1. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 How to make policy when happiness is the goal 14 th Journées Louis-André Gérard-Varet, Aix-en-Provence, 15 June 2015 Richard Layard

2. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 Assumption 2 1. Happiness is the overarching good “The care of human life and happiness… is the only legitimate object of good government”. Thomas Jefferson

3. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 Agenda Measurement Causes Policy evaluation Some policy implications 3 Happiness:

4. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 1. Measurement Typical Question: Overall, how satisfied are you with your life nowadays? (where 0 means ‘not at all’, and 10 means ‘completely’) 4

5. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 1. Measurement Evidence of validity of answers 1.Correlate with objective measurements of brain function 2. Tally with friends’ assessments 3.Predict (e.g. life expectancy, productivity) 4.Can be explained (by e.g. income, unemployment, family situation, health) H cardinal 5

6. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 Reported happiness over time in the United States Mean Happiness in Survey (0-10 Scale) AIPO (1950-1970) NORC (1963-1976) GSS (1972-2006) 6 Year

7. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 Reported life-satisfaction in West Germany Mean Happiness in Survey (0-10 Scale) Source: Eurobarometer and German Socio-Economic Panel. Mean life satisfaction reported on a 0-10 scale Eurobarometer 1973-2007 GSOEP 1985-2006 7 Year

8. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 Reported life-satisfaction in France 8

9. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 2. Causes: Income 9 Across individuals within countries (CS + panel) Income has a positive effect and explains under 2% out of the 20% of explained cross- sectional variance. Comparators’ income has a negative (and often equally large) effect, especially in richer countries. Confirmed by neuroscience. So relative-income effect helps explain flat time-series.

10. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 Diminishing marginal utility of income 10 Best functional form H = α log Y etc. Argues for greater equality. Source: Layard, R., Nickell, S.J. and Mayraz, G. (2008). 'The marginal utility of income', Journal of Public Economics, Special Issue: Happiness and Public Economics, vol. 92(8-9), pp. 1846-1857. Y H

11. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 2. Causes: Income cont. 11 Across countries Cross-section. Poor countries are less happy but for many reasons besides income. Time series. Uncertain. Wolfers v. Easterlin. World happiness up.15 of a within-country SD over last 40 years.

12. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 Income and Happiness Comparing Countries Russia Ukraine Zimbabwe Moldova Georgia Romania Bulgaria Belarus Albania Latvia Pakistan Macedonia Tanzania Bangladesh Azerbaijan Turkey Lithuania Estonia Slovakia Poland Iran India Jordan Uganda Morocco Peru Egypt Algeria China Philippines Vietnam Nigeria Indonesia South Africa Dominican Republic Croatia Brazil Venezuela El Salvador Colombia Mexico Chile Uruguay Hungary Greece South Korea Israel Spain Portugal New Zealand Slovenia Argentina Czech Republic Italy Japan Germany France Belgium Norway USA Switzerland Netherlands Ireland Canada Austria Denmark Finland Australia UK Singapore Sweden Average of percent “happy” and percent “satisfied” Source: Layard (2011), Happiness: Lessons from a New Science (2 nd Ed) Income per head ($ per year)

13. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 Differences Between Countries Partial correlation coefficients Life- satisfaction Positive feelings yesterday Log GDP per head0.28– Healthy life expectancy0.250.24 Social support0.290.43 Freedom0.150.49 Absence of corruption0.18–

14. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 2. Causes: Income cont. Conclusion (1) Long-run growth valuable but no more than many other things. N.B. Higher growth does not provide finance for more doctors, nurses, teachers and social workers. (2) Short-run economic fluctuations are very bad and should be avoided even it reduces LR growth. 14

15. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 2. Other Causes 15 External Work Family life Community engagement Internal Physical health Mental health

16. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 Individual life-satisfaction at 34: Current influences 16 Physical health (recorded 8 years earlier) Emotional health (recorded 8 years earlier) LIFE-SATISFACTION AT 34 Income Not unem- ployed Education level Married/ Cohabiting Crimi- nality.06.09.04.12-.07.07.20 Source: Layard, R., Clark, A.E., Cornaglia, F., Powdthavee, N. and Vernoit, J. (2014). 'What predicts a successful life? A life-course model of well-being', The Economic Journal, vol. 124(F720-738). ECONOMICSOCIAL PERSONAL (partial correlation coefficients)

17. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 17 Percentage of those in misery having the stated characteristics Australia

18. 18 United States Flèche and Layard (2015) “Does more of those in misery suffer from poverty, unemployment or mental illness?”, CEP Discussion Paper

19. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 Individual life-satisfaction at 34: Influences from childhood 19 Emotional develop- ment of child LIFE-SATISFACTION Family socio- economic features Family psychological features Cognitive development of child Behaviour of child Source: Layard, R., Clark, A.E., Cornaglia, F., Powdthavee, N. and Vernoit, J. (2014). 'What predicts a successful life? A life-course model of well-being', The Economic Journal, vol. 124(F720-738)..06.03.05.09.17 (partial correlation coefficients)

20. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 20 Background + Childhood Adult characteristics Life- satisfaction A model of the life-course

21. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 3. Policy evaluation 21

22. 3. Policy evaluation 22

23. 23 This could ultimately be main approach for Health Social Care Employment Law and order Environment Redistribution where choice provides little evidence.

24. 24 But revealed preference approach provides much better evidence on Transport Business policy Education

25. 25 Health evaluation Quality-adjusted life years require ratio scale for H

26. 26

27. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 4. Policy implications: new priority for mental health and social engagement 27 1.Mental illness should get parity of treatment in healthcare 2.Preventive mental health vital Parenting Couples therapy Schools should promote wellbeing Youth services 3.Employment policy crucial Apprenticeship guarantee + youth job guarantee. NOT EXPENSIVE (ESPECIALLY IN NET TERMS).

28. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 Economic cost of mental illness 40% of all disability 40% of all absenteeism 40% of all incapacity benefits The main illness of working age. Mental illness is 28

29. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 Degree of disability in each age group (Numbers per 1,000) Source: World Health Organisation (WHO). (2008). The global burden of disease: 2004 update. Geneva: World Health Organisation. Western Europe 29

30. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 Treatable: e.g. Cognitive Behavioural Therapy (CBT) Cost €1,200 for 10 sessions Recovery rates within 4 months Anxiety 50% mostly permanent (better than pills) Depression50% (with lower risk of relapse than pills) 30

31. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 Implication: no net cost to government Gross cost < Savings on disability benefits + lost taxes Gross cost < Savings on excess physical healthcare if person has given physical condition + mental illness 31

32. Savings due to psychological therapy 91 U.S. trials Cut annual physical healthcare costs by 20% (equivalent to €1,400). In 28 studies, data on cost of therapy showed savings exceeded cost in 26/28 cases. 32 Chiles, J.A., et al. (1999), "The impact of psychological interventions on medical cost offset: a meta-analytic review", Clinical Psychology: Science and Practice, 6(2): 204-220.

33. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 Improving Access to Psychological Therapy 2008No evidence-based treatments available in National Health Service 2008-156,000 therapists trained 2015400,000 patients treated 33

34. 34

35. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 The case for more health expenditure 35 In Britain we only authorise treatments which cost less than £40,000 per Quality- Adjusted Life Year (QALY). That cost reduces total life-satisfaction by 0.06 SDs of one year’s life-satisfaction. One extra QALY increases life-satisfaction by 5 SDs of one year’s life-satisfaction. We should spend more.

36. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 Will politicians listen? 36 Life-Satisfaction (LS) affects voting Incumbent vote share = 0.64 LS + 0.36 Economic Growth - 0.06 Unemployment + 0.15 Inflation. Source: Eurobarometer. All variables standardised. Controls include previous vote-share. See Ward, G (2015) “Is happiness a predictor of election results?”, CEP Discussion Paper No. 1343.

37. PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231 223 222 132 174 181 74 130 148 231 4 41 Individuals www.actionforhappiness.org 37