Happiness Inequality #3: Putting It All Together

Two days back I noted that happiness inequality today is at much lower levels than in earlier decades, despite rising income inequality. What lies behind these trends?

Economists typically think about inequality as reflecting three influences.

First, differences in average levels of happiness between groups may have changed. And indeed, in yesterday’s post, I showed that differences in happiness by gender and race have narrowed, even as differences by education widened.

A second influence is that inequality may have changed within even narrowly defined groups. To get at this, we broke the sample up into 24 sub-samples, reflecting a division by gender, three separate age groups, and four education levels. Within 20 of these 24 sub-samples, we found that happiness inequality has declined, and in no case did we find a group for whom there is a statistically significant increase in happiness inequality.

We also ran a more complex analysis, tracing the evolution of the inequality of happiness as a function of each of six demographic variables. The results are shown in the following graph:

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While some of these lines are hard to distinguish, the main insight is that the trend decline in the variance of happiness within each group is surprisingly similar across groups.

The third contributor to happiness inequality is changes in the composition of the population. For instance, falling numbers of high school dropouts yield lower happiness inequality.

Putting these three pieces together, we tried to figure out the extent to which the changing distribution of happiness reflects changes between groups, changes within groups, and changing composition.

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Our key finding is that most of the movements in happiness inequality reflect changes in happiness inequality within even narrowly-defined demographic groups, and these changes are quite pervasive.

While this is a statistical explanation, it simply begs the question: What changes could have narrowed happiness inequality so pervasively? And juxtaposing our observed trends in happiness inequality with measures of income inequality — which have pretty much risen for the past four decades in a row — presents a real puzzle. How might we reconcile these trends?

Our sense is that there may be important trends in the non-pecuniary domain that have had a major equalizing effect. But once you start thinking about the possibilities, the list of suspects is pretty long: what has happened to leisure, to family life, to religiosity, to communities, to notions of procedural fairness, belief in the American Dream, or to personal freedoms? Could these changes yield a more equal distribution of happiness. And how could we test these theories?

At this point, our research has simply documented the facts about the evolution of U.S. happiness, and Betsey and I are yet to dig into the bigger question of why. So let me ask: What do you think explains these trends in happiness inequality?


Doug Acker

Speaking from inside my own life, my happiness is high because of sex, available because of inexpensive birth control and the sexual revolution, cheap books at the library, and internet at home.

All these sources of happiness are reletively recent. Both the near-bottom and the top of income range can now afford these. The top has their BMWs and their 50 hour work weeks, but the near-bottom have the time to enjoy these delights.

All

Mike

#2 sounds very plausible to me. Reporting bias over time.

We're privy to so much more information and awareness now about being happy and what it takes. The "Oprah Effect" proposed above is brilliant!

Or, we could just be more medicated with anti-depressants and anti-anxiety pills.

Or, as standards of living increase, unhappiness falls quicker than happiness rises? This would be evident in all groups across America, right?

Phil Loomis

I found this overview of the types and dynamics happiness very useful:

http://www.youtube.com/watch?v=9FBxfd7DL3E

Seligman is a past president of the American Psychological Association. He has an interesting site at:

http://www.authentichappiness.sas.upenn.edu/Default.aspx

with tools to delve more deeply into this subject.

John Harlow

The internet gives people previously isolated from society, and therefore unhappy, a tool that they can use to interact socially. The growth and availability of the internet has reached a stage where most Americans have access and can utilize this resource to enhance utility, if they so require. I think this may have made some previously unhappy persons happier.

Ben

Overall, while income inequality has grown, there have been large increases in income across all groups. While these gains have been larger for people at the top of the income range, people towards the bottom have seen themselves having more purchasing power and therefore find themselves to me more materialistically satisfied; allowing their perceived happiness to have increased over the last few decades while those at the top find the continuing pressures of their lifestyles and occupations to drive their happiness downward.

jon

I thought people are more happy now than in times past because it is socially acceptable to be single or divorced, people change jobs fairly regularly, tech is cheaper than it has ever been, public universities are having too many students to find funding for everyone. The things that cause people stress are no longer with you for the rest of your life. If you want a divorce, you get one. If you hate your job, get a new one, start a company, or even go back to university and find something you like doing. Society has gotten far more flexible than in any time past.

misterb

Your graphs look to me like the noise is larger than the signal. I'm no fan of sophisticated curve-fitting, and I work in this area most every day. Ultimately, your models are only as good as the data you put in them, and I'd have to say your data are suspect. First of all, happiness is subjective, rendering comparisons of one person's happiness to another's philosophically questionable. Secondly, an individual's perceptions of happiness may vary from time, as may sampling procedure, making tracking relative shifts fraught with difficulty.

Note that I'm not questioning your mathematics, I'm questioning the judgments that underlie the application of math to your problem.

In my opinion, you would be better served by studying our society's freedom (that is, our ability to pursue happiness) than our evanescent opinions of what we want.

Jason Malloy

Arnold Kling has a suggestion:

http://econlog.econlib.org/archives/2008/08/two_from_will_w_1.html

If high and low status people are increasingly demographically segregated from eachother, the high status people become less happy, and the low status people become more happy, because their respective status reference groups have become more bounded.

stefan Fiebig

My first take on this question is that the availability of cheap credit for the poor is the reason for their happiness to grow (your data ends before the dance around the cheap credit cow stopped).

At the same time the rich moved to far out exurbs, resulting in long commutes - nothing makes you less happy than long commutes.

Maybe for answering your question you should look at what makes people happy and what does not.

In his book "Who's Your City", Richard Florida links happiness to a triangle of your personal life (like your family), of your work (the substance of your work, not your pay) and satisfaction with place (like how's your hood, is it safe, do you fit in, etc.). I can't go any deeper now, but it's very interesting reading.

Milt Blood

#7 says, "it seems nowadays it's more important to be happy than be successful." I'd say more people are including happiness as an important component of their definition of success. And we live in a society that allows most of us quite a bit of discretion of how we pursue our idiosyncratic definition of success. To suggest that people are achieving happiness at the expense of success inserts an external definition of success, rather than the definition chosen by the person whose happiness is being assessed.

Jan

Like #4, I also vote for expectation - specifically changes in the expectation regarding rate of quality of life improvement.

I'd also like to propose that as home entertainment including video games and HD home presentation of film and television become more immersive that happiness will de-link from many of the more measurable real world attributes.

Find out how many virtual cars someone owns and you may be able to re-link happiness with pecuniary factors...

Travis Ormsby

#1 may be on to something. While people's wants may be insatiable, the amount of happiness that can be provided by material comforts could suffer from diminishing returns.

Expectations might also play a role. If the material expectations of people on the lower end of the SES spectrum have declined relative to the expectations of those at the top, there may be a greater mismatch between expected and actual status among wealthier people. This mismatch may serve to decrease their happiness, even as their objective comforts have risen substantially.

Dennis Pagni

it's simple. people have been jerked around for so long by the "conservative revolution" that they've forgotten what a truly open, enlightened, hopeful, wise, progressive, intelligent, joyful, and cultured society is like (JFK). "been down so long it looks like up to me."

janya

Happiness is no longer tightly coupled with income in people's mind. It has become acceptable to be poor and happy, not-quite-materially-successful and happy, cheap and happy. Moreover, it seems that nowadays it's more important to be happy than be successful.

In addition, happiness is sticky, once people decide to feel happy they actually become happier, so happiness feeds on itself, and further decouples from income.

CRM

Maybe all this shows is that the measurement of happiness over time is flawed. It's suspicious that all the graphs look so similar. Perhaps measuring happiness is like quantum mechanics: the observation affects the measurement.

In particular, what if talking about measuring happiness levels (on TV talk or news shows) has led to people having a "stock answer" to happiness questions that they didn't have 10 or 30 years ago? I'd guess that people surprised to be asked about their happiness levels would give more honest responses. More recent surveys would receive predetermined answers designed to show that the surveyee is "normal". All it takes is Oprah to begin a topic with "Most people would consider themselves reasonably happy, but...." and the next day an extra million people would respond to a happiness survey with "reasonably happy".

Steve

Happiness is a function of one's expectations. Perhaps, the high expectations created in the 1950's and 60' are finally abating.

Contrary to what #1 says, there has not been any real income growth over the past 40 years that has accrued to anybody other than the upper class. Any increases in monetary well being has been the result of having two incomes rather than one and over time, this has tended to be eaten up by much higher house prices. Consequently, people have far less free time and as a result are less happy because of this. Looking at the future, I would predict that soon, even 2 incomes will be insufficient. Having your Mother in Law move in to maske ends meet is not a recipe for happiness.

What to do? If one is good looking, have moderate expectations. Having it all may seem like a worthy goal but success is elusive and the type of people you attract will disappoint you when your looks fade. If you are not good looking, have rock bottom expectations and at least you won't be disappointed. Occasionally, you'll be mildly surprised.

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Ted

Honestly, I would say the huge advancements in information technology would have the greatest equalizing effect. Those at the bottom of the happiness ladder now have access to cheap entertainment and unprecedented connectivity, decreasing loneliness. This blessing for the working class is also a curse for those at the top, who are now expected to be on the job 24/7 with their secondary home office and blackberries. Connectivity has arguably led to a more stressful, frantic life thats hard to avoid for those under the watch of investors, not to mention the investors themselves.

Trey

How about this? Maybe growth over the past few decades has pushed the unhappiest people over some threshold. If you assume that returns on happiness diminish very quickly after some threshold point, then it can make sense to see income inequality rise, but happiness inequality decline.

Tom Byrne

Although aggregate income inequality has increased, individual incomes remain far from stagnant as Thomas Sowell points out in this column from IRS data - http://article.nationalreview.com/?q=NDA3MWQ0NmM0ZjQyMWIwZDg1YzA4MDk4OGYzNmFlYjA= .

People in the bottom fifth of income-tax filers in 1996 had their incomes increase by 91 percent by 2005. Essentially, if you look at how much individuals progress rather than the entire income inequality of the population, you'll find that people are making larger gains. Maybe that is why they are happy.