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Lecture 6 Happiness, health and sustainable development

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Title: Lecture 6 Happiness, health and sustainable development


1
Lecture 6 Happiness, health and sustainable
development
  • Alessandro Vercelli
  • (University of Siena)
  • Based upon
  • Borghesi, S. and A.Vercelli
  • 2008, Global sustainability, Palgrave Macmillan,
    London
  • 2012, Happiness and Health two paradoxes, (with
    S.Borghesi), Journal of Economic Survey, 2012,
    Vol.26, 2, pp.203-233

2
PURPOSE
  • reflection on the limits to growth from the point
    of view of human well-being
  • by studying the interaction between two streams
    of literature
  • - happiness
  • social determinants
  • - health
  • - happiness mainly economists,
    sociologists and psychologists
  • separate streams
  • - health mainly social
    epidemiologists
  • - happiness ? health
  • cross-fertilization illuminating for both of them
  • - policy implications
  • - the gap between growth and
    development

3
APPROACH (1)
  • - subjective indexes of happiness
    self-reported happiness
  • interrelations -life expectancy
  • - objective indexes of health -mortality
    rates
  • -morbidity rates
  • sufficiently independent to be informative
  • the correlation between self-reported health and
    subjective happiness is
  • too high to be informative in 18 OECD countries
    r 0.85 (Kahneman and Ris, 2004),
  • - both are rooted in the personality of the
    individual who assesses them
  • As
  • - almost everyone asserts that the main
    determinant of happiness is health
  • The interaction between objective health and
    subjective happiness depends on a set of factors
    that we are going to consider in what follows

4
APPROACH (2)
  • self-reported health
  • Significant correlation objective health indexes
  • subjective happiness
  • as it may change to some extent with time and
    space
  • in particular it depends on cultural factors
  • e.g. French people declare a much lower index of
    self-reported health than US citizens but have a
    better health (e.g. live three years longer)
  • The record and analysis of self-reported health
    is now rapidly developing
  • however, the analysis of a population health
    status is still based mainly on the
  • objective indexes of health

5
APPROACH (3)
  • the objective health indexes are partial indexes
    of subjective health
  • as they cannot cover the whole range of factors
    that affect it
  • unconscious sources of happiness
  • however they implicitly register
  • psychosomatic symptoms
  • self-reported health
  • this may help us to study the distortions
  • subjective happiness
  • quality-adjusted life expectation indexes
  • they integrate mortality and morbidity indexes
    with other indexes of quality of life to express
    health status in terms of equivalents of
    well-years of life
  • we ignore this category of indexes,
    notwithstanding their obvious appeal because
  • -their availability is still limited
  • -unsettled methodological questions (Hansen
    and Østerdal, 2006)

6
The determinants of self-reported happiness
7
The role of absolute income
  • The economists have traditionally stressed the
    role of per capita income Y
  • ? focus of economic policy on the growth of GDP
  • A) Cross section analysis shows
  • ( 1 ) W f1 ( Y ), f2gt0, f2lt0.
  • -saturation
  • Utilitarian tradition of needs
  • -hierarchy
  • 10,000 (Frey and Stutzer, 2002)
  • However strong nonlinearity threshold
  • 15,000 (Layard, 2006)

8
The relationship between income per head and
happiness
9
The happiness paradox
  • B) Time series show that, in developed countries
    after WWII,
  • correlation with per capita income is generally
    nonexistent or slightly negative
  • -continuous growth of per capita income
  • happiness paradox
  • -happiness did not increase, sometimes
    decreased
  • Easterlin (1974) for the USA
  • subsequently confirmed for other developed
    countries such as
  • the UK, Japan, France, Germany, Netherlands

10
Happiness and income in the USA
11
Happiness and per capita income in Japan
12
Happiness in Italy (1975-2007)
Source Nicola Lucia, 2008
13
Explanations of the paradox
  • hedonic treadmill Easterlin (1974) from
    Brickman and Campbell (1971)
  • however stimulation goods (Scitowsky, 1976)
  • the satisfaction treadmill aspiration theory
  • ( 2 ) W f2 (Y Y), f2 lt 0.
  • elasticity of aspirations to ?Y close to one
    (Frey and Stutzer, 2002)
  • ( 3 ) ?Y k ( ?Y), k
    1,
  • from which we easily derive that ?W f2 (?Y
    ?Y) 0, i.e. that
  • happiness does not tend to increase in
    consequence of ?Y
  • aged individuals lower and declining
    elasticity
  • However
  • no decline of happiness unless growing
    frustration

14
The role of social factors
  • After a threshold between 10,000 and 15,000 per
    year,
  • the influence of absolute income on happiness
    rapidly fades away,
  • while the crucial role is taken over by social
    factors
  • The aspiration theory itself may be explained in
    sociological terms as positional goods (Hirsch,
    1976)
  • scarcity rent of socio-economic status since
    the latter is in fixed supply, any conspicuous
    consumption generates negative externalities

15
The role of social factors crucial after the
threshold relative income
  • ?? income inequality YR makes people more
    unhappy
  • ( 4 ) Wi f4 ( YR ), f4 lt 0,
  • where YR is an index of inequality (such as Gini
    or Theil indexes)
  • Explanation differential access to positional
    goods ? relative deprivation
  • signals social ranking and depends on the gap
    between different classes of income
  • In most OECD countries U-shaped behavior of
    inequality
  • This cannot explain the behavior of self-reported
    happiness since WWII, although it may contribute
    to explain the worsening of the trend observed
    since the early 1980s

16
Inequality in the U.K., 1939-1996 ()
56
52
48
44
40
36
Gini index
32
28
24
20
16
1975
1985
1945
1955
1965
1995
1935
1940
1950
1960
1970
1980
1990
2000
Fig. 5
Source Brandolini (2002)
17
Inequality in the USA, 1929-1996
56
52
48
44
40
Gini index
36
32
28
24
20
16
1975
1985
1915
1925
1935
1945
1955
1965
1995
1930
1940
1950
1960
1970
1980
1990
1920
2000
Fig. 6
Source Brandolini (2002)
18
The role of social factors relational goods
  • The consumption of relational goods R is
    positively correlated with happiness
  • ( 5 ) W f5 ( R ), f5 gt 0.
  • relational goods introduced only recently in
    order to capture the affective and communicative
    components of social relations (Gui, 1996)
  • -end in themselves
  • different goods -cannot be produced or
    consumed by a single individual
  • -value depends on the interactions
    under reciprocity
  • examples are love, friendship, and more in
    general direct personal social relations, i.e.
    not mediated by economic or political exchanges
  • - strong positive correlation between relational
    activity and happiness
  • - loneliness is negatively correlated with
    happiness
  • -altruism and voluntary service contribute to
    happiness
  • (Frey Stutzer, 2002)

19
The role of social factors relational goods
  • the development of the market has suffocated the
    production and consumption of relational goods
  • the price of comfort goods decreased due to
    technical progress and standardization, while the
    costs of relational goods did not diminish or
    even increased (Bruni, 2006b)
  • ? substitution of cheap comfort goods for
    relational goods
  • e.g. TV watching is positively correlated with
    hours of work and negatively correlated with
    happiness (Bruni and Stanca, 2005)
  • the deterioration of relational goods contributes
    to explain the happiness paradox (Bartolini and
    Bonatti, 2002 Bartolini, 2010),
  • but its trend is slow

20
Other social factors unemployment
  • Unemployment reduces well-being, even after
    controlling for the associated fall in income
    (Clark, Frijters, and Shield, 2007)
  • ( 9 ) W f9 ( U ), f9 lt 0.
  • the unemployed is victim of anxiety, anger,
    depression and a loss of self-esteem and social
    status and that may disrupt his/her familiar and
    social life
  • Remark the strong correlation of unemployment
    with unhappiness is inconsistent with the
    conviction that unemployment is never involuntary
  • (Lucas and New Classical Economics)
  • However unemployment diminished in the 1950s and
    1960s, increased in the 1970s and 1980s and
    diminished again in the 1990s and first 2000s
  • this diminution was correlated to growing
    flexibility of labour markets and industrial
    relations that contributed to declining job
    satisfaction

21
Other social factors education
  • Personality and happiness are affected by the
    degree of education I
  • ( 10 ) W f10 ( I ), f10 gt 0.
  • a higher degree of education correlates with a
    higher degree of subjective happiness
    independently of variations of p. c. income
    (Easterlin, 2004)
  • education ?? set of enjoyable goods cultural and
    stimulating goods
  • the average level of education increased
    continuously in most countries since WWII but
    apparently also in this field individual
    aspirations increased with the average level of
    education

22
Other factors psychogenetic factors
  • Theory of adaptation maintains that individuals
    are characterized by a stable equilibrium state
    of happiness (Brickman et al. 1978)
  • ( 6 ) Wi f6 (Wi Xi), f6gt 0 when Wi
    Xigt0,and f6lt0 when Wi Xilt0.
  • where Xi is the stable equilibrium point (or
    set point) of happiness of the individual i
  • Theory of personality equilibrium rooted in
    personality as established by genetic and
    psychogenetic factors G
  • (e.g., Likken and Tellegen, 1996)
  • ( 7 ) Wi f7 ( Gi ).
  • However, adaptation is not complete (Diener,
    1996) shifting equilibrium

23
Other factors environmental externalities
  • Growth of per capita income produces negative
    externalities E that deteriorate the happiness of
    citizen
  • ( 8 ) W f8( E ), f8 lt0,
  • in consequence of pollution and exhaustion of
    environmental goods
  • Crucial explanation of the happiness paradox but
    the quantification of its impact is strictly
    dependent on the list of relevant externalities
    and their evaluation, issues that are very
    controversial

24
Health and the second happiness paradox
  • When people are asked to evaluate the importance
    of various factors of happiness, good health
    obtains the higher rating
  • (Frey-Stutzer, 2002, p.56)
  • ( 10 ) W f11 ( H ), f11 gt 0.
  • ? a new happiness paradox emerges
  • the most comprehensive objective indexes of
    health (life expectancy and mortality rates)
    improved continuously in most countries after
    WWII but this did not translate in increasing
    self-reported happiness
  • FIRST self-reported happiness and per capita
    income
  • happiness paradoxes
  • SECOND self-reported happiness and objective
    health

25
The happiness function
None of the main determinants of happiness is
sufficient to explain the happiness paradox but
they do not exclude each other we can thus
summarize the acquisitions of the research
surveyed above through the following happiness
function ( 12 ) W F (Y, YR, Y Y, G, R,
E, I, U, H), where we assume that the partial
derivatives for each factor have the same signs
already specified The capital letters that
appear in the argument of the function F may be
considered as vectors of variables each of which
has both a flow dimension and a stock dimension
26
The social determinants of objective health
27
Health and the second happiness paradox
  • Subjective happiness is a crucial determinant of
    health
  • -length of life (Palmore, 1969)
  • e.g. -heart disease (Sales and House, 1971)
  • -suicide (Koivumaa and Honkanen et al., 2001)
  • Health is reported to be a crucial determinant of
    subjective happiness
  • ? a new happiness paradox emerges
  • the most comprehensive objective indexes of
    health (life expectancy and mortality rates)
    improved continuously in most countries most of
    the time
  • after WWII but this did not translate in
    increasing self-reported happiness
  • FIRST self-reported happiness and per capita
    income
  • happiness paradoxes
  • SECOND self-reported happiness and objective
    health

28
The role of absolute income
  • The per capita income of a community is generally
    considered as a major determinant of its average
    health
  • An increase in absolute income
  • - relaxes the budget constraints access to
    therapies
  • -higher expenditures in health programs
  • -better medical/pharmaceutical technologies
  • -higher education levels ? ? updated medical
    knowledge and know-how

29
The role of absolute income
  • The empirical literature shows that the
    relationship between Y and H
  • -is strongly non linear
  • -has a pattern very similar to that of the
    relationship between Y and W
  • ( 13 ) H f1 ( Y ), f1 gt 0, f1
    lt 0.
  • cross-section studies
  • -the health of the poor has higher income
    elasticity than that of the rich
  • A) cross-country evidence
  • -life expectancy increases with average per
    capita income in poor countries
  • -this relationship tends to vanish for relatively
    rich countries
  • (Preston, 1975)

30
The role of absolute income
  • similar results emerge also in single-country
    cross-section studies
  • using a survey on health and income in Britain,
    Wilkinson (1992) finds that several health
    indicators increase rapidly as income rises from
    the lowest to the middle classes of the income
    distribution, while no further health
    improvements occur at higher income levels
  • similarly, using data from the National
    Longitudinal Mortality Survey in the USA, Deaton
    (2001) observes that the male (age adjusted)
    probability of death decreases rapidly as income
    grows at low family income levels, while it
    flattens out at high family income levels

31

Cross-country relationship between per capita GDP
and health (2000)
Source World Bank
32
Happiness and health the relationship with p.c.
GDP
33
The role of relative income
  • The concave relation between Y and H implies
  • ? income inequality ? ? the average population
    health
  • In recent years several studies have argued that
  • YR, independently of Y, has a crucial influence
    on health
  • ( 14 ) H f2 ( YR ), f2 gt 0,
  • where YR is the relative income that may be
    measured in different ways
  • relative income hypothesis
  • After a threshold of about 5,000 p. y. (4,000
    in Cornia et al, 2007)
  • income inequality emerges as a crucial
    determinant of health even by controlling for
    other factors including absolute income

34
The role of relative income
  • In a pioneering cross-country study on a data set
    referring to nine OECD countries, Wilkinson
    (1992) found evidence of a strong correlation
    between life expectancy and inequality that is
    argued to be independent of absolute income
  • Similar results emerged in several other studies
    that focused on different groups of countries and
    periods of time (see Borghesi and Vercelli, 2007)
  • Also at the local level a close relationship
    emerged between inequality and mortality rates in
    the US states (Kaplan et al., 1996)
  • Among the 282 US metropolitan areas the ones with
    the most unequal income distribution turned out
    to have the highest mortality rates (Lynch et al,
    1998)

35
The role of relative income
  • Income inequality ? relative deprivation
  • people compare themselves with reference groups
    and suffer from chronic stress and depression
    when comparison is unfavorable
  • (Deaton, 2001)
  • ? the most egalitarian developed countries have
    the highest life expectancy
  • A close relationship between income inequality
    and mortality rates emerges also in time series
    referring to single countries (Russia, UK)
  • Physiological mechanism activation of hormones
    that affect the cardiovascular and immune systems
    (Wilkinson, 2002, pp.15-16)
  • ? similar to economic short-termism

36
The role of other social factors
  • Health is strongly affected by a series of social
    factors connected with relative income but in
    part independent of it (see, e.g., Ryff and
    Singer, 2000)
  • First, relational goods R
  • ( 15 ) H f3 ( R ) , f3 gt 0.
  • For example, stress-related mortality of married
    people is significantly lower than of widowed,
    divorced and single people (Cornia et al., 2007)
  • In order to withstand physiological and
    psychological shocks, a crucial role is played by
    the intensity and quality of social relations, or
    what is often called social capital (social
    trust, hostility)
  • -the lack of social trust was shown to be
    positively and significantly correlated with
    mortality in the USA (Kawachi et al., 1997)
  • -analogously hostility is positively correlated
    with mortality (Williams et al.,1995)

37
The role of other social factors
  • A fundamental determinant of health is
    unemployment U
  • ( 19 ) H f7 ( U ), f7 lt 0.
  • Loss of employment, especially if unanticipated
    and in the absence of a public safety net,
    heavily affects health (Cornia et al., 2007)
  • Unemployment implies not only a lower income but
    also a loss of social status and self-respect
    (Sen, 1997)
  • Another crucial determinant of health is
    education
  • ( 18 ) H f6 ( I ), f6 lt0, f6 gt0,
  • the relationship between education and
    health is strongly non linear as health increases
    sharply by moving from primary to secondary
    education and above
  • the level of education of mothers is a major
    determinant of health of all family members,
    especially the children (Hertzman 1995)

38
The influence of environmental externalities and
happiness
  • Bad environmental conditions are directly
    responsible for about 25 of all cases of
    preventable illness all over the world (WHO,
    1997)
  • we have thus to consider negative environmental
    externalities E
  • ( 16 ) H f4 ( E ), f4lt 0,
  • from atmospheric, water and soil pollution
  • Finally, subjective happiness is a crucial
    determinant of health
  • ( 17 ) H f5 ( W ), f5 gt 0.
  • -length of life (Palmore, 1969)
  • e.g.
  • -heart disease (Sales and House, 1971)
  • This closes the feed-back between reported
    happiness and objective health

39
Other factors genetic factors and medical
technology
  • Progress in medical-pharmaceutical technology T
    played a crucial role in the progressive
    improvement of the indexes of health in the last
    century
  • ( 17 ) H f5 ( T ), f5 gt 0.
  • In order to get insights on the other
    determinants of health we have to study the
    deviations from this common trend due to specific
    factors
  • Also genetic factors G may have a sizable impact
    on health
  • ( 20 ) H f8 ( G ).
  • mutation of genes
  • two factors
  • polygenic inheritance bias towards specific
    chronic diseases

40
The main determinants of health
  • The main determinants of health considered in the
    epidemiological literature do not exclude each
    other
  • Health Function H F (Y, YR, G, R, E, I, U, T,
    W)
  • where we assume that the partial derivatives for
    each factor have the same signs already discussed
  • The capital letters that appear in the argument
    of the function F may be considered as vectors of
    variables each of which has a flow dimension and
    a stock dimension

41
Determinants of health and determinants of
happiness a comparative analysis
  • Although the literature on the determinants of
    happiness and health developed quite
    independently, they pointed out about the same
    list of main determinants
  • Happiness function W F (Y, YR, Y Y, G,
    R, E, I, U, H)
  • Health function H F (Y, YR, G, R, E,
    I, U, T, W)
  • The only substantial differences
  • the absence in the health function of frustrated
    income aspirations
  • (in the case of health frustration matters but
    less focused on income Marmot, 2005)
  • the presence of the health technology
  • (general technology matters for happiness
    through income and health)

42
Further determinant of happiness
  • Leisure the necessary disaggregation of leisure
    activities sends back to factors already
    considered such as social relations,
  • absolute and relative income, health
  • Inflation we have doubt about the genuine
    independence of its influence as inflation acts
    mainly through modifications of absolute and
    relative income and disruption of social
    relations
  • Institutional factors this line of research is
    certainly stimulating and inspiring but it is
    not yet clear to what extent the influence of
    institutions on happiness are independent of
    their impact on factors already considered such
    as social relations.

43
The second happiness paradox the ageing
population
  • ?life expectancy ? ageing of pop. ? ? self-r.
    health ?? subjective happiness
  • - self-reported health declines with
    age
  • empirical evidence however
  • - the importance of health increases
    with age
  • happiness declines from youth to working age but
    increases again, though moderately, since around
    the age of retirement (Frey-Stutzer, 2002)
  • this may be related to
  • -increasing free time of senior people
  • -decreasing responsibilities
  • -downsizing of aspirations
  • -progressive natural selection of the healthier
    and happier individuals
  • The negative effect exerted by ageing on health
    and happiness is more than compensated by other
    factors correlated with age

44
Policy implications the first paradox
  • The twin paradoxes are not genuine paradoxes
  • many convincing explanations (over-determination
    may be solved through more sophisticated
    statistical methods)
  • First Paradox the real paradox is that policy
    makers still focus on GDP and its growth
    (Bhagwati, 2004 B.Friedman, 2005)
  • We know since long that GDP is an inadequate
    index of well-being
  • -the exhaustion of natural resources
  • Not registered -the deterioration of natural
    and social capital
  • -environmental and social externalities
  • -relational goods
  • Unduly registered -defensive expenditure

45
Policy implications the first paradox
  • Alternative indexes that aimed to correct the
    shortcomings
  • NEW (Net Economic Welfare) suggested by Nordhaus
    and Tobin (1973)
  • has grown more slowly than GDP in the post-war
    period in industrial countries
  • ISEW (Index of Sustainable Economic Welfare) by
    Daly and Cobb (1989)
  • while the US GNP increased from 1951 to 1986 at
    an average rate of 1.90, the ISEW grew much less
    (0.53) and became negative since the early 1970s
  • ? the alternative indexes of well-being focus on
    the same determinants considered in the
    literature on happiness

46
Policy implications the second paradox
  • Also the second happiness paradox is basically
    explained by the inadequacy of the general
    indexes of objective health
  • there are specific health indexes strictly
    correlated with subjective unhappiness, such as
    frequency of depression and suicides, that
    increased progressively in the post-war period
  • Self-reported health depends not only on the
    length of life but also on their quality
  • -a long life is not necessarily a happy life
  • -this is well known since long e.g. the
    immortal STRULDBRUGS are very unhappy (Swift,
    1726)
  • The quantitative indexes of health should be
    corrected to take account of the quality of life
    (quality-adjusted indexes of health should be
    systematically computed solving unsettled
    methodological problems) (Zeckhauser-Shepard,
    2006)

47
Policy implications
  • We have to focus both analysis and policy not on
    GDP but on indexes of sustainable development
    that take account of the social, environmental,
    psychological and health factors that determine
    human well-being (or happiness)
  • Analysis of happiness and health determinants
    suggest similar policy measures
  • ? poverty
  • ? inequality
  • ? unemployment and precarious jobs
  • ? investment in education
  • ? investment in art and creative activities
  • ? investment in environmental and social capital
  • health
  • All these policy measures are likely to improve
    of citizens
  • well-being
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