmaid would, relatively speaking, add to the individuals feeling of well-being. This in turn would would show up on psychological testing about subjective happiness.

[NSF]

There are cultural differences that dictate emotional responses and happiness is an emotional response. Pakis belong to a religion that imposes a fatalistic attitude. If it is to be, it is to be. Take this survey of pakistanis to northern pakistan (the kashmir region) where they are miserable and your responses will be different.

[Ken Houghton]

"diminishing returns kick in. Somewhere around Mexico."

Not the first time that has happened.

To no one's great surprise (I trust), the highest curve matched with the oldest people, who are happy to have survived that long.

The second highest matches with the youngest set, who are too young to have been beaten down by work and/or marriage.

If Deaton didn't, I may have to point this data against the average life expectancy per county, just to see if that affects the levels.

[Ali Sohail]

NSF wrote: 'Pakis belong to a religion that imposes a fatalistic attitude. If it is to be, it is to be. Take this survey of pakistanis to northern pakistan (the kashmir region) where they are miserable and your responses will be different.'

lol- unbelievable! such powerful words and little understanding!

and we feel illiteracy is a problem, your ignorance takes the cake my friend!

[Barkley Rosser]

Regarding Mexico, I note that in general, Central American countries are among those in these cross-section studies that are poor but come out pretty high on happiness.

The criticism of Kahnemann is all too valid, and I find the willingness of a lot of media to trumpet these recent cross-section studies as somehow proving that greater income means more happiness to be really disreputable. It is not just the US and Japan, but pretty much every country that longer time series are available for: happiness has not risen with income over time (the US maxed out on reported happiness back in 1956).

This means that whatever pattern we are seeing now across countries has been largely in place for a long time, including predating the spread of television. I would offer as an alternative pride in national status and power. Richer countries are stronger militarily and politically than poorer ones, and indeed prior to a half century ago, were often ruling many of those poorer ones. So, these cross-country comparisons may have much more to do with the standing of nations in the world order than with income per se, and even before TV, people had a pretty good idea where their country stood, especially if they were being ruled by a foreign power.

[Per Kurowski]

As I am not a hardened PhD, so much talk of happiness brings tears to my eyes!

[Etienne Calame]

seems good news for governments of the west, could tell us "see, you are happy, isn't this enough?". I doubt about polls and surveys designed on western criteria, the way to describe happiness is not the same in all culture therefore results are difficult to compare (even Italian and German are not “happy” the same way!). One can not measure all and I am not sure the aim of economics is to make people happy.

[Per Kurowski]

“I am not sure the aim of economics is to make people happy”

Posted by: Etienne Calame | February 04, 2008 at 08:21 AM

Well that is a challenging question…are the economists somehow biased in favor of happiness?

[Frank]

I am moving to Brazil, there you get the most happiness for your bang.

[Dominic]

Everyone should note that this shows self perceived happiness against national GDP, not happiness against personal income.

The conclusion has to be that the wealth of your society has a significant benefit to the way people perceive their own lots.

Anyone who has spent a lot of time in developing countries should be able to understand how the wealth (or lack there-of) of others in society has a major impact on your own experience. In a place where most people are poor, you have to put up with terrible facilities, poor cleanliness, crowds, red-tape and a whole host of things which just make you angry.

Having spent a lot of time in China, I can attest that I tend to be on edge while I'm there, even though I love the place. When I come home (to Aus) I'm much less stressed and generally more happy, although a little more bored. And this, despite my real personal wealth being much higher while I'm in China!

[Aqdas Afzal (Pakistan)]

Dani Rodrik: "And Pakistanis are significantly happier than either. One wonders what they are on."

Dani you have asked a pertinent question. Why should Pakistanis be happy given the current situation in the country with very high inflation, suicide attacks, no job creation, power and food cirses to name a few.

A few explanations come to mind:

I wonder when was this Gallup poll taken. Less than a year ago things weren't really so bad, here.

Still, I don't think Pakistanis are that happy as a nation, which seems to cast a very dark cloud over the research presented here. But wait.

Actually, survey techniques are really very poor here in Pakistan. Since I have conducted a few market related surveys, I can tell you that as far as the surveyors are concerned there is a lot of corner-cutting with almost no back checking by the supervisors.

The fundamental reason for this is that surveyors are paid very poorly and it is really very, very hard to work long hours in the extreme weather (too cold in winter and too, too hot in summer)when one is being paid peanuts.

Perhaps, should treat Pakistan as an outlier for this research.

[Holger Siebrecht]

I didn't follow NSF's point about the highest curve. That dpeends where on the x-axis you are.

But I _do_ find it interesting that older people don't seem to exhibit the same concavity (i.e. diminishing marginal returns) as younger people.

[jaleel]

Well... things are a lot cheaper out here in India.. and perhaps even cheaper in China...

Besides, there is this thing of lifestyles... maybe the Chinese have more elaborate needs and wants, while Indians have maybe elaborate but lower costing needs and wants...

[Sanjay S]

I think the poster "Frank" has it right inadvertently -- what the graph shows really is where you get the most happiness for you buck. Rest else is relative.

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One can not measure all and I am not sure the aim of economics is to make people happy.

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