Tuesday, April 10, 2018

Unresolved Issues In Happiness Economics From The Conference Honoring The Retirement Of The Field's Founder

That would be Richard A. Easterlin, age 92, retiring this spring from the U. of Southern California after being there since 1981, following an earlier stint at U. of Penn, where he got his PhD under Simon Kuznets.  Kuznets in turn got his from Wesley Clair Mitchell, who was in turn the student of Thorstein Veblen, and it was mentioned (by me actually) at this conference that happened over this past weekend at USC that Easterlin's work has emphasized the issue of social comparisons that was strongly developed by Veblen in his 1899 Theory of the Leisure Class.  This applies not only to his famous Easterlin Paradox, the starting shot shown in his long ignored 1974 book chapter that started happiness economics, but also in his earlier Easterlin Hypothesis on demography in economic history.  As it was, this conference focused on happiness economics, with several leading figures in the field present.  I shall note some matters that were disputed at the conference and remain open.

Probably the most hotly disputed is the matter of the relationship between age and happiness (more frequently labeled "social well being" or "life satisfaction").  The current more or less conventional  view is that this is on average a U-shaped relation, at least in the US, with people happy at 20 but with this declining to about 45 or so, and then rising after that.  There are serious problems with measuring this, especially the fact that we do not have full panel data following individuals throughout their lives so as to avoid the bias induced by the fact that happier people tend to live longer than unhappy ones, which skews results at the upper age end for simple cross-section studies.  A more recent finding from European nations suggests this may be more of an M-shape, with happiness actually rising a bit from 20 into the late 20s or so, declining to about 45, rising to about 70, but then either plateauing or even declining slightly after that.

However, looking across nations one finds apparently more diverse findings, with some showing patterns that simply decline from youth on.  This seems more prevalent in poorer nations where there may not be old age pension systems.  Another matter is that there may be changes in the shapes of this pattern across nations based on kinds of employment systems, family relations, and community patterns, with supposedly "nicer" systems leading to some smoothing out of that midlife crisis dip.  This argument, put forward by John Helliwell at the conference, lead author of the recent UN study on happiness, was sharply challenged by Andrew Oswald in the most heated exchange of the conference.  This matter is definitely an open and unresolved question that can get people worked up.

On the matter of old age pensions possibly playing a role in improving happiness for older people, a general theme not seriously disputed, although details were, is that better social safety nets seem to  be associated with higher levels of happiness in nations (along with greater income equality).  This was a major theme in Easterlin's own closing remarks, who claimed that in general social safety nets are spreading or improving around the world, despite some setbacks here and there, leading him to take an ultimately optimistic view of the future of the world.  A particular case discussed in several of the 24 presentations by some of his former students involved China (not all presentations were by his former students).  There reported happiness levels were declining from about 1990 to 2005, with them rising since then.  Easterlin and his students identify as a likely important factor in this a collapse of the social safety net during the declining happiness period, with a reinstitution of it since supporting the increase in happiness.  This has involved both health care and old age pensions, with the introduction of an old age pension system in rural areas between 2009 and 2013 important for the turnaround and recent increase in happiness. 

The other major area of disagreement, although people were less vigorous in arguing about this as it is a central view of Easterlin's himself, involved his famous Paradox.  The Easterlin Paradox is that at any point in time in a nation, happiness is positively correlated with income, but over time, rising income does not increase happiness.  People seem to view themselves relative to others, the central Veblenian argument. The poster boys for this from his 1995 JEBO paper were the US, where measured happiness peaked in 1956 (and is falling sharply now) and Japan.  However, many, especially Justin Wolfers and coauthors (none of them at the conference), have sharply challenged this argument.  In a paper, "Paradox Lost," in the special issue honoring him that Easterlin wrote and I published in the journal I edit, Review of Behavioral Economics (ROBE), he responded to his critics and argued that his paradox holds in some disputed nations (especially in Eastern Europe) if one examines the data carefully and properly enough.  He did not address this himself at the conference, but several papers did.  According to several, some nations clearly fit the paradox, with US, Japan, China, and most of Northern Europe doing so.  Some others clearly do not (with rising incomes apparently being associated with rising happiness levels), with Southern Europe and parts of Latin America fitting that, with others up in the air, including Eastern Europe.  This is a complicated matter clearly open to further research and debate.

Regarding the US, a presentation by Carol Graham was very pessimistic about the near term future of the US, with a collapse of happiness among poor whites the main theme, with declining life expectancies and the opioid epidemic major themes.

In any case, I was honored to be invited to participate, and I look forward to future research on this and other related matters in the future (with the relation between gender and happiness also an open question, although less discussed at the conference than these others).

Barkley Rosser


AXEC / E.K-H said...

Economics is NOT about Happiness but about Profit
Comment on Barkley Rosser on ‘Unresolved Issues In Happiness Economics From The Conference Honoring The Retirement Of The Field’s Founder’

The common methodological blunder of orthodox and heterodox economists and the ultimate reason why economics is one of the worst scientific failures of all times consists of defining economics as a social science.

While it is trivially true that human behavior plays an important role in how an economy develops, this is NOT the subject matter of economics but of Psychology, Sociology, Anthropology, History, Political Science, Social Philosophy, Biology/Evolution Theory etcetera.

Imagine a passenger plane flying with high speed at high altitude. Now, one can ask two entirely different questions about this phenomenon, i.e. (i) behavioral, or (ii), physical.

• Behavioral questions relate to the motives of travel, social status e.g. 1st/2nd class, feelings/fear of flying/claustrophobia/euphoria, satisfaction with comfort/service/entertainment, trust on pilots/crew/airline, uncertainty about value for money, etcetera.
• Physical questions relate to the laws of aerodynamics, thermodynamics, material stability of the craft, weather conditions, navigation, remaining fuel supply, etcetera.

The theory of flight abstracts from the concrete human beings and leaves all Human Nature issues to social scientists, that is, to people who can endlessly waffle about utility/happiness but will NEVER get a plane or anything else off the ground.

Analogous for the subject matter of economics. Economics has to focus on the systemic aspects of the economy, in other words, economics is NOT a social science but a system science.

Unfortunately, economics took the wrong turn at the very beginning because it defined itself as Political Economy. Politics, though, is the very antithesis of science.#1

The most important scientific contribution an economist can make is to reveal how the actual economy works. This contribution takes the form of the true theory with truth well-defined as material and formal consistency.

The crucial step on the way to the true theory is to move from the naive description of reality to abstraction: “Since, therefore, it is vain to hope that truth can be arrived at, either in Political Economy or in any other department of the social science, while we look at the facts in the concrete, clothed in all the complexity with which nature has surrounded them, and endeavour to elicit a general law by a process of induction from a comparison of details; there remains no other method than the à priori one, or that of ‘abstract speculation’.” (J. S. Mill)

Needless to emphasize that abstraction can go badly wrong. By getting stuck with Human Nature/motives/behavior/action economists committed the Fallacy of Insufficient Abstraction. And this is why economics is a failed science.#2

Economists got lost in the woods with folk psychological and folk sociological blather about utility/happiness and can to this very day not tell what profit is and how the price- and profit mechanism works. Walrasianism, Keynesianism, Marxianism, Austrianism is proto-scientific garbage but the former editor of the Review of Behavioral Economics, the Cargo Cult Scientist Barkley Rosser, has not got it and will never get it.

Egmont Kakarot-Handtke

#1 Yes, orthodox economics is poor science, but can Heterodoxy raise hope?

#2 See ‘Economics: 200+ years of scientific incompetence and fraud’

Barkley Rosser said...

Sorry, but I could not disagree more, although I shall not respond further to any other posts you make on this thread.
Profit is an important topic in economics, and a few economists (Marx especially, even though you dismiss him as among the unwashed and unscientific) have agreed with you that it is the most important topic. But the vast majority do not, including me. As it is, as I have repeatedly explained but will not do so at any length here, that your theory Is of little use. It is tautological and obvious and well-known. Its only use is for modeling private capital formation, which does indeed depend partly on retained earnings, although also on other things such as interest rates and the growth rate of the economy, as well as other factors. So, your empty and vacuous theory is only slightly useful, aside from being well known, if not in your pathetically narrow and simple-minded formulation.

Happiness, on the other hand, is immensely important. That it is hard to measure is certainly the case, and indeed there are many economists who dismiss the whole field as worthless because of its reliance on surveys, asking people how satisfied they are with their lives. Some hard core positivist types say it is only behavior that matters, what people do, not what they say, and I recognize that as a valid philosophical position, even if I do not agree with it. As it is, at the conference Andrew Oswald posed measuring oxygenated blood flow through reward centers of brains as a more solid measure, and apparently that seems to correlate with the widely used survey measures.

BTW, Easterlin's original paper from 1974 that he could not get published in a journal was titled, "Does Economic Growth Improve the Human Lot?" He just looked at US data from 1945-1970 for that.

Lord said...

I would think, not rise of income, but rate of rise of income would be what humans are most adapted for, with mood shifts at inflection points.

rosserjb@jmu.edu said...


Well, not much evidence of that. Japan saw no increase in reported happiness during its decades of very rapid growth. China actually saw declines in happiness between 1990-2005 even though growth rates were very high. Also, India has had rapid growth in recent decades with basically no increase in happiness levels. There is no evidence of changes anywhere at inflection points.

What we do see is that happiness almost everywhere declines when income levels decline. There is an asymmetry here, sort of reflecting loss aversion: people really do not losing things and going downhill. Indeed, in his paper in my special issue, this Is the key to Easterlin's paper, "Paradox Lost?" his reply to his critics. The key is that in the short run happiness levels seem to move with income levels over business cycles, but in many countries do not trend upwards as per capita income trends upward. This can happen id the declines in happiness during recessions are so great that the increases in happiness during the longer growth periods are not able to move the happiness levels up over time, which is what seems to go on in many nations, although not all.

Sandwichman said...

"happier people tend to live longer than unhappy ones"

I not sure this is true. Egmont is still alive and he is the saddest excuse for a human being I have ever encountered. Thinking back on those from my cohort who have "gone to meet their maker" (so to speak), in retrospect, they all seem to have been happier than me when they were alive. I have become happier because I inherited money, qualified for a pension and finally got a job doing exactly what I wanted to do -- even though I didn't have to do anything at all.

I would say wealthier people live longer and that is probably what they are so happy about. Schadenfreude.

AXEC / E.K-H said...

Barkley Rosser

You say: “Profit is an important topic in economics, and a few economists … have agreed with you that it is the most important topic. But the vast majority do not, including me.”

The vast majority of economists including you is scientifically behind the curve just as badly as any Flat-Earther ever was.

Take Keynes as an example. Here is the proof from the General Theory: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63)

This two-liner is conceptually and logically defective because Keynes never came to grips with profit.

“His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.)

The economist Keynes had no idea what profit is. Neither had those who came before him or after him, including Barkley Rosser.

How absurd is this? What are economists waiting for? That psychologist will eventually tell them what profit is while economists tell them in turn what happiness is?

Profit theory is provably false, distribution theory is false, employment theory is false, the theory of money is false, growth theory is false yet Barkley Rosser is blathering about happiness, Yusuf on the cross, the lone nut hypothesis of the JFK and King assassinations, and the reproductive behavior of the House of Saud.

It is obvious that the vast majority of economists including Barkley Rosser most clearly failed the theme#1 and has now happily arrived at the bottom of the proto-scientific shithole.#2

Egmont Kakarot-Handtke

#1 Capitalism, poverty, exploitation, and cross-over exploitation

#2 Economics has arrived at the bottom of the proto-scientific shithole

rosserjb@jmu.edu said...


It may not be the case among those you know, but I think more broadly it is true. Suicides are generally not happy. There is reason to believe that unhappiness reduces immune reistance levels, and so on.

Among people I have known, several suicides, all unhappy, some drug overdoses not thought to be intended, also not too happy. One of my closest and earliest friends, chronically depressed and smoked cigarettes, died of lung cancer at 48.

OTOH, my mother lived to 97, almost too happy in the eyes of (mostly younger female) some relatives. Unhappy childhood, but later always looking on the bright side of everything and smiling her way to her long delayed deathbed.

I also know or have known some prominent economists living and being active well into their 90s, all of them pretty happy as near as I could or can tell. Among those is 92-year old Dick Easterlin, on the verge of retiring finally, not only wise and still active, but definitely very happy every time I have seen him, or at least putting on a good act of being so (and not all happiness economists seem happy to me, some of them quite grumpy).

rosserjb@jmu.edu said...

BTW, S-man, of course wealthier and higher income people tend to live longer than those less so. They also tend to be happier on average than others within their societies when asked.

All of these matters are averages, after all. There certainly are "poor little rich girls (and guys)" as well as happy poor people.

AXEC / E.K-H said...

Barkley Rosser

The underlying philosophy of economics is Utilitarianism/Darwinism/ Malthusianism and it has not changed in the last 200+ years.

What is the bottom-line of the new field of Happiness Economics? You sum up: “… of course wealthier and higher income people tend to live longer than those less so. They also tend to be happier on average than others within their societies when asked.”

This is what already Malthus told the world and he left no doubt that the premature death of the poor=unfit is a good=natural thing. The progress in economics consists in the main in applying the methods of modern marketing and in repackaging Malthus’ dismal message as Happiness economics.

Economics never rose above the level of poor philosophy and proto-scientific rubbish.

Egmont Kakarot-Handtke

Barkley Rosser said...

Actually, Egmont, at the conference Malthus's views were mentioned a few times. You missed the really important part, which is that he may have been the first economist to note that income and happiness may not be perfectly correlated, even if on average higher income people are happier at a given point in time in a given society. But money (or real consumption) is not the end all and be all, and happiness involves a lot more, which in fact the research of Easterlin and others shows. Much more important than money are relations with family and friends as well as good health.

So, on my 70th birthday, I hope all of you have those things, good relations with family and friends and good health, all much more important than income or wealth.

Sandwichman said...

Happy Birthday, Barkley! A month and a day happier than me.

Sandwichman said...
This comment has been removed by the author.
AXEC / E.K-H said...

Barkley Rosser

You say “You missed the really important part, which is that he [Malthus] may have been the first economist to note that income and happiness may not be perfectly correlated, even if on average higher income people are happier at a given point in time in a given society.”

As always, it’s you who badly misses the point. The economist Malthus was by no means the first to note the correlation between wealth/happiness respectively the mirror correlation poverty/premature death but he became notorious as the chief proponent of ““positive checks’, which lead to premature death: disease, starvation, war, …” (Wikipedia)

‘Positive checks’ by the four blunt tools, also known as the Horsemen War, Famine, Pestilence and Disease, were later-on supplemented by the more subtle tools of medicine and economics. It is not an accident that the economist Keynes was a member of the Eugenics Society. Economics and Social Darwinism were always joined at the hip.

Happiness economics is the botoxed version of the foundational creed of Political Economy: Better a healthy, happy, long-lived exploiter than a sick, unhappy, short-lived exploitee.

Guess what, Barkley Rosser, people came up with this trivial philosophy some thousand years before some silly economists gathered to celebrate “The Retirement Of The Field’s Founder” and to peer-applaud their asinine drivel.

Egmont Kakarot-Handtke