Money buys happiness, at the margin

Subjective Well-Being and Income: Is There Any Evidence of Satiation? 

Betsey Stevenson & Justin Wolfers 
NBER Working Paper, April 2013 

Abstract: Many scholars have argued that once "basic needs" have been met, higher income is no longer associated with higher in subjective well-being. We assess the validity of this claim in comparisons of both rich and poor countries, and also of rich and poor people within a country. Analyzing multiple datasets, multiple definitions of "basic needs" and multiple questions about well-being, we find no support for this claim. The relationship between well-being and income is roughly linear-log and does not diminish as incomes rise. If there is a satiation point, we are yet to reach it.

Nod to Kevin Lewis

$$ can't buy happiness, but do happy people make more $$?

Estimating the influence of life satisfaction and positive affect on later income using sibling fixed effects

Jan-Emmanuel De Neve & Andrew Oswald
Proceedings of the National Academy of Sciences, 4 December 2012, Pages 19953-19958

Abstract:
The question of whether there is a connection between income and psychological well-being is a long-studied issue across the social, psychological, and behavioral sciences. Much research has found that richer people tend to be happier. However, relatively little attention has been paid to whether happier individuals perform better financially in the first place. This possibility of reverse causality is arguably understudied. Using data from a large US representative panel, we show that adolescents and young adults who report higher life satisfaction or positive affect grow up to earn significantly higher levels of income later in life. We focus on earnings approximately one decade after the person’s well-being is measured; we exploit the availability of sibling clusters to introduce family fixed effects; we account for the human capacity to imagine later socioeconomic outcomes and to anticipate the resulting feelings in current well-being. The study’s results are robust to the inclusion of controls such as education, intelligence quotient, physical health, height, self-esteem, and later happiness. We consider how psychological well-being may influence income. Sobel–Goodman mediation tests reveal direct and indirect effects that carry the influence from happiness to income. Significant mediating pathways include a higher probability of obtaining a college degree, getting hired and promoted, having higher degrees of optimism and extraversion, and less neuroticism.

Nod to Kevin Lewis

For Those Cold UNC Football Games...

For those extra supplies you'll need at that late season UNC football game.


The police will just think that you are drinking your own urine in the stands, which is not a problem if you wait until after half-time. This will look a little strange for people who appear to be women, but those UNC fans are VERY inclusive.

Kansas City Que-Off

I'm relaxing in the concierge lounge of the KC Intercontinental hotel getting ready for the econ blogger conference sessions tomorrow (Friday) at the Kauffman Foundation. Some of the sessions will be live streamed at growthology.org, and I'm really looking forward to it.

But on to more important things. I've eaten barbeque extensively in Lexington NC (with LeBron) and once in Lockhart TX (with Mrs. Angus) and now in the third 'que capital of America, Kansas City.

The Kauffman dinner was co-catered by Oklahoma Joe's and Jack Stack.

People you know I'm going to pick a winner here.

I'd have to say the single best item was the Oklahoma Joe's pork ribs. They were amazing! I'm not sure if they weren't better than the beef in Lockhart (I'll need to do more research). The second best item of the dinner was the beef burnt ends from Jack Stack. So I'd say Joe's for pork and Jack's for beef.

I ate two huge plates of nothin' but meat and can't thank the folks at Kauffman enough for such an enjoyable dinner.

Smiles: Fake? And can you tell?

Poker faces often have "tells;" so do smiles.

Spot The Fake Smile
(be sure to click the button to watch the smile.)

This experiment is designed to test whether you can spot the difference between a fake smile and a real one. It has 20 questions and should take you 10 minutes. It is based on research by Professor Paul Ekman, a psychologist at the University of California. Each video clip will take approximately 15 seconds to load on a 56k modem and you can only play each smile once.

In case you are wondering, they did it by taking real smiles that occurred spontaneously in interviews, or by telling the person to smile. Obviously you can't say, "Give us a genuine smile, now!"

Bizarrely, I got 18 out of 20 correct. Had a bit of luck, I expect. But that's better classification than I would have expected. Only missed two, one F that was a G, and one G that was an F.

How do YOU fare?

(Nod to the Blonde, who never fakes it)

Raleigh: America's Best City?

Raleigh is America's best city?

I happen to agree, mind you. Considering all the factors, I can't imagine a better place to live.

What a nice pup....

This dog is not really cute, but he is obedient.

And if you are really obedient, people will think you are cute anyway. That approach certainly works for me in MY marriage.

The ultimate Giffen good?

Betsey S. says it may be kids!!

The whole article is excellent. Here's the nub:

Stating the problem this way makes it clear that Caplan’s argument actually requires parents to be making two mistakes. The first mistake is that the returns to the marginal hours with our children are lower than we think, and so we are over-investing in quality. If he’s right, we can all save ourselves a lot of time. But this doesn’t mean that we should necessarily have more kids. Here’s where the second assumption really matters: Caplan thinks that we should take the time we save and spend it on a greater quantity of children.

You can think of this another way. Caplan says that we parents are charging ourselves too much for children. And just as we buy more televisions when the price falls, we should have more children when the price falls. Maybe. But maybe not. When we reduce the price, there are both income and substitution effects. Caplan is entirely focused on the substitution effect: having kids becomes cheaper relative to buying TVs. So he says buy more kids, and fewer TVs. But what about the income effect? As people become richer, they tend to “buy” fewer children, not more. So there’s an offsetting income effect. Is it possible that the income effect overwhelms the substitution effect? Typically this only occurs among goods which take a big share of our budgets. Like children.

1,000,000 th KPC visitor: Mid June

Sometime in Mid-June, we'll have our 1 millionth visitor. And we need suggestions on how to celebrate. You may recall that our 500k th visitor was in September 2009. So, it took 5.5 years to get to 500k (mostly without Angus) and only a little less than two years to get from 500k to 1 million (with Angus). I think the Angus factor has a pretty important role here in the explanation of hits/month.

So, I think that lucky millionth visitor should get a FAAAABULOUS prize from Angus and from me. BUT that visitor will have to know s/he is the 1 millionth visitor, and will have to send us an email identifying her/himself. (And we can tell, from the IP address, where your physical location is, on Sitemeter, so fraud should not be easy).

I already know what I'll be sending out to that lucky winner. A signed, and tastefully framed, copy of this memorable moment:

But what should Angus do? A picture of Mr. 2T riding a whale?

Happiness is a Warm...Republican?

Two maps. You draw your own conclusion.

First, happy. Darker orange is happier, lighter is sad.

Then, Congressional districts that elected a Republican in 2010 (red is Repub, of course):


The happiest man in the US, in terms of statistical prediction. The scoop:

The New York Times asked Gallup to come up with a statistical composite for the happiest person in America, based on the characteristics that most closely correlated with happiness in 2010. Men, for example, tend to be happier than women, older people are happier than middle-aged people, and so on.

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 ...

Meet Alvin Wong. He is a 5-foot-10, 69-year-old, Chinese-American, Kosher-observing Jew, who’s married with children and lives in Honolulu. He runs his own health care management business and earns more than $120,000 a year.

That man is clearly a Republican.

(Nod to Anonyman, who once thought he was a Republican, but decided he hated being happy...)

The Africa paradox?

While walking Mr. Tooty this morning Mrs. Angus and I were discussing why Americans visiting in Africa so often conclude that Africans are intrinsically more "joyful" and don't care about material things.

She suggested an analogy to the literature showing that people have a very hard time predicting the emotional consequences of being in unfamiliar, unfavorable situations.

For example, healthy people overwhelmingly say they'd be unhappy with their life if they lost a limb or were in a wheelchair, but people actually in those situations often report that they are happy. Here is a recent example regarding people with "locked in" syndrome. There is a term for this phenomenon; the disability paradox.

So maybe, when rich Westerners visit in Africa, they project their expectations of how happy they would be if they lived in the situations they see onto the local people. When these local people demonstrate that they are actually happy, it causes cognitive dissonance and the westerners attribute the paradox to some intrinsic otherness or lack of materialism, rather than recognizing that external circumstances do not determine happiness.

I am NOT saying poverty is a disability, I AM saying that the phenomenon of inaccurately predicting happiness in unfamiliar, adverse situations may apply more broadly than just to cases of physical disabilities.

What's In a Name

They may want to honor the guy, but not by naming the new Gov Center after him. The name is....infelicitious.

More, and a picture.

(Nod to the Blonde)

Libertarian Goverment: You'd Be Happier, Thinner, and Taller

An amusing little interview, on NPR.

Markets in everything: Celebrity smells edition

Bay Em Vay Zwei

The second BMW picture....my xmas present from the LMM!And here I thought I had been naughty...

Video of Dawn at Wilmington

Enforcing government defined happiness

It can be a tricky business. Consider the current news from Gross National Happiness pioneer, Bhutan:

Bhutan has warned its citizens over cutting down thousands of young trees every year to make prayer flags, a threat to the tiny kingdom's lush scenery and the government's duty to bring "Gross National Happiness."

Himalayan Buddhists put up prayer flags for good luck or to help the dead find the right path to their next life. The more flag poles put up for the departed the better, and Buddhist monks say fresh poles must be used each time.

Having failed to convince its citizens to switch from wood to steel for prayer flags, the government of the Himalayas' last Buddhist kingdom is growing bamboo, which it hopes will be an attractive alternative.

"The pressure on forest is from all sides -- from flagposts to hydropower. We are discussing this every day," Agriculture Secretary Sherub Gyaltshen, said.

Bhutan's constitution, which emphasises the importance of Gross National Happiness over Gross Domestic Product, stipulates the country must have at least 60 percent forest cover.

Himalayan Buddhists believe winds will carry positive vibrations of tantric symbols written on the prayer flags in yellow, green, red, white and blue to represent the five elements, and 108 prayer flags are put up when someone dies.

So I guess my question is, what actions produce national happiness? What the people obviously want to do, or what the government wants them to do? Why wouldn't a program to plant renewable prayer flag seedlings be the way to address this issue?

Or maybe is this actually a weird reverse prisoner's dilemma problem, where everyone individually would like to stop with the prayer flags already but can't risk the stigma from being the only one who quits? And the government really is doing their people a favor?