1. Emotional Prosperity Invited BJIR Annual Lecture at LSE, 2009 Andrew Oswald I would like to acknowledge that much of this work is joint with coauthors Andrew Clark, Nick Powdthavee, David G. Blanchflower, Rainer Winkelmann, and Steve Wu. I thank Andrew Steptoe, Francis Green, Justin Wolfers and Helen Urry for valuable discussions and for their kind permission to use certain later graphics. My research is supported by an ESRC professorship.

2. Social science is changing

3. Researchers are studying mental well-being.

4. Social science is changing Researchers are studying mental well-being. We are drawing closer to psychology and medicine.

5. Using random samples from many nations: Researchers try to understand what influences the psychological wellbeing of (i) individuals (ii) nations.

6. Is modern society going in a sensible direction?

7. The types of statistical sources General Social Survey of the USA British Household Panel Study (BHPS) German Socioeconomic Panel Australian HILDA Panel Eurobarometer Surveys Labour Force Survey from the UK World Values Surveys NCDS 1958 cohort BRFSS

8. Regression equations Mental well-being = f(Age, gender, education level, income, marital status, friendship networks, region, year…)

9. Could we perhaps learn …

10. ..how to make whole countries happier?

11. Preferably without relying on implausibly good fortune:

12. England 8 Brazil 0

13. Stiglitz-Sen-Fitoussi Report Bina AGARWAL University of Delhi Anthony B. ATKINSON Warden of Nuffield College François BOURGUIGNON School of Economics, Jean-Philippe COTIS Insee, Angus S. DEATON Princeton University Kemal DERVIS UNPD Marc FLEURBAEY Université Paris 5 Nancy FOLBRE University of Massachussets Jean GADREY Université Lille Enrico GIOVANNINI OECD Roger GUESNERIE Collège de France James J. HECKMAN Chicago University Geoffrey HEAL Columbia University Claude HENRY Sciences-Po/Columbia University Daniel KAHNEMAN Princeton University Alan B. KRUEGER Princeton University Andrew J. OSWALD University of Warwick Robert D. PUTNAM Harvard University Nick STERN London School of Economics Cass SUNSTEIN University of Chicago Philippe WEIL Sciences Po

14. Stiglitz Report 2009 www.stiglitz-sen-fitoussi.fr

15. The Stiglitz Commission Report advocates a shift of emphasis from a production-oriented measurement system … toward broader measures of social progress.

16. Some cheery news:

17. In Western nations, most people seem happy with their lives

18. Some cheery news: In Western nations, most people seem happy with their lives

19. The distribution of life-satisfaction levels among British people Source: BHPS, 1997-2003. N = 74,481

20. From the U.S. General Social Survey (sample size 40,000 Americans approx.) 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?

21. Typical GHQ mental-strain questions

22. Have you recently: Lost much sleep over worry? Felt constantly under strain? Felt you could not overcome your difficulties? Been feeling unhappy and depressed? Been losing confidence in yourself? Been thinking of yourself as a worthless person? Been able to enjoy your normal day-to-day activities?

23. The Warwick-Edinburgh Mental Well- being Scale (WEMWBS) Ive been feeling optimistic about the future Ive been feeling interested in other people Ive had energy to spare Ive been thinking clearly Ive been feeling good about myself Ive been feeling confident Ive been able to make up my own mind Ive been feeling loved Ive been feeling cheerful

24. Happiness and mental well- being are of interest in themselves.

25. But, more broadly, there seem to be deep links between mind and body.

26. Author(s): Ebrecht M, Hextall J, Kirtley LG, Taylor A, Dyson M, Weinman JEbrecht MHextall JKirtley LGTaylor ADyson MWeinman J PSYCHONEUROENDOCRINOLOGY Volume: 29 Issue: 6 Pages: 798- 809 Published: JUL 2004

27. Every subject received a standard 4mm-punch biopsy, and the healing progress was monitored via high-resolution ultrasound scanning.

29. Ebrecht et al 2004 The overall results showed a significant negative correlation between speed of wound healing and GHQ scores (r = -.59; p <.01)

30. In other words, happier human beings heal more quickly.

31. A more recent paper

32. Enhanced wound healing after emotional disclosure intervention Weinman, Ebrecht et al BRITISH JOURNAL OF HEALTH PSYCHOLOGY Volume: 13 Pages: 95-102 Part: Part 1 Published: FEB 2008

33. Participants who wrote about traumatic events had significantly smaller wounds 14 and 21 days after the biopsy compared with those who wrote about time management.

34. We need to understand these interconnections better.

35. How has the modern work on the economics of happiness proceeded?

36. The London School of Economics itself has played a prominent historical role in these issues.

37. Prof. Lionel Robbins

39. He was influential in dissuading economists from studying mental well-being. He worked at LSE for 30 years. "Interpersonal Comparisons of Utility: A Comment", 1938, Economic Journal.

40. Eventually the intellectual tide turned. [One reason was a meeting near here]

41. 1993: Lionel Robbins Building

42. The first economics-of-happiness conference was held. A central person was Andrew Clark, then a PhD student at LSE.

43. Our 1993 economics-of- happiness conference, 50 metres from here, was of course a great success?

44. Our 1993 economics-of- happiness conference, 50 metres from here, was of course a great success? Well, no.

45. The conference at 10.30am before it filled up.

46. The conference at 11.30am after it filled up.

47. 10 people came. Unfortunately, that included the international speakers whom we had asked to give keynote addresses.

48. Where the lecture is going next: Various questions

49. Question #1

50. In the coming century, should our societys goal be happiness rather than GDP?

51. Question #2

52. In a well-off country, how might human progress -- emotional prosperity not just financial prosperity -- be assessed?

53. Question #3

54. Could physiological measures -- biomarkers -- be used as proxies for well- being?

55. Question #3 Could physiological measures -- biomarkers -- be used as proxies for well- being?

56. Question #4

57. What recommendations were made by the (Stiglitz) Commission on Human Progress set up by Nicholas Sarkozy?

58. Lets return for a moment to the microeconomics of human well-being

59. What have we learned?

60. Big effects Unemployment Divorce Marriage Bereavement Friendship networks Health [No effects from children]

61. There is also an intriguing life-cycle pattern

62. The pattern of a typical persons happiness through life

63. This holds in various settings

64. For example, we see the same age pattern in mental health among a recent sample of 800,000 UK citizens: [Blanchflower and Oswald, Social Science & Medicine, 2008]

65. The probability of depression by age Males, LFS data set 2004-2006 -0.01 -0.005 0 0.005 0.01 0.015 0.02 19381942194619501954195819621966197019741978198219861990 Year of birth Regression coefficient

66. -0.014 -0.012 -0.01 -0.008 -0.006 -0.004 -0.002 0 0.002 1942194619501954195819621966197019741978198219861990 Depression by age among females: LFS data 2004-2006Q2 Year of birth Regression coefficient

67. Obviously life is a mixture of ups and downs

68. Much of the newest research follows people through time. eg. Andrew Clarks work

69. The unhappiness from bereavement

70. Human beings also bounce back from, say, disability. Work with N. Powdthavee, Journal of Public Economics, 2008

71. Life-Satisfaction Path of Those Who Entered Disability at Time T and Remained Disabled in T+1 and T+2 BHPS data 1996-2005

72. However, there is a downside to that adaptability (eg. marriage)

74. And should you invest in a baby?

75. Happiness and children

76. But people do not seem to adapt to joblessness

77. An important question in a modern society is the impact of divorce.

78. Divorce (eventually) makes people happier

80. What about money and happiness?

81. A key social-science fact

82. The data show that richer people are happier and healthier.

83. The same phenomenon holds true at the cross-sectional level for nations.

85. The road to nowhere? Growth in income is now not correlated with growth in happiness This is the Easterlin paradox

86. The Man Behind the Easterlin Paradox

87. Average Happiness and Real GDP per Capita for Repeated Cross-sections of Americans.

88. Life-satisfaction country averages

89. Average GHQ Psychological Distress Levels Over Time in Britain: BHPS, 1991-2004

90. Might this have something to do with work getting more stressful? [Yes] Work by Francis Green, Keith Whitfield, et al.

91. Proportion of High-Strain Jobs Green (2008) Work Effort and Worker Well-Being in the Age of Affluence Source: Skills Survey series

92. What of well-being among the young?

93. Helen Sweeting et al GHQ increases among Scottish 15 year olds 1987–2006 Social Psychiatry & Psychiatric Epidemiology (2008).

94. Her team assesses whether life is getting more stressful for young people.

95. Mental strain in young Scots in 1987

96. Mental strain in young Scots in 1999

97. Mental strain in young Scots by 2006

98. Equivalent results have been found for adults in the Netherlands, UK and Belgium.

99. Worsening GHQ levels through time Verhaak, P.F.M., Hoeymans, N. and Westert, G.P. (2005). Mental health in the Dutch population and in general practice: 1987-2001, British Journal of General Practice. Wauterickx, N. and P. Bracke (2005), Unipolar depression in the Belgian population - Trends and sex differences in an eight-wave sample, Social Psychiatry and Psychiatric Epidemiology. Sacker, A. and Wiggins, R.D. (2002). Age- period-cohort effects on inequalities in psychological distress. Psychological Medicine.

100. So there is much evidence that all this extra money we have today is not doing a lot for us. Easterlins Paradox.

101. There has recently been a critique of Easterlins idea

102. Betsey Stevenson and Justin Wolfers have argued that economic growth does buy happiness. Brookings Papers, Spring 2008

103. Their work is extremely valuable

104. But ultimately I think they probably have (approximately) the wrong answer. Much of their paper is concerned with cross-section patterns. In the long time-differences, which is the appropriate test, little is statistically significant in 1973-2007 European data.

105. Another key difficulty is that we know unemployment movements – omitted from most regression equations -- affect mental well- being. Di Tella et al AER 2001

106. Moreover, Stevenson and Wolfers agree that Americans have if anything become less happy over the last 30 years.

107. Overall I would say that currently the balance of the evidence favours Easterlin rather than Stephenson-Wolfers. [though it is bad science for us ever to close our minds, so we must watch for new evidence as it accumulates]

108. But many general economists have low life-satisfaction when they hear about this research.

110. They say: Should we actually pay attention to happiness data?

111. The tradition of economics has been to ignore what people say about the quality of their own lives.

112. Many are opposed to the idea of measuring happiness.

113. I always liked the retort:

114. If molecules could talk, would physicists refuse to listen? A. Blinder

115. I always liked the retort: If molecules could talk, would physicists refuse to listen? A. Blinder

116. So how could we move forward?

117. Brain-science correlates as a validation

118. So how could we move forward? Brain-science correlates as a validation Physiological correlates as a validation

119. RD Lane et al American Journal of Psychiatry July 1997. Neuroanatomical correlates of happiness, sadness, and disgust

120. Brain Responses in Two Pictures (MRI Scans) Source: Richard Davidson, University of Wisconsin

121. Another study H. Davis et al Brain Imaging and Behavior, June 2008.

122. Another study H. Davis et al Brain Imaging and Behavior, June 2008. fMRI BOLD signal changes in elite swimmers while viewing videos of personal failure

123. An alternative approach is EEG:

125. A brain-science approach (Urry et al Psych. Sci. 2004)

126. But, for a sceptic, there is a major difficulty.

127. The Problem: Biological data only validate well-being scores in so far as they are unambiguously measures of utility or happiness.

128. The next few slides are fractionally more technical.

129. Could we exploit neo-classical economic theory to assess the validity of well-being data?

130. Think not about people but about places.

131. Joint work with Steve Wu New data from the Behavioral Risk Factor Surveillance System (BRFSS) 1.3 million randomly sampled Americans 2005 to 2008 A life-satisfaction equation

132. Then we go to the compensating- differentials literature dating back to Adam Smith, Sherwin Rosen, Jennifer Roback, etc. The most recent is Gabriel et al 2003.

133. Gabriel painstakingly takes data on Precipitation Humidity Heating Degree Days Cooling Degree Days Wind Speed Sunshine Coast Inland Water Federal Land Visitors to National Parks Visitors to State Parks Number of hazardous waste sites

134. and Environmental Regulation Leniency Commuting Time Violent Crime Rate Air Quality-Ozone Air Quality-Carbon Monoxide Student-teacher ratio State and local taxes on property, income and sales and other State and local expenditures on higher education, public welfare, highways, and corrections Cost-of-living

135. Then there are 2 ways to measure human well-being or utility across space. Subjective and objective

136. Gabriels work assigns a 1 to the state with the highest imputed quality-of-life, and 50 to the state with the lowest.

137. So we need to uncover a negative association – in order to find a match.

138. One Million Americans Life Satisfaction and Objective Quality-of-Life in 50 States

139. To conclude across US states: There is a close match between life-satisfaction scores and the quality of life calculated using (only) non-subjective data.

140. Next, consider the Stiglitz Commissions Findings

141. Stiglitz Report 2009: Measures of.. objective and subjective well- being provide key information about peoples quality of life. Statistical offices [worldwide] should incorporate questions to capture peoples life evaluations, hedonic experiences … in their own survey. P.16. Executive Summary of Commission Report.

142. Emphasis on growth is misguided Beyond GDP Measuring what matters

143. Happiness is the new GDP Smile, and the economy smiles with you. Factory workers in Macedonia.

144. The Reports Arguments

145. Life is now more complex The time has come to adapt our system of measurement … to better reflect the structural changes which have characterized the evolution of modern economies.

146. Services dominate In effect, the growing share of services and the production of increasingly complex products make the measurement of output and economic performance more difficult than in the past.

147. In this country

148. In 1900, there were 1 million coal miners (5% of the workforce).

149. In this country In 1900, there were 1 million coal miners (5% of the workforce). Today there are approximately 1,000.

150. We need to measure well-being per se A… unifying theme of the report, is that the time is ripe for our measurement system to shift emphasis from measuring economic production to measuring peoples well-being.

151. Inequality itself matters Recommendation 7: Quality-of-life indicators in all the dimensions covered should assess inequalities in a comprehensive way.

152. Official statistics should blend objective and subjective well- being data Recommendation 10: Measures of both objective and subjective well-being provide key information about peoples quality of life. Statistical offices should incorporate questions to capture peoples life evaluations, hedonic experiences and priorities in their own survey.

153. Sustainability must be a criterion Recommendation 11: Sustainability assessment requires a well-identified dashboard of indicators…the components of this dashboard should be … interpretable as variations of some underlying stocks. A monetary index of sustainability has its place in such a dashboard

154. Where might research head in the future?

155. Biomarkers and their possible uses

156. An interesting border is between happiness and medicine

157. Is it possible that we can find physiological correlates with human well-being? Perhaps to broaden the standard policy goal of GDP?

158. Some of our latest work: Joint with Nicholas Christakis (Harvard) and David Blanchflower (Dartmouth) Statistical links between the heart and income and happiness.

159. To clinicians High blood pressure is potentially a sign of mental strain and low well-being

160. But how about high blood pressure as a national measure of well-being?

161. Across nations, hypertension and happiness are inversely correlated (Blanchflower and Oswald, 2008 Journal of Health Economics)

162. Important work by Andrew Steptoe of UCL: Whitehall II data

163. Salivary cortisol (Steptoe data) 8 samples (08:00 – 22:30) Adjusted for gender, age, occupational grade, smoking, bmi, and GHQ P =.009

164. Heart rate Adjusted for age, occupational grade, concurrent physical activity, smoking, bmi, and GHQ score P =.017 in men Steptoe et al, 2005 PNAS

165. It is known that heart rate rises under stress.

166. Stress comes in different forms

178. Nicolas Troubat et al (2009) European Journal of Applied Physiology 20 chess players – international and national-level players. They all played against a computer.

179. The computer standard was deliberately set one level higher.

180. So all the players lost against the computer.

181. What happened? Average heart-rate rose 11 beats a minute On average, players used up 140 calories playing the game Overall, the physiological changes were similar…those … in moderate physical exercise.

182. In our own work, we study physiological data -- measuring heart rate, blood pressure, fibrinogen, and C-reactive protein - - on a random sample of 100,000 English citizens.

183. Pulse: Average heart rate is about 72 beats per minute.

184. Heart-Rate Equations

185. Pulse and Money We find that for every extra £40,000 pounds a year, heart rate is 1 beat a minute slower.

186. Interesting patterns emerge First, there are well-determined income gradients in (and only in) heart-rate and C-reactive protein equations.

187. Second, heart rate seems to have potential as a proxy measure for mental strain, so might eventually be usable as a measure of negative utility in an economists framework.

188. Third, education has little effect within biomarker equations.

189. Fourth, it is more important to control for diet than has been traditionally recognized in the health-economics literature.

190. Fifth, biomarker variables work powerfully in well-being equations.

191. Thus: There are deep connections between happiness, money and health.

192. Some ideas to end:

193. Conclusions #1 In the next century, new measures of human well-being may be required.

194. Conclusions #2 As social scientists, we probably need to understand better the connections between mental and physical health.

195. Conclusions #3 Heart-rate and blood pressure data have particular potential in policy design.

196. Conclusions #4 Social scientists will, I believe, collaborate more with doctors and epidemiologists.

197. My hunch

198. The methods of the economics of happiness and mental well- being will slowly enter public life.

199. Other important applications

200. The valuation of environmental amenities

201. Other important applications The valuation of environmental amenities The valuation of health states

202. Other important applications The valuation of environmental amenities The valuation of health states The valuation of emotional damages for the courts.

203. Let me close by returning to Lionel Robbins, a distinguished thinker and economist.

204. Conventionally: Economics is a social science concerned with the efficient allocation of scarce resources

205. We owe this definition to Lionel Robbins of the London School of Economics. For a long time, it served us well.

206. But perhaps the time has come to think differently – and to define economics differently.

207. An alternative definition for 2009:

208. Economics is a social science concerned with the best way to allocate plentiful resources to maximize a societys well-being and mental health.

209. There is considerable evidence: (i) In the rich countries, happiness is running flat or declining (ii) Levels of GHQ mental-strain are rising.

210. These (uncomfortable) facts raise fundamental intellectual and policy questions for our generation and beyond.

211. Looking ahead Policy in the coming century may need to concentrate on non-materialistic goals.

212. Looking ahead Policy in the coming century may need to concentrate on non-materialistic goals. GNH not GDP.

213. Thank you.

214. Emotional Prosperity Andrew Oswald Research site: www.andrewoswald.com I would like to acknowledge that much of this work is joint with coauthors Andrew Clark, Nick Powdthavee, David G. Blanchflower, and Steve Wu.