David Cameron wasted money on his well-being programme – we already know what makes us happy

Research in happiness economics now increasingly looks like medicine, where policy impacts are measured

It hasn’t been a great week for my personal well-being. Lots of snow and ice and cabin fever was taking hold so the wife and I decided it was time to take our two dogs for a walk. Big mistake: I went flying on the ice and heard that terrible crack and immediately knew what had happened as my foot stuck out sideways.

My volunteer neighbours from the local fire department showed up in the town’s old ambulance and drove me to the Dartmouth Hitchcock where I stayed for four days. I now know the inside workings of an X-ray machine really well.

To cut a long story short I have a cast on my ankle the size of a coconut along with a full collection of bolts and plates attached variously to my leg, which is going to take some explaining at airports. I am supposed to be non-weight bearing for ten weeks, that is 70 days or 1,680 hours or 100,800 minutes but who is counting. Not me, well not much. Only 107,543 minutes left now.

All of that set me thinking about well-being and despite the fact that we get horrid injuries like broken legs, we do get over them. People are very adaptable. The truth is if you asked me last week how happy my life is on a scale of 1 through 10 as many happiness surveys do, I would have said 7.  Today I am probably also a seven despite being on crutches and in some pain.

Some surveys ask for responses in a very narrow time window, which make little sense.  If you asked me in the 15-minute period when I was lying on the ground waiting for the ambulance to come the answer was zero. Similarly, the answer would be 10 one minute after a respondent had an orgasm. But they aren’t representative moments and are broadly worthless in working out the big picture. I will get over this. It turns out that the determinants of happiness are basically the same everywhere, no matter which question is asked or when. The Swedes and Danes are happy while the Bulgarians and Romanians are unhappy. I am still pretty happy despite the change in my middle name to Hopalong as in Cassidy.

David Cameron’s Big Society idea was to set up a well-being programme at the Office for National Statistics. This has been a total waste of money as it really hasn’t taught us happiness researchers much of anything we didn’t already know.

Here are the basic facts. Women are happier than men. Unemployment makes people unhappy while work makes them happy. Happiness is U-shaped in age and there is a mid-life crisis. Depression is highest in mid-life and people disproportionately take anti-depressants and pain medication in their forties and fifties. Marriage makes people happy. Second marriages are less happy than first marriages and there is adaptation. People get over divorce. Separated people are least happy.  Happiness tends to be broadly flat over time. The educated are happier than the least educated. Money does buy happiness and relative things matter a lot.

My Dartmouth colleague Erzo Luttmer has shown people care about their relative position and lagging behind the Joneses the McTavishes or the Cameroons, depending on where you live, diminishes well-being. He finds that an increase in neighbour’s earnings and a similarly sized decrease in one’s own income each have roughly the same negative effects on well-being.

Behavioural economics has taught us a lot about patterns in well-being data, not least that people adapt and we get over broken legs and child birth. Worries that answers to happiness questions differ by culture and language have slipped away given the large literature that is now emerging that subjective happiness measures are well correlated with objective measures. These include heart rate and blood-pressure measures of response to stress. They include the risk of coronary heart disease and the duration of authentic or so-called “Duchenne” smiles.  A Duchenne smile occurs when both the zygomatic major and obicularus orus facial muscles fire, and human beings identify these as “genuine” smiles, so happy people smile more.

Other objective measures include skin-resistance measures of response to stress and electroencephelogram measures of prefrontal brain activity. Happy people live longer and heal faster ( I am hoping this really is true).

Research in happiness economics now increasingly looks like medicine, where the impacts of treatments are measured in controlled lab settings with treatment and placebo and the results seem to go through.

A new experimental paper by MIT Graduate students Johannes Haushofer and Jeremy Shapiro studied the response of poor rural households in rural Kenya to large temporary income changes and they found money buys happiness.

What they also found was that the results were essentially the same whether they used subjective measures of well-being or an objective measure of stress such as the level of cortisol.

 Using a controlled trial, Haushofer and Shapiro randomly assigned households to receive unconditional cash transfers of at least $404. This is a large amount of money in Kenya – enough to help build a roof.

The authors designed the experiment to address examine the effects of transfers on psychological well-being and levels of the stress hormone cortisol. They randomised at both the village and household levels.

Further, within the treatment group, they randomised recipient gender (wife vs. husband), and transfer magnitude ($404 vs. $1,520).  Interestingly, they found a strong consumption response to transfers, with an increase in monthly consumption from $157 to $194 four months after the transfer ended.

Intriguingly, recipient gender did not affect the household response to the program.  Transfer recipients experience large increases in psychological well-being, and several types of transfers resulted in reductions in the levels of the stress hormone cortisol.

Together, these results suggest that unconditional cash transfers have significant impacts on consumption and psychological well-being. Good stuff.

Only 107,443 minutes left until I can stand on my own two feet. I just hope I don’t get hit by lightning when I am next out on the golf course.