Measuring Happiness One Nation at a Time

That there is a flood of interest in the study of happiness may be a sign of the times-- the recent financial crisis and uncertain economic future. Many people are questioning the role of income relative to other factors as they assess their well being, not least because many have lost a great deal of income. It seems a good time to raise the question: Is money is indeed the key to happiness?

I have been working in this area for over a decade, well before it was in vogue. Given that I am an economist and not a psychologist, I do not focus on telling people what to do to be happier; rather I use happiness surveys as a research tool to better understand the determinants--both income and non-income--of individual well being. I have conducted surveys of happiness around the world, in countries as diverse as Chile and China, Afghanistan and the United States.

The basic determinants of happiness--age (a U-shaped relationship with happiness with the low point in the mid forties), income, health, stable partnerships, and friendships, among others--are remarkably similar in countries and cultures around the world. At the same time, people are also remarkably adaptable, and can adapt to both prosperity and adversity and retain their set happiness levels. Thus people in Afghanistan score higher than the world average on open-ended happiness questions (although they score lower when asked to compare their lives in relative terms). Crime and corruption are bad for happiness, but they are less bad when there is more crime and corruption and people are accustomed to these phenomena as day-to-day events. Good health is important to happiness, but people who are used to poor norms of health are satisfied with far inferior health conditions. Thus, people in Kenya are as satisfied with their health care as are respondents in the United States.

Uncertainty, however, is something that people have a hard time adapting too. Health conditions associated with uncertainty, such as pain, anxiety, and uncontrolled epilepsy, have far higher happiness costs than do those associated with unpleasant certainty, such as mobility problems and obesity. One example of the role of uncertainty is the recent crisis in the United States. Average happiness levels dropped precipitously with the fall in the markets in 2008 and early 2009. But once the uncertainty abated and there were modest signs of stability and recovery, happiness levels recovered very quickly and surpassed their pre-crisis levels, even though the same respondents said that their economic situations were worse than before. (see attached chart, please cite as in Graham, Chattopadhyay, and Picon 2010) this is surely an example of there being more to happiness than just money!

Happiness surveys are a wonderful tool for answering questions that defy standard economic tools. Standard economic approaches rely on revealed preferences--usually consumption choices - as proxy measures for individual welfare or utility. The idea is that people make conscious choices--and trade offs within a budget constraint--about what will make them better off. Standard approaches shy away from expressed preferences--such as survey data--because there is no consequence to what people say. But there are many questions that defy this approach, either because people are unable to express a choice, or because their choices are not rational and optimal, but driven by norms, addiction, or self-control problems.

The welfare effects of institutional arrangements that individuals are powerless to change--such as inequality or macroeconomic volatility or bad governance--are examples of the former, and low expectations among discriminated groups, cigarette smoking, and obesity are examples of the latter. I have been using happiness surveys to study the welfare effects of inequality and of different kinds of governance arrangements; the unhappiness effects of obesity; and the role of adaptation and low expectations among the very poor in driving their investments (or lack thereof) in their own and in their children's future, among other questions.

So while I cannot tell people what to do to be happy, I can say a lot about what makes people happy or unhappy in countries and places all over the world. And I am having a tremendous amount of fun doing it.

If you want to know more, it's in my most recent book: Happiness around the World: The Paradox of Happy Peasants and Miserable Millionaires (Oxford University Press, 2010).