Asking About Changes in Happiness in a Daily Web Survey and Its Implication for the Easterlin Paradox

Abstract

This chapter investigates whether the level of happiness and integrated process of changes in happiness are the same. Using the daily data of two waves of 4 and 6 months each, we found that the level of happiness is stationary, whereas the integrated process of changes is non-stationary with a rising trend, implying that they are different series. An examination of the causes of the difference indicated that although adaptation completely influences the level of happiness, it only partially influences the change in happiness. This may be because the latter is based on a comparison between today and yesterday,

The original article first appeared in the Japanese Economic Review 63(1): 38–56, 2012. A newly written addendum has been added to this book chapter.

Addendum: “Ladder of Life Question” from Gallop World Poll, and Easterlin Paradox

This addendum has been newly written for this book chapter.

The Easterlin Paradox implies that the average happiness level of a country remains constant over a long period. However, the paradox is sometimes demonstrated using scatterplots of various countries’ GDP and average happiness. Figure 17.7 is an example. Among poor countries, higher income generally correlates with higher happiness, while among wealthier countries, no clear relation between per capita income and happiness is recognized. In a word, the figure reveals that happiness becomes independent of income where income exceeds a certain level; this is the Easterlin Paradox.

Fig. 17.7

Scatterplots of various countries’ GDP and average happiness

However, in recent years, challenges to this paradox have appeared. For example, Deaton (2008) and Stevenson and Wolfers (2008), using the Gallop World Poll conducted in 2006 which investigated 132 countries, establish a clear positive link between average levels of subjective well-being and GDP per capita across countries, and find no evidence of a satiation point beyond which wealthier countries have no further increases in subjective well-being as income rises.²⁵

Graham (2011) sums up the reasons why this result is obtained from the Gallop World Poll as follows: First, it is reasonable that wealthier people are happier, and in addition, freedom, stable employment and good health are easier to come by in wealthier countries. Second, later surveys, including the Gallop World Poll, include many more observations from small poor countries than do earlier surveys. Third, the Gallop World Poll uses Cantril’s “ladder of life question,” (or “Self-Anchoring Striving Scale”), which asks: “Here is a picture of a ladder. Suppose that we say the top of the ladder represents the best possible life for you and the bottom represents the worst possible life for you. Where on the ladder do you feel you personally stand at the present time?” Comparing with usual question such as “In general, how happy would you say you are—very happy, fairly happy, or not very happy?” the “ladder of life question” asks respondents to make a relative comparison when they assess their lives.

What is important in this appendix is that Cantril’s “ladder of life question” strengthens the relationship between happiness and income because it requires respondents to make a comparison. On this point, Deaton (2008) argues that when people answer such questions, they must assess their life satisfaction relative to some benchmark, such as their own life in the past, or the lives of those around them. He also offers a simpler interpretation: “When asked to imagine the best and worst possible lives for themselves, people use a global standard.” Using data from Latin America, Graham et~al. (2010) report that differences in framing these questions can have important effects on the measured relationship between income and happiness. “Questions that provide more tangible economic or status frames seem to have a closer relationship with income than do more open-ended questions.” This result, as was argued in the text, suggests that the Easterlin Paradox emerges when questions are based on subjective happiness elicited by “overall questions”; once we introduce the element of “comparison” to the questions that measure happiness, happiness begins to correlate with income (standard of living).