Happiness, Subjective Wellbeing and Behavioural Economics: Old Ideas, New Understandings...

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Happiness, Subjective Wellbeing and Behavioural Economics: Old Ideas, New Understandings Jon.Hall@abs.gov.au. Two Key Questions. How do we measure Subjective Wellbeing? Why do we need to measure Subjective Wellbeing?. Two Key Questions. How do we measure Subjective Wellbeing?. - PowerPoint PPT Presentation

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Happiness, Subjective Wellbeing and Behavioural Economics: Old Ideas, New

Understandings

Jon.Hall@abs.gov.au

Two Key Questions

How do we measure Subjective Wellbeing?

Why do we need to measure Subjective Wellbeing?

Two Key Questions

How do we measure Subjective Wellbeing?

Two Key Questions

How do we measure Subjective Wellbeing?

What is Subjective Wellbeing?

What is Subjective Wellbeing?How individuals rate the quality of their lives

Two broad approaches based on…

1. How individuals evaluate the quality of their lives.

2. Positive and negative emotions, measured momentarily or remembered.

What is Subjective Wellbeing?Different questions, different uses

“How satisfied are you with your life?” is much more influenced by life circumstances than our day to day emotions.

People are “happier” at the weekend, but no more satisfied with life overall.

Life satisfaction questions are useful for looking at which circumstances of life drive happiness.

What is Subjective Wellbeing?Different questions, different uses

Momentary assessments – based on (in real) time use diaries – show different answers to remembered assessments

e.g. time spent with children, experiences of pain Which is the more important to understand?

What is Subjective Wellbeing?Different questions, different uses

Evidence shows respondents do interpret their relative position in the world well

e.g. self-assessed health declines with age. But the decline is eliminated when respondents are asked to compare their health to their peers.

Ed Diener’s Would You Move? Test of validity

Life Evaluation Ladder – Ideal to Worst

Denmark 8.0 Togo 3.2

Finland 7.7 Cambodia 3.6

Switzerland 7.5 Sierra Leone 3.6

Netherlands 7.5 Georgia 3.7

Spain 7.2 Zimbabwe 3.8

Ireland 7.1 West Bank 4.7

Why do we need to measure Subjective Wellbeing?

1. Happiness/Wellbeing is a legitimate goal of public policy

Why do we need to measure Subjective Wellbeing?

1. Happiness/Wellbeing is a legitimate goal of public policy

2. SWB drives objective wellbeing

Why do we need to measure Subjective Wellbeing?

1. Happiness/Wellbeing is a legitimate goal of public policy

2. SWB drives objective wellbeing

3. SWB measures can promote a facts-based debate about the statistics that matter

Why do we need to measure Subjective Wellbeing?

1. Happiness/Wellbeing is a legitimate goal of public policy

2. SWB drives objective wellbeing

3. SWB measures can promote a facts-based debate about the statistics that matter

4. Looking at policy through an SWB lens generates new ideas

Why do we need to measure Subjective Wellbeing?

1. Happiness is a legitimate goal of public policy

2. SWB drives objective wellbeing

3. SWB measures can promote a facts-based debate about the statistics that matter

4. Looking at policy through an SWB lens generates new ideas

Bhutan

USA

Why do we need to measure Subjective Wellbeing?

1. Happiness/wellbeing is a legitimate goal of public policy

2. SWB drives objective-wellbeing

3. SWB measures can promote a facts-based debate about the statistics that matter

4. Looking at policy through an SWB lens generates new ideas

Happiness and Health

This is a new science

Extremely difficult to test for links between happiness and health because of confounding variables, false causality etc. etc. – few “laboratory” experiments are possible

Happiness and Health

Happiness and Health

Happiest Quartile Least happy Quartile

% Surviving to 8590% 34%

% Surviving to 94 54% 11%

Happiness and Health

Social Benefits of Happiness

Trust

Social Connections

Happiness

Why do we need to measure Subjective Wellbeing?

1. Happiness/wellbeing is a legitimate goal of public policy

2. SWB drives objective wellbeing

3. SWB measures can promote a facts-based debate about the statistics that matter

4. Looking at policy through an SWB lens generates new ideas

Happiness and the headlines

Happiness and the headlines

Discovered: The Happiest Man in AmericaBy CATHERINE RAMPELLPublished: March 5, 2011

Gallup’s answer: he’s a tall, Asian-American, observant Jew who is at least 65 and married, has children, lives in Hawaii, runs his own business and has a household income of more than $120,000 a year. A few phone calls later and ...

Happiness and the headlines

Monthly happiness indicator triggers public discussion

1. Why the changes?2. Which groups/regions faring differently?

Trojan Horse for facts-based debate about health, wealth, education, employment, environment etc. etc.

Happiness

TIME

Why do we need to measure Subjective Wellbeing?

1. Happiness/wellbeing is a legitimate goal of public policy

2. SWB drives objective wellbeing

3. SWB measures can promote a facts-based debate about the statistics that matter

4. Looking at policy through an SWB lens generates new ideas

Behavioural Economics

Behavioural EconomicsPeople do not seek necessarily to maximise their own utility.

Behavioural EconomicsPeople do not seek necessarily to maximise their own utility.

Which would you prefer?

a. You and all your team receive $1000 pay rise

Behavioural EconomicsPeople do not seek necessarily to maximise their own utility.

Which would you prefer?

a. You and all your team receive $1000 pay rise

b. You get a $2k rise – your colleagues each get $5k

Behavioural EconomicsPeople do not seek necessarily to maximise their own utility.

Which would you prefer?

a. You and all your team receive $1000 pay rise

b. You get a $2000 rise – your colleagues each get $5k

Economic theory says b)

Human nature says a)

Behavioural EconomicsUnemployment, happiness and your partner

Happiest State of Affairs

You Your partner

1 Employed Employed

2 Employed Unemployed

3 Unemployed Unemployed

4 Unemployed Employed

Behavioural Economics

Ingenious natural experiments ….

The Dutch postcode lottery – keeping up with the Van Jones’s

Feelings matter – for behaviour & policy

High Subjective Wellbeing

Low Subjective Wellbeing

High Objective Wellbeing

Wellbeing Dissonance

Low Objective Wellbeing

Adaptation Deprivation

Feelings matter – for behaviour & policy responses

High Fear of Crime Low Fear of Crime

High Risk of Crime

Low Risk of Crime

Feelings matter – for behaviour & policy responses

High Fear of Crime Low Fear of Crime

High Risk of Crime Your doors are locked and you have a dog: email your MP

Low Risk of Crime

Feelings matter – for behaviour & policy responses

High Fear of Crime Low Fear of Crime

High Risk of Crime Your doors are locked and you have a dog: email your MP

Start locking your doors and buy a dog – then email your MP (if your computer hasn’t been stolen)

Low Risk of Crime

Feelings matter – for behaviour & policy responses

High Fear of Crime Low Fear of Crime

High Risk of Crime Your doors are locked and you have a dog: email your MP

Start locking your doors and buy a dog – then email your MP (if your computer hasn’t been stolen)

Low Risk of Crime Open your doors and give your dog to your MP

Feelings matter – for behaviour & policy responses

High Fear of Crime Low Fear of Crime

High Risk of Crime Your doors are locked and you have a dog: email your MP

Start locking your doors and buy a dog – then email your MP (if your computer hasn’t been stolen)

Low Risk of Crime Open your doors and give your dog to your MP

How’s the weather in Japan?

The Policy Revolution

Subjective Wellbeing – the New Business of Government

From Bhutan to the UK, governments are getting serious about measuring “happiness” … “subjective wellbeing:” … “flourishing societies”

“To those who say that all this sounds like a distraction from the serious business of government, I say finding out what will really improve lives and acting on it is the serious business of government."David Cameron, 2010

3. Subjective Wellbeing – the New Business of Government

From Bhutan to the UK, governments are getting serious about measuring “happiness” … “subjective wellbeing:” … “flourishing societies”

A new science…. but we know that wellbeing matters

Subjective Wellbeing – the New Business of Government

From Bhutan to the UK, governments are getting serious about measuring “happiness” … “subjective wellbeing:” … “flourishing societies”

A new science…. but we know that wellbeing matters

a. Different conversations e.g. community cohesion

Subjective Wellbeing – the New Business of Government

From Bhutan to the UK, governments are getting serious about measuring “happiness” … “subjective wellbeing:” … “flourishing societies”

A new science…. but we know that wellbeing matters

a. Different conversationsb. Different behaviours & policies e.g. commuting or

police investigations

Subjective Wellbeing – the New Business of Government

From Bhutan to the UK, governments are getting serious about measuring “happiness” … “subjective wellbeing:” … “flourishing societies”

A new science…. but we know that wellbeing matters

a. Different conversationsb. Different behaviours & policies c. Cost benefit analyses – inflation vs. unemployment

Subjective Wellbeing – the New Business of Government

From Bhutan to the UK, governments are getting serious about measuring “happiness” … “subjective wellbeing:” … “flourishing societies”

A new science…. but we know that wellbeing matters

a. Different conversationsb. Different behaviours & c. Cost benefit analyses d. Management practices – the weekend effect

Subjective Wellbeing – the New Business of Government

From Bhutan to the UK, governments are getting serious about measuring “happiness” … “subjective wellbeing:” … “flourishing societies”

A new science…. but we know that wellbeing matters

a. Different conversationsb. Different behaviours & policies c. Cost benefit analysesd. Management practicese. Korea’s response to the GFC

Subjective Wellbeing – the New Business of Government

From Bhutan to the UK, governments are getting serious about measuring “happiness” … “subjective wellbeing:” … “flourishing societies”

A new science…. but we know that wellbeing matters

By 2030…? Radical reform of the how we understand/think about policy…

Subjective Wellbeing – the New Business of Government

Consider education policy.

To educate and build socially inclusive communities where all Australians have the opportunity to reach their full potential and to actively participate in a rewarding economic and social life.

DEEWR, 2011

Subjective Wellbeing – the New Business of Government

Consider education policy.

To educate and build socially inclusive communities where all Australians have the opportunity to reach their full potential and to actively participate in a rewarding economic and social life.DEEWR, 2011

But that requires understanding: 1) What is a “ rewarding” life?

Subjective Wellbeing – the New Business of Government

Consider education policy.

To educate and build socially inclusive communities where all Australians have the opportunity to reach their full potential and to actively participate in a rewarding economic and social life.DEEWR, 2011

But that requires understanding: 1) What is a “ rewarding” life?2) How education contributes to broader wellbeing. What

are the social outcomes of learning?

Subjective Wellbeing – the New Business of Government

Consider education policy.

To educate and build socially inclusive communities where all Australians have the opportunity to reach their full potential and to actively participate in a rewarding economic and social life.

DEEWR, 2011

But that requires understanding 1) What is a “ rewarding” life2) How education contributes to broader wellbeing. What are the social

outcomes of learning?

Which requires new measures.

We manage what we measure.

Subjective Wellbeing….1. Affects our outcomes in many aspects of life

2. Affects our behaviour in many aspects of life

3. Is a legitimate goal of policy-making

We used to think that revolutions are the cause of change. Actually it is the other

way around: change prepares the ground for revolution.

Eric Hoffer

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