Track a nation’s well-being? Start with joy, not GDP

Cheong Suk-wai The Straits Times AsiaOne 31 Mar 14;

SINGAPORE - British economist Andrew Oswald awaits eagerly the day when the central bank of every country will take to announcing its economic health based on the heart rates and blood pressure readings of its people, instead of the usual GDP and unemployment figures.

GDP, or gross domestic product, is the sum of a country's officially verified earnings from its goods and services, typically for a year. It is a gauge of how strong an economy is.

Professor Oswald, 60, is a pioneer in studying how much people's happiness is affected by the rise and ebb of economic tides. His big idea, then, is that governments should measure regularly how stressed or relaxed their peoples are to design economic and social policies that improve the quality of their lives.

For example, his studies have shown that the soaring unemployment rates in Europe since the 2008 global financial crisis depress those with jobs almost as much as those without work. Such grimness dampens productivity badly, pulling already ailing economies down further.

Using GDP as a measure of a country's well-being is wrong, he says, because economists such as Prof Richard Easterlin and Prof Armin Falk have found that people are happier when they have the one up on others. As he points out: "With GDP, all boats rise but, unfortunately, people are more concerned with the size of their boats."

This don from the University of Warwick was on his third trip to Singapore late last year to give talks here, as well as to study the country's high home ownership rates.

He became interested in the impact of personal happiness on the economy in the early 1990s, after debunking the prevailing view then among economists that those who are jobless are jobless because they have chosen not to work.

He recalls: "I was very interested in unemployment at that time because it seemed to produce a great deal of harm in the world. But the view of the University of Chicago school of economics then was that most people who are unemployed have chosen to be unemployed because they are unwilling to take on other jobs... (and are) happy being unemployed."

Prof Oswald's research not only found no proof that those on unemployment benefits were disinclined to look for work, but also showed that being jobless was on a par with severe illness and a painful divorce, akin to serving the worst blows to a person's mental health.

He says: "Only 20 per cent of the impact had to do with a drop in income, Eighty per cent had to do with losing their sense of meaning, their sense of identity and their sense of worth."

He says that stems from humanity's innate fear of falling behind others. Consequently, he has found, most people are much happier when they outperform others, no matter how small the reward is for doing so.

Prof Oswald and his fellow researchers on the economics of happiness - they include economists Nattavudh Powdthavee, Eugenio Proto and David Sgrio - have made the most of powerful computers to crunch data from two main databases to learn more about global happiness.

Their first source is the United States General Social Survey, with responses from about 50,000 Americans from 1972 to 2008, and the second is known as the Eurobarometer, which had responses from about 300,000 people in 12 European countries between 1975 and 1992.

In both surveys, and within the periods surveyed, large groups of randomly selected people were asked how they felt on a particular day, or to assess their lives thus far. "We did not ask them what makes them happy. We just asked them how happy they were at that point in time, and then measured that against everything else in their lives at that point in time."

Everything else included how many children they had and how many cigarettes they smoked a day.

This matching method, he argues, is a systematic and reliable way to measure happiness, which is notoriously subjective and so, critics charge, very hard to analyse with academic rigour.

But surely his method means he is making assumptions about the respondents that may not be true at all?

No, he counters. He is able to overcome such a danger by surveying large groups of people randomly and studying the patterns that emerge from doing so. "I can't tell you everything about your life, but I can get to the bottom of the typical person," he insists.

From such analyses, he found what he calls "deep patterns", or clear and coherent commonalities among diverse peoples from different cultures, chiefly as follows:

Woe of the sexes: Women are slightly happier than men, although both genders have about the same levels of happiness. Asked if that has something to do with a woman's instinct to nurture others, he admits: "The truth is we don't know why that is so."

Men at work: Men are hit harder than women by job loss, as they define themselves more narrowly, that is, by work.

Wedded bliss: Marriage is a huge boost for happiness, he says, "provided you find the right person".

Baby blues: Children do not heighten happiness, he says, because those without children are freer to pursue their passions.

Learning pays off: Those who are better educated are happier than those with little education because they can mingle with and compete against others better.

The rich rejoice: One's joy does increase with higher pay. But, Prof Oswald cautions, once a person earns enough to subsist reasonably, making more money would not usually make him happier.

Mind the gap: Countries with little income inequality, such as those in Scandinavia, have happier people.

Singapore, he notes, was No.30 in the World Happiness Report 2013 - with Denmark tops because it was open to trade, had low inflation, little income inequality, low crime and corruption, and was very clean and green.

He puts Singapore's lower ranking down to its relatively modest social spending currently. But as the Government announced last month, Singapore will increase such spending significantly from now on.

Prof Oswald and his team have also found that the lifetime arc of human happiness is U-shaped, that is, a person is happiest between the ages of 15 and 20 and between the ages of 61 and 70, and unhappiest between the ages of 41 and 50.

Going by that, he is approaching his second peak of lifetime joy. The alumnus of Oxford University taught there and at the London School of Economics before joining Warwick in 1996.

He has been there since, with the odd stint at such universities as Princeton, Harvard and Dartmouth College.

He is currently a reviewing editor for the vaunted journal Science and, in 2009, was a member of the French-initiated Stiglitz Commission to measure national well-being broadly.

From his 20 years of happiness research, he muses: "People now have the intuition that taking on yet more work to buy a bigger car is just not the right way for society to go from now on.

"So Singapore might want to concentrate on things that are not just about having more Singapore dollars."

Andrew Oswald on...

THE INITIAL RESPONSE TO HIS BIG IDEA

"In 1993, I ran what I think was the first Economics Of Happiness conference in London. I put out 150 seats and advertised the conference all over London and the south of England. Only eight people came - and half among them were the speakers."

WHY ECONOMISTS ARE STILL CHARY OF STUDYING HAPPINESS SERIOUSLY

"Many among them are still reluctant to face the fact that humans do have feelings about their lives."

WHAT SURPRISES HIM ABOUT THE CURRENT INTEREST IN THE ECONOMICS OF HAPPINESS

"I thought there might be a chance I would see it in my lifetime, but I thought I would be even greyer when that happened. But in just under 20 years, there's been a huge change in how economists approach what humans care about."

WHY HE HAS FOCUSED HIS HAPPINESS RESEARCH ON THE UNITED STATES

"Because we need to persuade a large number of US economists that happiness is an important thing to study. When Britain ruled the world 200 years ago, we had to persuade everyone with British things. Now we have to persuade them with American data."

WHY GLOBAL FINANCIAL CRISES RECUR SO FREQUENTLY

"As a species, we repeat the failures. We don't repeat the lessons. We just don't learn."

HIS RESEARCH ON THE HAPPIER WAY TO HOME OWNERSHIP

"For the bulk of their lives, people should be renting the places they live in, and own one towards the end of their lives. Seventy per cent of the Swiss do, and look how rich they are.