Presentation at the HLEG thematic workshop on "Multidimensional Subjective Well-being", 30-31 October 2014, Turin, Italy, http://oe.cd/HLEG-workshop-subjective-wb-2014
HLEG thematic workshop on "Multidimensional Subjective Well-being", Angus Deaton
1. Angus Deaton, Princeton University
HLEG working group on subjective wellbeing
Herbert Simon Society, Turin
October 2014
USING WELLBEING MEASURES FOR
POLICY: PROMISES AND PITFALLS
2. Prolog
We have measures, especially evaluative
measures
We have many correlates of SWB
How to use these?
Government regulation and cost-benefit analysis
Deshrouding: telling people “what works” for
happiness
Parallel with NICE for health
Up to people what to do with this, not enforced in policy
Subject to the “curse of the average”: what is good on
average may not be good for you
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3. The problem of z’s
Think of conventional utility as max u which is a function of q and
z, former chosen subject to budget constraint p.q=y, but z’s are
not chosen
Think of public goods
We have a standard apparatus (CV, EV, COLI) for evaluating
changes in q (i.e. p and y)
But behavior does not reveal the value of z
Many doomed attempts in the literature
Three possibilities
z is chosen, e.g. political economy
Change in z can be priced, shadow pricing
Measure u directly: happiness regressions
Shadow pricing is what governments do now
But it is difficult and badly done
Must keep this in mind when critiquing happiness measures
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4. Consider examples
Correlates of happiness
Can we use them to value z’s, for CBA or deshrouding?
Clocks and life-cycles
Religion
Relative income
SWB over space
Is SWB or safe?
What about Sen’s critique that it risks neglecting important
deprivations?
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5. Clocks and cycles
People are tired in the evening!
Knowing that can be useful
U-shape of wellbeing in rich countries
People don’t seem to know this & are interested
Perhaps elderly don’t deserve as much as they get?
Perhaps connected with social security
If elderly are just more efficient in producing utility, a utilitarian would
give them more, not less
Stress, anger, worry, decline rapidly with age
Again, people are interested, but deshrouding?
Not much room for action
But again relevant for wellbeing of the elderly
Which is also why those regressions are easy to interpret
All subject to “average critique”: because it works on average doesn’t
mean it works for you
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6. Religion
Those who say that religion is important in
their lives have better SWB
Is this a causal effect? Who knows? But
perhaps
People become religious and change their
religion often, so potentially useful
information
But also makes it easier to challenge the finding
Policy? Countries have established religions,
perhaps positive social policy to encourage
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7. Relative income
Many claims that SWB depends on your
income relative to the income of others
If so, there is an externality of my working
hard and earning more
Case for a high marginal tax rate to
discourage this
Coase solution seems unlikely to work
But the econometrics is fraught, and it could
be your own past income, or something else
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8. Geography
Economist standard model is that people locate to maximize
utility given their abilities
Conditional on ability (human capital?) SWB ought to be the
same over space if no restrictions, e.g. within the US
Psychologists see people as “stumbling” on happiness: random
allocation
Michigan and Californians agree that happiness is higher in California,
but are equally happy
How would I know how happy I would be in some place I have never
been?
Evidence: spatial diffs are small locally, large over bigger areas,
e.g. states on opposite coasts in US
Perhaps costs of relocation are larger over larger distances
If so, policy based on spatial differences can be unproductive
E.g. noise regulation for airports
Disamenity regulation in general
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9. Sen’s critique
US regressions of life evaluation on circumstances show
without controls
Blacks lower LE
Women higher than men
Hispanics higher than whites
Control for income, marital status, education, and age
Blacks much higher LE than whites
Hispanics higher than whites
Women more than men
D0es this mean that other deprivations don’t matter?
For blacks, no correction for quality of education, higher
mortality, imprisonment, healthcare, etc. etc.
But this cannot mean that those deprivations do not matter!
Plausible SWB can’t behave like this: not there yet!
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