Agent-Based Simulations of Subjective Well-Being

Abstract

There has been extensive empirical research in recent years pointing to a weak correlation between economic growth and subjective well-being (happiness), at least for developed economies (i.e. the so-called ‘Easterlin paradox’). Recent findings from the behavioural sciences and happiness literature link this paradoxical relationship to negative externalities on utility imposed by social comparison (i.e. relative income with respect to others) and adaptation (habituation to own income in the past). We believe that the type of economic growth (pro-poor, pro-middle, pro-rich, neutral), in combination with sensitivity to social comparison and past income, is a key determinant of happiness trajectories and future utility levels. With the use of agent-based simulations we examine the long-term dynamics of subjective-well-being by focusing attention on the type of growth process rather than the mere size of income growth. We generally find that pro-middle (and balanced) growth corresponds to much higher levels of long-term happiness in comparison to pro-rich growth.

This is a preview of subscription content, log in to check access.

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5
Fig. 6

Notes

  1. 1.

    A researcher who uses computer simulated ABM to represent a real system needs to undergo a model-building process that can be delineated in three stages (Galán et al. 2009). First of all, one needs to conceptualise the system that will be represented, thus defining the “research question” and identifying the crucial variables of the system and their interrelations. Subsequently, it is necessary to find a set of formal specifications that is able to characterise the conceptual model. Finally, the model needs to be coded and executed (Galán et al. 2009).

  2. 2.

    The model is implemented and simulated in Netlogo 4.1.2 (Wilensky 1999).

  3. 3.

    In other words, we assume that at period t 0, the total population of agents is equally divided between happy and unhappy individuals.

  4. 4.

    One can also notice that pro-middle growth generally corresponds to higher levels of happiness in Fig. 1b compared to Fig. 1a for any given level of α. This is expected since a larger value for s (as it is the case in Fig. 1b) increases the relative share of the middle-income group in the total population.

References

  1. Akay, A., & Martinsson, P. (2011). Does relative income matter for the very poor? Evidence from rural Ethiopia. Economics Letters, 110, 213–215.

    Article  Google Scholar 

  2. Arrow, K., & Dasgupta, P. (2009). Conspicuous consumption, inconspicuous leisure. Economic Journal, 119, 497–516.

    Article  Google Scholar 

  3. Axelrod, R. (1997). Advancing the art of simulation in the social sciences. Complexity, 3, 16–22.

    Article  Google Scholar 

  4. Balisacan, A. M. (2007). Why does poverty persist in the Philippines? Facts, fancies, and policies. In R. Severino & L. Salazarl (Eds.), Whither the Philippines in the 21st Century?. Singapore: ISEAS Publishing.

    Google Scholar 

  5. Blanchflower, D. G., & Oswald, A. J. (2000). Well-being over time in Britain and the USA. NBER working paper no. 7487.

  6. Bonabeau, E. (2002). Agent-based modeling: Methods and techniques for simulating human systems. Proceedings of the National Academy of Sciences, 99(Suppl. 3), 7280–7287.

    Article  Google Scholar 

  7. Boyce, C. J., Brown, G. D. A., & Moore, C. S. (2010). Money and happiness: Rank of income, not income, affects life satisfaction. Psychological Science, 21, 471–475.

    Article  Google Scholar 

  8. Breckling, B., Middelhoff, U., & Reutera, H. (2006). Individual-based models as tools for ecological theory and application: Understanding the emergence of organisational properties in ecological systems. Ecological Modelling, 194, 102–113.

    Article  Google Scholar 

  9. Brereton, F., Clinch, J. P., & Ferreira, S. (2008). Happiness, geography and the environment. Ecological Economics, 65(2), 386–396.

    Article  Google Scholar 

  10. Brockmann, H., Delhey, J., Welzel, C., & Yuan, H. (2009). The China puzzle: Falling happiness in a rising economy. Journal of Happiness Studies, 10, 387–405.

    Article  Google Scholar 

  11. Camfield, L., Choudhury, K., & Devine, J. (2009). Well-being, happiness and why relationships matter: Evidence from Bangladesh. Journal of Happiness Studies, 10, 71–91.

    Article  Google Scholar 

  12. Choudhary, M. A., Levine, P., McAdam, P., & Welz, P. (2011). The happiness puzzle: Analytical aspects of the Easterlin paradox. Oxford Economic Papers, 64, 27–42.

    Article  Google Scholar 

  13. Clark, A. E., Frijters, P., & Shields, M. A. (2008). Relative income, happiness, and utility: An explanation for the Easterlin paradox and other puzzles. Journal of Economic Literature, 46, 95–144.

    Article  Google Scholar 

  14. Clark, A., & Postel-Vinay, F. (2009). Job security and job protection. Oxford Economic Papers, 61, 207–239.

    Article  Google Scholar 

  15. Dasgupta, P., & Mäler, K. G. (2000). Net national product, wealth, and social well-being. Environment and Development Economics, 5, 69–93.

    Article  Google Scholar 

  16. DeAngelis, D. L., & Mooij, W. M. (2005). Individual-based modeling of ecological and evolutionary processes. Annual Review of Ecology, Evolution and Systematic, 36, 147–168.

    Article  Google Scholar 

  17. Di Tella, R., Haisken-De New, J., & MacCulloch, R. (2010). Happiness adaptation to income and to status in an individual panel. Journal of Economic Behavior & Organization, 76, 834–852.

    Article  Google Scholar 

  18. Di Tella, R., & MacCulloch, R. (2008). Gross national happiness as an answer to the Easterlin paradox? Journal of Development Economics, 86, 22–42.

    Article  Google Scholar 

  19. Diener, E. (2006). Guidelines for national indicators of subjective well-being and ill-being. Applied Research in Quality of Life, 1, 151–157.

    Article  Google Scholar 

  20. Dockery, A. M. (2005). The happiness of young Australians: Empirical evidence on the role of labour market experience. Economic Record, 81, 322–335.

    Article  Google Scholar 

  21. Dolan, P., Peasgood, T., & White, M. (2008). Do we really know what makes us happy? A review of the economic literature on the factors associated with subjective well-being. Journal of Economic Psychology, 29, 94–122.

    Article  Google Scholar 

  22. Easterlin, R. (1995). Will raising the incomes of all increase the happiness of all? Journal of Economic Behavior & Organization, 27, 35–47.

    Article  Google Scholar 

  23. Easterlin, R. (2001). Income and happiness: Towards a unified theory. Economic Journal, 111, 465–484.

    Article  Google Scholar 

  24. Easterlin, R. (2004). The economics of happiness. Deadalus, 133, 26–33.

    Article  Google Scholar 

  25. Easterlin, R. (2005). Building a better theory of well-being. In L. Bruni & P. L. Porter (Eds.), Economics and happiness. Oxford: Oxford University Press.

    Google Scholar 

  26. Easterlin, R. (2007). The escalation of material goods: Fingering the wrong culprit. Psychological Inquiry, 18, 31–33.

    Article  Google Scholar 

  27. Easterlin, R., & Angelescu, L. (2009). Happiness and growth the world over: Time series evidence on the happiness-income paradox. IZA discussion paper no. 4060.

  28. Easterlin, R., Angelescu, L., Switek, M., Sawangfa, O., & Smith Zweig, J. (2010). The happiness-income paradox revisited. Proceedings of the National Academy of Sciences, 107, 22463–22468.

    Article  Google Scholar 

  29. Easterlin, R., & Sawangfa, O. (2008). Happiness and growth: Does the cross section predict time trends? Evidence from developing countries. In E. Diner, J. Heliwell, & D. Kahneman (Eds.), International differences in well-being. Princeton, NJ: Princeton University Press.

    Google Scholar 

  30. Frederick, S., & Loewenstein, G. (1999). Hedonic adaptation. In D. Kahneman, E. Diener, & N. Schwartz (Eds.), Foundations of Hedonic Psychology: Scientific perspectives on enjoyment and suffering. New York: Russel Sage Foundation.

    Google Scholar 

  31. Frey, B. (2008). Happiness: A revolution in economics. Cambridge, MA: MIT Press.

    Google Scholar 

  32. Galán, J. M., Izquierdo, L. R., Izquierdo, S. S., Santos, J. I., del Olmo, R., & López-Paredes, A. (2009). Errors and artefacts in agent-based modelling. Journal of Artificial Societies and Social Simulation, 12(1), 1.

    Google Scholar 

  33. Graham, C. (2011). Adaptation amidst prosperity and adversity: Insights from happiness studies from around the world. World Bank Research Observer, 26, 105–137.

    Article  Google Scholar 

  34. Henrickson, L., & McKelvey, B. (2002). Foundations of “new” social science: Institutional legitimacy from philosophy, complexity science, postmodernism, and agent-based modeling. Proceedings of the National Academy of Sciences, 99(Suppl 3), 7288–7295.

    Article  Google Scholar 

  35. Hovel, K. A., & Regan, H. M. (2008). Using an individual-based model to examine the roles of habitat fragmentation and behavior on predator–prey relationships in seagrass landscapes. Landscape Ecology, 23(Suppl. 1), 75–89.

    Article  Google Scholar 

  36. Howarth, R. B. (2003). Climate change and relative consumption. In E. Jochem, D. Bouille, & J. Satahye (Eds.), Society, behavior, and climate change mitigation. Dordrecht: Kluwer.

    Google Scholar 

  37. Johns, H., & Ormerod, P. (2007). Happiness, economics and public policy. London: The Institute of Economic Affairs.

    Google Scholar 

  38. Kahneman, D., & Krueger, A. B. (2006). Developments in the measurement of subjective well-being. Journal of Economic Perspectives, 20, 3–24.

    Article  Google Scholar 

  39. Kahneman, D., Krueger, A., Schkade, D., Schwarz, N., & Stone, A. (2004). Would you be happier if you were richer? A focusing illusion. Science, 312, 1908–1910.

    Article  Google Scholar 

  40. Kandil, H. (2012). Why did the Egyptian middle class march to Tahrir Square? Mediterranean Politics, 17, 197–215.

    Article  Google Scholar 

  41. Kelegama, S. (2004). Economic policy in Sri Lanka: Issues and debates. New Delhi: Sage Publications.

    Google Scholar 

  42. Kimball, M., & Willis, R. (2006). Utility and happiness. University of Michigan, mimeo.

  43. Knight, J., & Gunatilaka, R. (2010). The rural–urban divide in China: Income but not happiness? Journal of Development Studies, 46, 506–534.

    Article  Google Scholar 

  44. Knight, J., & Song, L. (2009). Subjective well-being and its determinants in rural China. China Economic Review, 20, 635–649.

    Article  Google Scholar 

  45. Layard, R., Mayraz, G., & Nickell, S. (2010). Does relative income matter? Are the critics right? In E. Diener, J. Helliwell, & D. Kahneman (Eds.), International differences in well-being. New York, NY: Oxford University Press.

    Google Scholar 

  46. Levinson, A. (2009). Valuing public goods using happiness data: The case of air quality. NBER working paper no. 15156.

  47. Luechinger, S. (2009). Life satisfaction and transboundary air pollution. Economics Letters, 107, 4–6.

    Article  Google Scholar 

  48. Macy, M. W., & Willer, R. (2002). From factors to actors: Computational sociology and agent-based modeling. Annual Review of Sociology, 28, 143–166.

    Article  Google Scholar 

  49. McBride, M. (2001). Relative-income effects on subjective well-being in the cross-section. Journal of Economic Behavior and Organization, 45, 251–278.

    Article  Google Scholar 

  50. Moro, M., Brereton, F., Ferreira, S., & Clinch, J. P. (2008). Ranking quality of life using subjective well-being data. Ecological Economics, 65(3), 448–460.

    Article  Google Scholar 

  51. Ng, Y.-K. (2003). From preference to happiness: Towards a more complete welfare economics. Social Choice and Welfare, 20, 307–350.

    Article  Google Scholar 

  52. Nonaka, E., & Holme, P. (2007). Agent-based model approach to optimal foraging in heterogeneous landscapes: Effects of patch clumpiness. Ecography, 30, 777–788.

    Article  Google Scholar 

  53. Pugno, M. (2009). The Easterlin paradox and the decline of social capital: An integrated explanation. Journal of Socio-Economics, 38, 590–600.

    Article  Google Scholar 

  54. Ravallion, M. (2004). Pro-poor growth: A primer. World bank policy research working paper no. 3242, World bank, Washington, DC.

  55. Rayo, L., & Becker, G. S. (2007). Habits, peers and happiness: An evolutionary perspective. American Economic Review, 97, 487–491.

    Article  Google Scholar 

  56. Sen, A. (1976). Real national income. Review of Economic Studies, 43, 19–39.

    Article  Google Scholar 

  57. Senik, C. (2009). Direct evidence on income comparisons and their welfare effects. Journal of Economic Behavior and Organization, 72, 408–424.

    Article  Google Scholar 

  58. Stiglitz, J. E., Sen, A., & Fitoussi, J. P. (2010). Mismeasuring our lives: Why GDP doesn’t add up. New York, NY: New Press.

    Google Scholar 

  59. Stutzer, A. (2004). The role of income aspirations in individual happiness. Journal of Economic Behavior and Organization, 54, 1359–1386.

    Article  Google Scholar 

  60. Treichel, V. (2005). Tanzania’s growth process and success in reducing poverty. IMF working paper no. 05/35, International Monetary Fund, Washington.

  61. Tsai, M.-C. (2009). Market openness, transition economies and subjective wellbeing. Journal of Happiness Studies, 10(5), 523–539.

    Article  Google Scholar 

  62. UNU-WIDER (2008). World Income Inequality Database, Version 2.0c, May 2008.

  63. van den Bergh, J. C. J. M. (2009). The GDP paradox. Journal of Economic Psychology, 30(2), 117–135.

    Article  Google Scholar 

  64. van Praag, B. M. S., & Ferrer-i-Carbonell, A. (2008). Happiness quantified: A satisfaction calculus approach. Oxford: Oxford University Press.

    Google Scholar 

  65. Veenhoven, R. (2002). Why social policy needs subjective indicators. Social Indicators Research, 11, 33–45.

    Article  Google Scholar 

  66. Vemuri, A. W., & Costanza, R. (2006). The role of human, social, built, and natural capital in explaining life satisfaction at the country level: Toward a National Well-Being Index (NWI). Ecological Economics, 58, 119–133.

    Article  Google Scholar 

  67. Welsch, H. (2006). Environment and happiness: Valuation of air pollution using life satisfaction data. Ecological Economics, 58, 801–813.

    Article  Google Scholar 

  68. Welsch, H. (2009). Implications of happiness research for environmental economics. Ecological Economics, 68, 2735–2742.

    Article  Google Scholar 

  69. Wilensky, U. (1999). Netlogo http://ccl.northwestern.edu/netlogo/ Center for connected learning and computer-based modeling, Northwestern University, Evanston, IL.

  70. Wilkinson, R., & Pickett, K. (2009). The spirit level: Why more equal societies always do better. London: Allen Lane.

    Google Scholar 

  71. Wolbring, T., Keuschnigg, M., & Negele, E. (2011). Needs, comparisons, and adaptation: The importance of relative income for life satisfaction. European Sociological Review (forthcoming).

Download references

Author information

Affiliations

Authors

Corresponding author

Correspondence to Jacopo A. Baggio.

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Baggio, J.A., Papyrakis, E. Agent-Based Simulations of Subjective Well-Being. Soc Indic Res 115, 623–635 (2014). https://doi.org/10.1007/s11205-012-0231-5

Download citation

Keywords

  • Happiness
  • Income redistribution
  • Simulations