SUBJECTIVE WELL-BEING AND PUBLIC POLICY Richard A. Easterlin University of Southern California Institute of Medicine May, 2013 (With help from Laura Angelescu-McVey, Robson Morgan, Kelsey O’Connor, Anke Plagnol, Onnicha Sawangfa, Malgorzata Switek, Jacqueline Smith Zweig) 1

WHAT IS SWB? ANS. The responses in a nationally representative survey to questions about how you would rate your: 1. HAPPINESS 2. SATISFACTION WITH LIFE 3. STANDING, ON A BEST/WORST LIFE SCALE 2

EXAMPLES OF SWB MEASURES HAPPINESS (United States General Social Survey): “Taken all together, how would you say things are these days, would you say that you are very happy, pretty happy, or not too happy?” (Coded 3,2,1). LIFE SATISFACTION (World Values Survey): “All things considered, how satisfied are you with your life as a whole these days? Please use this card to help with your answer.” 1 ‘Dissatisfied’ ‘Satisfied’ 3

Are SWB Measures Meaningful? 1. Stiglitz-Sen-Fitoussi Report (Sarkozy Report) 2008 “Research has shown that it is possible to collect meaningful and reliable data on subjective as well as objective well-being… [T]he types of questions that have proved their value within small-scale and unofficial surveys should be included in larger-scale surveys undertaken by official statistical offices.” (p.16, emphasis added) 2. Official actions: UK, France, Canada, OECD, UN. 4 YES.

ARE SWB MEASURES MEANINGFUL? ANS. YES. When people are asked what makes them happy, the responses of most people everywhere in the world are quite similar. 5

Concerns Average, all countries United States West Germany Yugoslavia Brazil Cuba Dominican Republic Panama India Israel Philippines Egypt Nigeria Living level Family Health Character Work Social equity International relations Domestic Politics None (status quo) Source: Cantril 1965, p Concerns Underlying Judgments of Personal Well-Being in Twelve Countries (% of respondents mentioning indicated concern)

7 IS SWB A BETTER MEASURE OF WELL-BEING THAN THOSE CURRENTLY USED (e.g., GDP per capita, HDI)? 1. Yes, it focuses directly on people’s personal feelings about their lives, rather than external indicators such as material goods (GDP), length of life, or education (HDI).

8 IS SWB A BETTER MEASURE OF WELL-BEING THAN THOSE CURRENTLY USED (e.g., GDP per capita, HDI)? 2. Yes, it is more comprehensive, covering a wide range of concerns affecting well- being. 3. Yes, it is a measure people can personally identify with, unlike GDP or HDI.

9 IS SWB THE MEASURE OF WELL-BEING? 1. A problem with SWB: Largely omits things like political and civil rights. 2. But better than current alternatives. BEST

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POLICY Q. Will economic growth in itself raise well- being (SWB)? A. No. The evidence is that: 1. Over the long-term (LT) more rapid economic growth has no effect on SWB. 2. There is, however, a positive short-term (ST) relation between growth and SWB. 11

ST: Fluctuations (solid lines) in SWB and GDP per capita are positively related. LT: Trends (broken lines) in SWB and GDP are not related. 12 Illustration of LT and ST Relation SWB GDP SWB GDP

Q. WHAT IS EVIDENCE FOR NIL LT RELATION? ANS. In general, countries with higher rates of economic growth do not have more rapid growth in SWB. 13

Q. Growth SWB? Conclusion: No ΔSWB ΔGDP p.c. Expected (positive ) Actual (nil ) 14 ΔSWB ΔGDP p.c.

The fitted regression is: y= -.255x (Adj R 2 = -0.05); t-stats in parentheses (0.5) (1.42) Slope: NS (n=17) (Latinobarometer) ACTUAL 15 ILLUSTRATION: LATIN AMERICAN COUNTRIES, 1994 – 2006

LT RELATION OF GROWTH AND SWB There is evidence like that for Latin America for: Developed countries (time span years) Transition countries (12-22 years) 3. 9 Less developed countries (15-33 years) 4. China,

POLICY CONCLUSION: ECONOMIC GROWTH GREATER SWB? No. The evidence for a variety of countries – developed, transition, and less developed – is that more rapid economic growth does not lead to greater improvement in SWB. 17

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POLICY (CONT.) Q. Are there other policies that will increase people’s well-being (SWB)? A. Yes. The evidence is that full employment and safety net policies increase SWB. 19

Q. POLICIES SWB? 2 Types of evidence: 1. If one compares European countries with the same GDP per capita, SWB is higher in countries with more supportive SOCIAL POLICIES. 2. There is a negative impact on SWB in Transition Countries when employment / safety net policies are abandoned. 20

Q. POLICIES SWB? 21 Compare European “Welfare States” with Similar Economic Conditions, Different Public Policies Welfare States: Average for Denmark, Sweden, Finland Semi-Welfare States: Average for France, UK, Germany, Austria

GDP pc ($000) Inflation rate (%/yr) 2.1 Unemp. rate (%) Conclusion: Very similar economic conditions. Welfare States Semi-Welfare States Source: OECD. Q. POLICIES SWB? Macro-Economic Conditions, 2007

Unemp. Benefit (0-15) Sickness Benefit (0-15) Pension Benefit Overall Benefit Benefit Generosity of Various Public Policies Scruggs (2002) Generosity Index Source: Scruggs, L. Welfare State Entitlement Data Set: A Comparative Institutional Analysis of 18 Welfare States, Version 1.1 (June 1, 2005), Conclusion: Welfare States’ policies are more generous than those of Semi-Welfare States Welfare States Semi-Welfare States Q. POLICIES SWB?

Are Policy Differences Reflected in People’s Feelings of Satisfaction? Work Health Family Life LIFE SAT (H) (Could you please tell me on a scale of 1 to 10 how satisfied you are with each of the following items, where 1 means very dissatisfied and 10 means very satisfied? Your ) Welfare States Semi-Welfare States Q. POLICIES SWB?

Although Welfare States and Semi-Welfare States have similar economic conditions, SWB is higher in the Welfare State countries where public policies regarding work, health, and family are more generous and comprehensive. 25 Conclusion from Comparison of Welfare States

Q. POLICIES SWB? Dissolution of full employment and safety net policies reduces SWB. Evidence: Countries transitioning from socialism to capitalism: China and Eastern Europe. 26

27 Q. POLICIES SWB? Effects of Transition

Q. POLICIES SWB? SWB in Transition CHINA 28 RUSSIAN FEDERATIONFORMER GDR

Q. POLICIES SWB? General Conclusion Yes, based on evidence from European Welfare States: More generous and comprehensive policies increase SWB Yes, based on evidence from transition countries: Dissolution of full employment and safety net policies reduces SWB. Full employment and safety net policies can increase SWB. 29

Q. POLICIES SWB? Illustration: Costa Rica Life satisfaction is highest in the world according to Gallup World Poll Surveys of 130 countries. Source: UN, World Happiness Report, Fig

Q. POLICIES SWB? Policies Costa Rica’s 31 "The best-known elements in Costa Rica's social development were introduced in the 1940s in the form of social insurance and pensions and the formation of a welfare or benefactor state, but the institutions of social development -- schools and general population literacy, health care facilities, and a population armed with information that helped protect themselves from health risks -- had been built in the 1890s.” James C. Riley, Low Income, Social Growth and Good Health, Univ. of California Press 2008, p. 87 (emphasis added)

Q. POLICIES SWB? GDP per capita Costa Rica’s 32 Costa Rica Today: One-fourth of current United States GDP per capita, but world’s highest life satisfaction.

OVERALL SUMMARY 1. Measures of SWB are better indicators of well-being than those currently used. 2. Economic growth in itself does not increase SWB. 3. Employment and social safety net policies do increase SWB. 33

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