Choice and SWB over time in the Easterlin Scenario: Women Only SWB over time SWB over time Option 1 Option 2 Option 1 57% 36% 93% Choice Option 2 0% 7% 7% 57% 43% Option 1 : born when you were Liddell Exact Test Option 2 : born 40 years earlier p value: 0 000 p-value: 0.000 n=56
Choice and SWB over time in the Easterlin Scenario: Men Only SWB over time SWB over time Option 1 Option 2 Option 1 61% 31% 93% Choice Option 2 0% 7% 7% 61% 39% Option 1 : born when you were Liddell Exact Test Option 2 : born 40 years earlier p-value: 0 000 p value: 0.000 n=54
“ The Paradox of Declining Female Happiness ” ” F l H i Betsey Stevenson and Justin Betsey Stevenson and Justin Wolfers Abstract: By most objective measures the lives of y j women in the United States have improved over the past 35 years, yet we show that measures of subjective well- being indicate that women ’ s happiness has declined ’ both absolutely and relative to male happiness. The paradox of women ’ s declining relative well being is paradox of women s declining relative well-being is found examining multiple countries, datasets, and measures of subjective well-being, and is pervasive j g, p across demographic groups. 36
• Relative declines in female happiness • Relative declines in female happiness have eroded a gender gap in happiness in which women in the 1970s typically hi h i th 1970 t i ll reported higher subjective well-being than did men. These declines have continued and a new gender gap is emerging—one and a new gender gap is emerging one with higher subjective well-being for men. Our findings raise provocative questions Our findings raise provocative questions about the contribution of the women ’ s movement to women ’ s welfare and about ’ t t lf d b t the legitimacy of using subjective well- being to assess broad social changes. 37
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Choice and SWB over time in the Women ’ s Liberation Scenario: Women Only SWB over time SWB over time Option 1 Option 2 Option 1 84% 10% 94% Choice Option 2 2% 3% 6% 87% 13% Liddell Exact Test p-value: 0.007 n=163 Option 1 : Women ’ s Liberation happened Option 2 : Women ’ s Liberation never happened Option 2 : Women s Liberation never happened
Choice and SWB over time in the Women ’ s Liberation Scenario: Men Only SWB over time SWB over time Option 1 Option 2 Option 1 61% 29% 90% Choice Option 2 3% 7% 10% 64% 36% Lidd ll E Liddell Exact Test t T t p-value: 0.000 n=110 n 110 Option 1 : Women ’ s Liberation happened Option 2 : Women ’ s Liberation never happened pp p
A Non-Judgmental View of the Effect of Materialism on Happiness • Materialism lowers happiness (weak, but interesting evidence in a Psychology g y gy paper “ The Dark Side of the American Dream ” ) Dream ). • Tradeoff between happiness and other goods. • Materialism means higher preferences for Materialism means higher preferences for other goods compared to happiness. 41
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Elicitations of Willingness to Pay for Happiness: Raw Distributions Raw Distributions Depression Treatment Time Spent On Meditation .3 .3 ensity .2 nsity .2 Den De .1 .1 e e % % % % % % % e e r 1 2 5 0 0 3 0 r s s s s s s f s s s s s f 1 2 3 5 n n n n n n r r r r r r o u u u u u i i i i i i m m m m m m o o o o o f h h h h h h h h h h t t o o 0 0 5 5 0 0 5 5 0 0 0 0 2 2 3 3 4 4 6 6 8 8 n 1 3 4 6 9 WTP as a Percentage of Income WTP as a Time Investment Magnetic Stimulation 3 .3 Density .2 .1 e e % % % % % % % e e 1 2 5 0 0 3 0 r r f f 1 2 3 5 r o f t o n WTP as a Percentage of Income g
Can Marginal Rates of Substitution Be Inferred From Substitution Be Inferred From Happiness Data? pp Evidence from Residency Ch i Choices Daniel J Benjamin (Cornell) Daniel J. Benjamin (Cornell) Ori Heffetz (Cornell) Mil Miles S. Kimball (Michigan) S Ki b ll (Mi hi ) Alex Rees-Jones (Wharton)
Marginal Rate of Substitution (MRS) (MRS) • The rate at which substitution of one good for e a e a c subs u o o o e good o another would leave an individual indifferent. • Estimation of MRSs: • Estimation of MRSs: – Traditionally: choice data. – Must seek alternatives when choice unobserved • public goods, externalities, policy, mistakes, etc. – One alternative: subjective well-being (SWB) data • This paper : to what extent do tradeoffs p p estimated from SWB data reflect (preference- based) MRSs? based) MRSs?
Figure 3: Tradeoff estimates: choice vs. anticipated SWB
Figure 3: Tradeoff estimates: choice vs. anticipated SWB
Beyond Happiness and Satisfaction: Satisfaction: Toward Well-Being Indices Toward Well Being Indices Based on Stated Preference Daniel J. Benjamin (Cornell) Ori Heffetz (Cornell) Ori Heffetz (Cornell) Miles S. Kimball (Michigan) Nichole Szembrot (Cornell) USC CESR Seminar USC CESR Seminar November 8, 2013
Key assumption: S tated preference an unbiased measure of true preference. •Surely false; known deviations; the “right” prefs?; our evidence.
Policy Choice (131 aspects) aspects) o cy C o ce ( 3
The bottom of the table: The bottom of the table:
Preference for Happiness and Dependence of Happiness on Recent D d f H i R t Good and Bad News (Recent Innovations to Lifetime Utility) T T v t E t t U ( X , H ( X , , 1 ,...)) t v E v 1 t t t t 55
Hedonic Adaptation: “ This, too, shall pass. ” 1 Aft 1. After time has passed, things that surely had a ti h d thi th t l h d big effect on happiness right after the event have surprisingly little effect on happiness. (Not just surprisingly little effect on happiness (Not just money.) • incarceration • incarceration • loss of the use of limbs • serious burns i b • death of a spouse • winning the lottery 2. The dynamics of national happiness after news 56
Figure 1 g Impulse Response of Happiness to Widowing With and Without Life Insurance 00 s 10 esponse 80 positive re 8 60 6 tage of p 40 4 percent 20 2 0 50 100 months since widowed With Life Insurance Without Life Insurance 57
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What does it mean to say that lifetime utility has fallen lifetime utility has fallen permanently? p y • Revealed Preference is the measure of lifetime utility. • If there were a lever to magically undo the If there were a lever to magically undo the damage of Katrina, we would pull it. – True for the harm to others. True for the harm to others – True for the harm to self, narrowly construed. – True even if the past cannot be changed but T if th t t b h d b t only the harm from now on reversed. 60
Electoral Outcomes and Happiness Electoral Outcomes and Happiness • Followed approximately 2,000 individuals in F ll d i t l 2 000 i di id l i RAND ALP – Two presidential elections: 2008, 2012 – Surveyed them immediately before election, soon after election ft l ti • Before election asked about: – Well-being – Political preferences – Beliefs about election outcomes • After election asked about: – Well-being
Electoral Outcomes and Happiness • Find strong evidence in favor of Kimball-Willis Fi d t id i f f Ki b ll Willi Model – Democrats have gain in happiness Democrats have gain in happiness – Republicans have loss in happiness • Changes in happiness from before to after election g pp driven by interaction of – Strength and direction of political preferences – Amount of suprise Amount of suprise • Strong hedonic adaptation – Half-life of emtional reaction approximation 0 65 days – Half-life of emtional reaction approximation 0.65 days • Evidence of gain-loss asymmetry – Stronger reduction in happiness for equivalent g pp q amount of surprise and partisanship if Republican than gain if Democrat
Dynamics of Daily Happiness Miles Kimball Fumio Ohtake Miles Kimball, Fumio Ohtake, Yoshiro Tsutsui and Yichuan Wang Wang 63
Data Description Data Description • 75 Osaka University Undergraduates, ~1.5 years, 75 O k U i it U d d t 1 5 ~30,000 daily observations • Many different measures of happiness M diff t f h i • Also ask about sleep • Demean, rescale each person by standard D l h b t d d deviation • De-seasonalize each person by day of week D li h b d f k effects • Form happiness factor (1 st principal component of Form happiness factor (1 st principal component of standardized happiness measures)
Relatively High Response Rates Relatively High Response Rates
Introduction Introduction • Time series properties of happiness matter! • Stylized facts: – Sleep matters for hedonic adaptation Sl tt f h d i d t ti – More than one “happiness” shock • Different shocks seem to decay at different rates • Duration hypothesis – Measurement Error can play a large role in typical happiness measurements yp pp – National news matters less than personal news
Normalized and Weekly Adjusted Log Autocovariances HAPPY NEWS • 1.5 • 2.0 Variable std_factor Cov) std_nnews td log(C std_pnews std_sleepfac • 2.5 • 3.0 • 3.5 0 5 10 15 20 0 5 10 15 20 l
Structural Estimation Structural Estimation • Three structural shocks, infinite exponential decay p y
Stacked Impulse Responses of Each Structural Shock Shock 1 2 3 H Happiness i N News 0.6 0.4 0.2 0.0 0.0 2.5 5.0 7.5 10.0 0.0 2.5 5.0 7.5 10.0 Number of Days Number of Days
Lessons from Structural Estimation • Model is best fit with 3 shocks with different decay M d l i b t fit ith 3 h k ith diff t d rates – Fastest decaying happiness shock ~50%/day. Fastest decaying happiness shock 50%/day. Slowest around 3%/day • Measurement error matters – Big contemporaneous variance, but covariances much smaller – Accounts for ~40% of variance of daily happiness Accounts for 40% of variance of daily happiness, ~60% of variance of daily personal news, and ~30% of contemporaneous covariance • Hedonic adaptation is fast Hedonic adaptation is fast – Nothing after 6 months
Next Steps Next Steps • No standard errors yet – working things out with bootstrap
Reduced form Estimation? Reduced form Estimation? • Problem: news innovation • Can estimate news “innovations” through Can estimate news innovations through an auto-regression on its own lags • Regress various leads of happiness R i l d f h i against current news innovations
Overall Class Friend 0.3 0.2 0.1 0.0 • 0.1 • 0.2 ness Teacher Part Time Job Parents/Family rdized Happin 0 3 0.3 0.2 0.1 its of Standar 0.0 • 0.1 • 0.2 Un Health Job Seeking Lover 0.3 0.2 0.1 0 1 0.0 • 0.1 • 0.2 4 8 12 4 8 12 4 8 12 Days in the Future
National News National News • Can adapt reduced form to see how national news and personal news compare p p • National news ~1/3 as important by second day second day
News Type Personal National 0.15 0.10 est 0.05 0.00 4 8 12 lead
The Evolutionary Psychology of Elation and Dismay • Functionally, elation and dismay may motivate cognitive processing—much like curiosity. – Elation: after good news, it pays to • think what you did right, so you can do it again • think how to take advantage of the new opportunities f – Dismay: after bad news, it pays to • think what you did wrong, so you can avoid doing it again think what you did wrong so you can avoid doing it again • think how to mitigate the harm of the bad news – Curiosity: after news that is neither clearly good nor Curiosity: after news that is neither clearly good nor bad, it pays to learn more for the sake of option value 82
The News and Happiness Axioms The News and Happiness Axioms 1 1. H Happiness at time t is a function of i t ti t i f ti f a. the other ultimate goods, represented by X , b. and the history of realized lifetime utility v b and the histor of reali ed lifetime tilit through time t. Holding X fixed, an individual is 2. happier if current expected lifetime utility is of happier if current expected lifetime utility is of 2 a preferred future. 3. less happy if past expected lifetime utility was 3. less happy if past expected lifetime utility was of a preferred future. 83
Lifetime Utility in the Additively Separable Case T T v t E t t U ( X , H ( X , , 1 ,...)) t t v E v 1 t t t t 84
The Innovation ι in Lifetime Utility v t v t E t 1 v t E Note about the lifetime utility v t 1 U ( X t 1 , H t 1 ) E t 1 v t innovation: t 1 t 1 t 1 t 1 t 1 [ v t 1 U ( X t 1 , H t 1 )] t v t t [ v t 1 so U ( t 1 , t 1 )] v t 85
N News and Happiness Axioms d H i A i + Additive Separability Imply + Additive Separability Imply H t H ( X t , t , t 1 ,...) ( t , t , t 1 , ) t H H Axiom 2 → t 0 t H H Axiom 3 → 1 t t 1 t j t j 86
Baseline Mood M and Elation e Baseline Mood M and Elation e M t H ( X t ,0,0,...) M ( X t ) H ( X 0 0 ) M ( X ) M e H ( X e t H ( X t , t , t 1 ,...) H ( X t ,0,0,...) ) H ( X 0 0 ) e ( X , , e ( X t , t , t 1 ,...) , ) 87
88 The Elation Theory of Happiness H t M ( X t ) e ( X t , t , t 1 ,...)
The Elation Theory of Happiness (In Words) Experienced happiness is the sum of two components: p • elation: short-run happiness that depends on recent news about lifetime utility on recent news about lifetime utility • baseline mood: long-run happiness that is the output of a household production function (like health, entertainment, or function (like health, entertainment, or nutrition.) 89
Key Implications of the Happiness and News Axioms • A theory of happiness can be described in terms A th f h i b d ib d i t of the objects that are well-defined by revealed preference: preference: – The fundamentals (state and control variables and outputs of household production functions) that outputs of household production functions) that people care about and – The history of which indifference curves for lifetime plans one has been on. • Old news about the future matters less for Old b t th f t tt l f happiness than recent news about the future. 90
Why are Utility and Happiness Confused? • Because they are dramatic, elation and dismay may dominate people ’ s perception of happiness. • Everyone wants good news. That is, everyone wants what spikes in happiness signal. g • Not everyone values the emotional spikes per se, as distinct from what they signal. se, as distinct from what they signal. • Not everyone will sacrifice other goods for the long-run happiness that remains even when long-run happiness that remains even when there is no good or bad news. 91
Loss Aversion from Elation Theory: L A i f El ti Th Happiness Additively Separable with Elation pp y p Concave in Lifetime Utility Innovations U(X,H)=F(X)+M(X) + α min( ι ι /2) + α 0 min( ι t , ι t /2) + α 1 min( ι t-1 , ι t-1 /2) + … 92
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El ti Elation-Independence: I d d Additively Separable Happiness with Elation y p pp Linear in Lifetime Utility Innovations U(X,H)=u(X)+M(X) + α 0 ι t + α 1 ι t-1 + … 95
Factual Mistakes about Happiness Need Not Cause Decision Mistakes • Given rational expectations, adding a linear combination of lifetime utility innovations to the utility function has no effect on the preferences represented. • In this case, mistakes about the rate of hedonic adaptation cause no harm to utility maximization. • However, mistakes about the controllable determinants of baseline mood will cause determinants of baseline mood will cause material harm. 96
Cumulative Elation Cumulative Elation • Cumulative Elation= ∆ Σ e as the result of a given news event g • the extra area (or lost area) under the curve of happiness against time (technically curve of happiness against time (technically discounted by ρ ) , after correcting for any change in baseline mood M . • The Cumulative Elation Hypothesis: the The Cumulative Elation Hypothesis: the size of an innovation in lifetime utility is monotonically related to the resulting monotonically related to the resulting cumulative elation. 97
The Duration Hypothesis The Duration Hypothesis 1. Weak Version: The rate of hedonic adaptation is slower for larger innovations p g in lifetime utility. 2 Strong Version: Variation in the rate of 2. Strong Version: Variation in the rate of hedonic adaptation accounts for most of the variance in cumulative elation when looking at different sizes of innovations to g lifetime utility. 98
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100 elation=b(win-lose)x α e - δ t/x^ β x=e γ poor cash
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