Following yesterday’s post, I promised to describe the new evidence that rich countries are happier than poor countries.
The simplest way to make this point is with a chart, using data from the Gallup World Poll. This amazing new dataset contains detailed data on subjective well-being for 132 countries in 2006. (Amazingly, Gallup plans to continue to field this poll every year.)
The key question asks:
“Please imagine a ladder/mountain with steps numbered from 0 at the bottom to 10 at the top. Suppose we say that the top of the ladder/mountain represents the best possible life for you and the bottom of the ladder/mountain represents the worst possible life for you. If the top step is 10 and the bottom step is 0, on which step of the ladder/mountain do you feel you personally stand at the present time?”
The following chart simply takes the average levels of satisfaction on this 0-10 scale, and plots it against G.D.P. per capita (note the log scale):
There is an incredibly high correlation between average levels of happiness and average incomes — greater than 0.8. Angus Deaton actually beat us to this finding, and his analysis of these data is worth a close reading, (here).
There’s another striking finding in this graph: the relationship between happiness and log income appears nearly linear.
Thus, a 10 percent rise in income in the United States appears to increase happiness by about as much as a 10 perecent rise in income in Burundi.
Let me add two further comments here:
1. This is an interesting finding, because many had argued that there is a “satiation point” beyond which you just don’t benefit from greater income. Indeed, Richard Layard has argued that “there is no evidence that richer countries are happier than poorer ones — so long as we confine ourselves to countries with incomes over $15,000 per head.”
In fact, the slope appears to get steeper above $15,000!
2. Even so, it is worth noting that a 10 percent rise in income in Burundi requires one-sixtieth as much income as a 10 percent rise in income in the U.S. Thus, even if the slope is three times as steep for rich countries as poor countries (as we estimate), this still means than an extra $100 has about a twenty-times-greater effect on happiness in Burundi than it would in the United States.
Comparisons like this make you think that foreign aid may not be such a bad idea.
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How do you know people don’t compare themselves to those in other countries? Immigrants do. Seeking, as in the question, the “best possible life”.
So individuals in higher-income nations consider themselves more satisfied with their lives. Does that mean that individuals in lower-income nations might be ….. “bitter”?
Perhaps Prof. Goolsbee has some thoughts on this issue.
All very interesting, but it’s a shame about the “best possible life for you” Gallup poll question. It doesn’t get at “happiness” in any real sense, the problem is that we don’t know if people are making relativistic comparisons across borders in their answers or not. Surely the chap in Burundi would answer more than 4 if he didn’t know that a better life was possible in say Denmark or the US. Really we need a veil of ignorance for this question to work, or we would need data over a large number of years to see if this graph shifts up as countries get richer on average or if it merely shifts to the right meaning that happiness as we previously thought is relative? I’m sure Justin will answer this question in part 3 though.
Maybe the Easterlin paradox was true before the days of globalised communication, when people only compared their own lives to the lives of people in their own country.
So it might still be about relative wealth, but the reference group has changed dramatically.
Before jumping to the conclusion that foreign aid would increase happiness, I think it’s worth arguing that happiness that comes from money, comes from one’s ability to earn money, not just have it handed to them. People need opportunities to progress, not just opportunities to spend money.
Agreed – it is always better to teach someone how to fish than to just give them fish.
I find the results of this study quite revealing and it is interesting that people are taking issue with its conclusions and the measure of “happiness” used. I think we in the west are somehow uncomfortable with (or feel guilty about) the idea that having a great deal of wealth and resources really does make our lives better and more satisfying than the lives of those that don’t. The old maxim that “money can’t buy happiness” was probably coined by someone who had both.
The question is asking for people to imagine “the best possible life” and NOT “how happy are you?”
1) Aren’t these questions entirely different?
2) If people are imagining the “best possible life”, then may they be comparing themselves to people around the world? If so, then wouldn’t you still say that people’s own sense of well being is relative to the rest of people out there? Isn’t this question inherently about people’s relative positions in life?