Carol Graham at the Center for Global Development and Brookings has done some interesting stuff on happiness in the developing world, and how it relates to social and economic mobility. She has a couple of books out that cover this pretty well, and are good reads, for policy-wonk texts.
Will Wilkinson has been blogging a lot about the subjective well being studies lately. In particular, he's been critiquing Layard's happiness. I haven't actually been reading it, but it's there if you want it for some reason.
More at the usual level of discussion around here, I endured an extensive line of argument once about how there is properly no phenomenon known as "well-being," there is only the reduction of "ill-being." Discuss.
No, this was dinner-table aggression from an economist. A good, and actually very pleasant one. The argument was actually that if you want to measure well-being, you can't do that, because the axes, or vectors on which well-being increases beyond a bare minimum diverge so widely (this is the color-tv problem).
(I was going to stick in the physics analogy here, but I defer it until requested to provide it.)
But you can measure reductions in ill-being, because we agree on its axes, or vectors -- disease, poverty, etc. These are clearly Bad Things and also susceptible of measurement. And we might construe their reduction as an approximation of well-being.
I see your point about well-being, but you're making a mistake when you talk about the increasing availability of cheap consumer goods. If real income falls, that means there is less purchasing power -- prices have been controlled for. That's what real means. So TV's may be cheaper, but overall, we can purchase less. In fact, if overall prices have risen, but cheap goods are even cheaper than before, then the stuff that's not crap must be *really* expensive now.
It's not really a basic contradiction, more a recognition that there's no market-basket that can really unambiguously set the level of inflation. The level of inflation we use is determined by looking at prices of a number of commodities whose prices are fairly stable, and averaging how much those prices have crept up. (I actually find that I have no specific idea what's in that market basket, so I'm mostly talking through my hat here.)
However, the prices of consumer electronics have dropped like a rock over the last few decades relative to the price of everything else. So Family X, whose income has dropped in real terms over the last decade, and finds it therefore just a little harder to pay for food, shelter, healthcare, etc., nonetheless now has access to all sorts of cool toys that they couldn't have afforded a decade ago. FL's question is how the hedonic effect of the increased access to cool toys affects happiness in light of otherwise falling real incomes.
Gilbert's good on what you might call the Sheryl Crow question. "If it makes you happy, why the hell are you so sad?" Happiness -- even, apparently, the happiness that comes with buying a new car -- evanesces.
You might think of it more profitably as Krugman vs. Krugman. His "Viagra and the Wealth of Nations" contains a good discussion of why real income is underestimated by usual measures.
Also, try skimming the Boskin Report from the mid-nineties, which made some adjustments to the measurement of the CPI. You'll get a good sense of the many ways in which inflation is overestimated and thus real wages are underestimated.
Virginia Postrel's article, here, does a nice job of illustrating one dimension of the problem:
You've framed the question less than ideally... They way we measure the price and availability of consumer goods determines the way we adjust nominal income to get a measure of real income. So the problem is that current BLS techniques fail to track adequately the availability of cheap consumer goods and therefore misrepresent adjusted income as having declined when it has not.
That's why we use chain weighted deflators. As the basket changes, so does the weighting. When relative prices change, so do relative quantities. Furthermore, many parts of the CPI now do use hedonic inexes, which should correct for your point (which I think is subtler than what FL was saying).
I mean, say what you want about cheap electronics, but essentisally the question now is, "is it bad that people who can't afford food and shelter are now making less money than they used to?" Right? Or are we asking if a cheap TV will make them feel better? It seems like the question no longer has any content.
Rereading, maybe I missed your point. Maybe what you're saying is that the question is, "Is the decline in welfare from the fall in real income offset by the change in relative prices of goods?" More cool electronic toys means fewer of some other sort of toy. I don't see the a priori reason for thinking that a change in relative prices should in any way increase welfare.
Maybe what you're saying is that the question is, "Is the decline in welfare from the fall in real income offset by the change in relative prices of goods?"
Pretty much. While my prejudices in the matter do line up with what yours appear to be (for example, I don't think a plasma-screen TV makes the owner any happier than the B&W 12" TV that could have been bought for the same inflation-adjusted price in 1957), I don't think the question is entirely empty.
Couldn't you compare wages to a Paasche index, like the GDP deflator, which underestimates deflation, to get the most optomistic view of the actions of real wages? The real movement of wages is likely somewhere between that and the movement of wages calculated compared to the CPI.
This sounds very much like an income inequality question. The people living on minimum wage are getting screwed no matter what relative prices here. When we're talking about the poor, even if some electronics weren't cheap, they would still be poor and not be able to afford stuff. That's what being poor is. And if their real incomes fall then they're even more poor.
As to the rising cost of healthcare, that's less of an issue because of medicaid.
In any situation, some goods will be cheaper than others. If you weren't pointing at electronics, it would be something else. So is it true that the fact that not all goods have the same prices raises welfare? Obviously not, but who cares? Maybe you're upset because the relative prices of some stuff has been falling. Again, so what? So some electronics are now cheaper? There are price indexes for just food. Go find data on that, deflate nominal income with it and come back. But just saying that some goods are cheaper than others it's much of a revelation.
If the B&W 12", which used to cost as much as a plasma screen, but which you can now get for $1 at a garage sale, makes you as happy as having a plasma-screen, and if that extra $1499.00 you saved by buying a set at a garage sale could buy you something that would improve your sense of well-being (a bond for your child's education, or whatever), then the decline in prices have certainly made you better off.
The data show that avg. happiness in the US has not gone up over the past several decades. Individually, however, more money predicts more happiness.
There are both strong a priori and a posteriori reasons for thinking that a decline prices positively affects welfare.
Sure, a decline in overall prices. But you're talking about with a fixed nominal income, whihc would imply higher real income. I only mean a change in *relative* prices. Sure, the tv's cheaper, but if we know there's inflation then something else is more expensive. Relative prices always change, who cares?
Yes, there are a priori and posteriori reasons for thinking a fall in overall prices raises welfare (ceteris paribus) but that's not what we're talking about here. In our situation, we can consider fixed nominal income, rising overall prices, and falling relative prices of electronics. Again, what's so special about electronics that makes their relative decline matter? What about airplane tickets? *nominal* prices are now less than they were in the 80's. Who cares?
I think you're still oversimplifiying. Mind you, I think you're ending up in the right spot, I just think that there's some value to asking the question posed above, and working out with as much rigor as possible that the answer is 'no, falling prices for some consumer goods don't offset the decline in welfare due to falling real incomes.'
For example, even fairly poor people have cell phones these days. 20 years ago, they didn't. It is possible, albeit very unlikely from my point of view, that the act of speaking on a cell phone brings the owner such ineffable delight that the fact that he now has a harder time paying his rent than he used to doesn't bother him. He has a cell phone.
I think this argument is bogus, but it's not self-evidently bogus, it's the kind of bogus that should really be investigated with surveys and such to confirm its bogosity. There are perfectly respectable people out there who believe that something like this is true, and it's worth carefully refuting them rather than just dismissing them.
Food, shelter, and healthcare are consumer goods, by the way. The prices of food and shelter have plummeted dramatically, and continue to do so.
Robert Fogel, Nobel-winning economic historian: ""A century ago, the typical household on OECD nations spent over 80 percent of its income on food, clothing, and shelter. Today these commodities account for less than a third of consumption."
Tracking the cost of health care is trickier, because health care really isn't anything in particular. It is a suite of services. The very nature of those services have fundamentally altered over the years, such that they aren't strictly comparable. The price of an MRI hasn't gone up over the past 30 years, because 30 years ago, you couldn't get an MRI at any price. And so on. There is, in any case, good reason to believe that todays price for a 1985 suite of treatments is much cheaper than in 1985. The problem is that the insane structure of govt.-mandated employer-based insurance makes pretty much wipes out consumer cost-sensitivity, and so no one offers cheaper quality services that are in principle available. That's a big problem.
Ah, we're talking past each other a bit. My contention is overall prices are not rising, and that the standard measurement techniques fail to capture this.
Ah, here's what I was talking about, "the GDP deflator takes account of purchaser's ability to substitute away from items that have increased prices, it does not take account of the reduction inutility--the implicit cost to consumers--of settling for second best." -DeLong
On the larger issue, I think Wilkinson is getting at the point when he implies that what one should really do is look at how the typical family divides up their money between luxury and necessity. My intuition that the biggest factor in determining happiness is how much work it takes to produce not just necessary goods but a socially acceptable lifestyle.
Also, my point about falling relative prices is that there's no point to a study because you can't design one. There can never be a situation where some things aren't cheaper than others. So we can't test whether some things being cheaper (electronics) has any effect on welfare. There's no alternative.
I live in Washington, DC, and it's certainly not decreasing for me!
Here's a useful passage from Cox & Alm's _Myths of Rich & Poor_:
"In 1997 a single-family home cost six times what it did in the early 1970s--in dollar terms. After adjusting for the increase in the size of new homes and higher pay, however, most of the inflation disappears. A 1,975-square-foot, median-priced, new home cost 9,961 hours [of labor] in 1970 and 11,039 hours in 1997, or 1,078 additional hours. Over 27 years, then, the average work time required to buy a new home rose only 10 percent, or the equivalent of six months. Mortgage rates are a percentage point lower than they were in the early 1970s. On a housre with a 5 percent down payment, the break in interest payments will trim the work cost of a new house over a 30-year purchase by 1,561 hours, a reduction of nine months on the job needed to pay for the house.
"Another consideration involves a decrease in household size during the past quarter century. Each residence today houses, on average, fewer people than it did in 1970, so in buying a median-sized home, each person is getting more square feet. If we take into account shrinking household size, then an individual's living space is actually 6 percent cheaper than it was in 1970. The adjustments show that housing is more affordable, but they still haven't captured all the added value in most of the homes coming on the market. . . New homes are more likely to contain central heating, air conditioning, kitchen appliances, extra bathrooms, garages, better insulation, and many other extras. The prices of new home includes these amenities, so an accounting of what's happened to the real cost of housing remains elusive."
Since I assume Will wouldn't have shown up here without my link to his blog in the comment thread (though he can correct me if he came here by a different route), I take credit for this being an interesting discussion despite (because of?) my non-participation.
Controlling for square-footage, without controlling for the desirability of location of a house of that square-footage, seems indefensible. Your quote acknowledges that new houses tend larger -- a likely consequence, then, is that the small house you're comparing as if on an apples-to-apples basis is probably older and in a less desirable area (crime rates, schools, etc.) than a house of the same size was in 1970. Your quote also doesn't address the rental market, where the poor or lower middle class are more likely to find their housing.
Also, you're putting forth a quote saying that "an accounting of what's happened to the real cost of housing remains elusive," as support for a contention that the cost of shelter has plummeted dramatically?
This is a good topic, although I tend to agree with Will that the framing of the question makes a difference. If we simply stipulate that real wages have stagnated, there are at least three questions that can be asked:
1. have lowered prices of consumer goods made up for this stagnation
2. have the availability of qualitatively new goods made up for this stagnation
3. what do we mean by "made up for"
Number two is of course immensely compelling. For a patient with rheumatoid arthritis, there is really no comparing the "basket" of health care available in 1970 with the basket available today. The pharmaceutical solutions are order of magnitude superior. This is true across numerous disease states, and is part of the point of Krugman's Viagra article. How does one value technological innovation that provides advantages simply different in kind from what came previously?
This is hard to do. It becomes even harder when one realizes that subjective happiness is only one measure (and not the best measure) by which policies can be compared )point number three). Via technologies available now I can accomplish ends (keep up with elderly relatives and friends who live ex-US, e.g.) that I could not in 1970. Does this make me subjectively happier? I don't know, and in fact, I don't much care. There are some ends that I think should be accomplished, and I am grateful for technology that allows me to do that.
a) despite obvious returns to market capitalism in terms of costs of goods and services
b) despite obvious returns to market capitalism in terms of new technologies that cannot be adequately captured in costs
c) despite the dubious nature of "real wages" calculations
d) despite the fact that technological innovation (which leads to one and two above) is widely cited as the most powerful factor (or one of two most powerful factos) depressing wage growth and increasing employment volatility among the bottom half of the population
Nonetheless we must regulate captialism in fundamentally illiberal ways because to market capitalism does not maximize self-reported happiness. And fortunately, we all agree that maximizing self-reported happiness is the signal goal of a liberal society.
I call chairman of the government coucil overseeing new condiment production!
baa, I like 2 and 3, but number 1 is giving me trouble. Consumer goods aren't cheaper, that's what the CPI says. Goods are more expensive. There are just some goods that we notice as relatively cheaper. Others are relatively more expensive. On average, everything is more expensive. That's inflation. The well known bias caused by new goods is, as you say, an issue, but it's simply not the case that consumer goods are cheaper.
Can you work on pickle relish? I find it's mostly too sweet.
Seriously, your 39 assumes (roughly, and for comic effect, of course) that technological advance is a priori incompatible with increased economic equality. While that's the sort of thing that could conceivably be true, it's a heck of an axiom to start from.
I would love to accede to your request, but I am afraid that having an overwhelming choice of the sweetness of relish will make you unhappy. There will be only two relishes, both sweet, and we are removing mango pickle entirely.
Re: 39. Fine, too glib by half. Stick with 38 for now. And in general, ignore me and pay attention to Will, as he's the high end vendor of economic liberalism in this thread.
Ian D-B: "On average, everything is more expensive". You mean in nominal or real terms.? In real terms, this simply cannot be true. What "everything" : a car? a computer? a cross-country flight? a pair of pants? a pound of hamburger? Education, health care, and (maybe) real-estate are the only items where I have seen literature suggesting price increases in real terms, and as Will points out these are often very vexed calculations. Why is Will's #29 Robert Fogel, Nobel-winning economic historian: ""A century ago, the typical household on OECD nations spent over 80 percent of its income on food, clothing, and shelter. Today these commodities account for less than a third of consumption." not immediately decisive here?
Happiness research isn't neccessarily a step on the road to serfdom. One of the things that happiness research has determined is that unemployment makes people very unhappy. Noone wants to feel useless.
The US's realitively low unemployment rates need to kept into consideration when comparing US levels of happiness with European levels of happiness.
downward bias in housing price indexes doesn't mean they say there's inflation, what it means is that they aren't keeping up with inflation -- housing prices rise faster than the CPI says.
Real price changes essentially are price changes relative to everything else. So yes, everything can't have a positive real price change. I just mean nominally. What I was saying all along is that there will always be some things with positive real price changes, and some with negative. As to the fogel quote, all that shows is that real incomes have risen. It's well known that as real income rises, spending on food, clothing, and shelter falls. That doesn't mean that their real prices are any different, just that real incomes rose.
As to why there's no literature on real price increases, it's because nobody cares, which is my point. Fine, some stuff has a different relative price. Give me a good a priori to think that would have any effect on general welfare.
I disagree with DeLong's point about choosing second best. I don't believe it. People always make decisions based on price, and always substitute between goods, there's never a decision where that doesn't happen -- remember your micro. If that's the case, I find it had to believe that every substitution contains disutility because then every purchase would.
Seriously, though, I am a big fan of happiness studies. I even try to model "satisficer" behaviors in my own life. What worries me is the (completely transparent) attempt to deploy happiness studies against economic liberalism. Technical/theoretical market failures that madate government "fixes" are a hardy perennial. Today, the paradox of choice, yesterday, the QWERTY keyboard.
I've heard that one factor here is that the US and European countries don't measure unemployment the same way. Apples-to-apples, I think the US still has lower unemployment, but it's less noticeable.
As to why there's no literature on real price increases, it's because nobody cares, which is my point.
Am I understanding you correctly? I can't be. Certainly people very much care how much "work" it takes to produce a day's nourishment. If it takes more than a day's effort then we will starve.
It's tough on a number of levels to compare US and EU employment data. First, they work far fewer hours per year, 100 or more if memory serves. Second, they have much more restrictive labor laws. Third, teens are far less likely to enter the labor force, people ofter don't enter until they're wll out of college. Fourth, marginal tax rates on a second entrant from a family (the wife) are enormous. Fifth, the retirement income you give up by staying in the labor force after the retirement age amounts to a shadow tax of up to 80%.
But really, it's tough to say what employment rates say about welfare. Fewer workers means less output, but more leisure. What's optimal? I'd argue that Europeans would rather work more, but restrictive labor laws and powerful unions don't let them.
a real price increase is a relative price increase. nothing more. Short of famine, it's tough to envision a situation in which the real price of food rises so much that nobody can eat.
It's very rare for economists to talk about the real prices of individual goods. They'll talk about the relative inflation of various sectors, they'll talk about the real price level of the whole economy, but generally not real prices of individual goods.
The data show that avg. happiness in the US has not gone up over the past several decades. Individually, however, more money predicts more happiness.
I'd sure like to see a reference for this, because my understanding is that more money does tend towards more happiness, to a point ($40K/yr) after which additional money will provide small or no increases in happiness.
Put another way, I doubt Bill Gates is a million times more happy than I am.
the real price of a good is its nominal price divided by the price level. The average real price of all goods must be equal to the price level. We can talk about total inflation -- that's what counts when looking at real income. But real prices of individual goods only refers to the price of a good relative to all other goods. Nobody calls that a real price change. This is all basic microeconomics, relative price changes, income and substitution effects, etc. Yes, people study this stuff. But on a macro scale, it all evens out. People study individual choices, but we're asking a macro question here -- general welfare. In that case, the relative prices of a few goods just don't matter.
Ok, you're right, if we had a famine, then it would matter that food is much more expensive than electronics. We don't. The question is about modern day america. We have lots of food, nobody is starving. My point is that the relative prices differences are benign, and I see no evidence to the contrary. There will always be some cheap goods. So what.
I admit to being a bit confused by the question, originally, because I thought that real income falling is equivalent to less purchasing power. But, the above discussion is good and even if I'm right about that, the questions that are raised about well-being are worthwhile.
One way to think of the question: Are people feeling better off than they should be? I've often heard people say in all seriousness that there is no real poverty in the U.S. because even poor families can have color TVs. This is absurd; but the people making these statements usually have in mind something like 'Well, my grandparents had to worry about putting food on the table during the Depression; that's poverty.'
So maybe the angle we're looking for is more "Does the 'happiness' caused by the accessibility of [cell-phone, TV, airline tickets] for low-income families offset the problems caused by falling real wages?" Are we measuring 2005 with a Depression-era yardstick and concluding that everything's fine, subjectively?
FL, a bit unrelated, but another thing to look at might be satisficing vs. optimizing theories of well-being. Not that I can think of any good references off the top of my head.
Some large part of this is whether we should be defining "acceptable" levels of consumption of goods and services by reference to an absolute standard or a relative standard.
Tripp, Pick any non-totally-arbitrary cohort of people (say, Californians). The richer people are happier than the poorer. This may be because of preferences of over relative position. But if income buys higher relative position, and relative position buys happiness, then money buys happiness.
If you get a raise tomorrow, odds are, you will be happier. You'll lose most of the gain due to habituation or adaptation effects, but you won't lose all of it.
Frey and Stutzer in Happiness & Economics: "After running many regressions with all kinds of data, the general result seems to be that happiness and income are indeed positively related."
The interesting point is that while income does positively effect happiness, it is not a large effect compared to the quality of one's personal relationships, etc. Which should come as no surprise.
By the way, my last point above relates to an interesting implication of the happiness research I've been seeing, but to which the researchers seem ideologically allergic.
Stable marriage has a huge effect on happiness. An increase in income has a relatively much smaller effect, even for the poor. So it seems that policies that were intended to increase the incomes of the poor, but which turned out to have a negative effect on family stability, have likely done much much more harm in hedonic terms than the benefit of the added income.
Superficially, it would seem to follow that Bushian initiatives to strengthen marriage are much more plausible candidate policies for enhancing welfare than redistributive cash transfers. I have seen little discussion of this, however, from the happiness mavens.
That said, Lykken has proposed that we implement licensing requirements for parents, and Layard has suggested, more moderately, mandatory state-funded parenting classes. No doubt he is imagining a class with a curriculum written by good technocratic parenting "experts." I wonder what the reaction to parenting classes with a more politically likely curriculum written by, say, Focus on the Family would be.
Tripp, It is far from linear. The effect grinds to a crawl past a certain level of income. But the point remains. Pick a person at random, give them a dollar, and you make them happier. How much happier depends on how much they already have.
It seems at least plausible that iniatives to strengthen marriage will not raise happiness because of a correlation/causation error (I do note that you said "superficially"). That is, a meaningful and well-functioning relationship leads to a stable marriage and also to happiness. But a stable marriage caused by welfare/ tax incentives and not by the relationship could, I imagine (though I'd love to see data on this) lead to less happiness than the same situation with the marriage absent.
But isn't there substantial reason to think that they wouldn't actually strengthen marriage? Compare: Abstinence education, relation of more or less every other Bush policy to its stated goals.
For instance, many Bushians profess to think that banning gay marriage and civil unions is a way of strengthening marriage, a view which is dumber than dogshit.
Matt, Yes, which is why I said "superficially." Similarly, the principle of diminishing marginal superficially implies that downward redistribution is utility maximizing, but the actual structure of many actual redistributive programs are, as you say, "dumber than dogshit."
I'm of the Sullivan/Rauch opinion that we'd strengthen marriage by allowing gays to do it. So here's a new argument. Allowing gay people to marry will make poor people happier! What's not to like?
w/d, I don't disagree. My point was really that the happiness folk are very critical of superficial implications of the research that does not point toward their policy preferences, and that they are amazingly cavalier about superficial implications that do. That is to say, I'm not defending Bushian marriage promotion schemes. Although I would defend proposals that would remove already existing perverse family incentives.
Right now, to change the topic, I think there is something really screwed up about draconian child support laws. Among other things, it is a huge tax, and therefore a disincentive to work, which makes these men less "marriageable" than they might otherwise be. If we abolished child support in certain kinds of cases, there would be a huge disincentive for some women to conceive or give birth, many men would have a greater incentive to work, and less incentive to work in the black market economy, and to constantly elude the law, etc... This is not well thought out, but probably worth thinking through.
Supporting your children is a tax these days? (not that I'm defending the child-support laws in detail -- I don't know much about family law -- this just seemed like a peculiar turn of phrase.)
I think Will's using the word "tax" to mean "income taken from you by government regulation." That is, if you had explicitly contracted with the woman at some point to take care of the kid - not a tax. Absent such a contract - a tax.
Agreeing with LB: don't we usually use taxes to describe payments going to the government and then being redistributed or used to pay for some service or pork or what have you, rather than payments which laws require from one citizen directly to another specific citizen due to the prior relationship between those citizens.
I think Will is slightly too used to equating disincentive and tax, but I'd imagine Cato will do that to you. :)
The thoroughly thought-out version sounds interesting. Would it incorporate a race to the courthouse, such that the first parent to disavow legal responsibility for their kids would leave the other parent holding the baby, or would we just walk away from the concept that parents are legally responsible for their children?
As a one-time Republican (I told you your embarrassing stories weren't in a league with mine), I've seen a few of these arguments in the distant past. I don't think there's a standard model, but IIRC the idea is that both men and women can opt out of caring for kids prior to the birth of kids - women by aborting, men by disclaiming responsibility prior to the point of no return. I'd be really surprised if that's the version Will's hewing to, but that's at least one version I've seen (this was 15-odd years ago).
Yes, y'all, I just meant it has a disincentive effect like unto a tax.
This is a truly fascinating issue, once you start turning it over. I of course agree with idea that we ought to "take responsibility" for our children. But the incentive effects of things like child support policy partly determine whether there will exist a child that needs supporting. Suppose you're a young woman, and you know no child support would be mandated or forthcoming. What does this do to your sexual behavior, birth control choices, etc? If a period of marriage was necessary before entitlement for child support kicked in, would you be more likely to get married before getting pregnant?
Now, I am so radically pro-choice, that I think fathers should not in fact have any legal responsibility for a child they have sired unless they have entered into an agreement, such as a marriage. This is, I think, the flipside of the idea that a man should have no legal say in the reproductive choices of his sexual partners.
I find this kind of policy much harder to talk about without making myself feel uncomfortable. But, truly, family policy does have a much greater effect on the welfare of the poor than the funding level of TANF.
Now, I am so radically pro-choice, that I think fathers should not in fact have any legal responsibility for a child they have sired unless they have entered into an agreement, such as a marriage.
Fascinating. Hell of a matriarchical family structure you're setting up there.
Will, no small part of the problem with such an argument is a lack of attention to transitioning from the current regime to the one you are proposing. It's not just a matter of setting a date certain in time after which fathers get to disclaim any future kids; it's making sure everyone understands this and isn't swayed by blandishments to the contrary, etc.
I'm also not sure it will be that much of a disincentive. You'd want to look at the actual contributions of fathers to the care of unwanted kids - I'd bet it's pretty small.
This has been fun and stimulating, folks. I should come here more often. Taking off now to an Institute for Humane Studies conference at UVA. So, peace.
You are extending the undue burden argument beyond its generally acknowledged scope. Once the mother has had the kid, she (I assume) has the same material obligations to the kid if she were to leave its care to the father and go off to do as she wanted.
Well, yes. I'd seen the version of the 'paper abortion' argument that SCMT identified before -- that either parent can disavow responsibility for a pregnancy before, say 20 weeks: the mother by aborting, and the father by signing a paper. As I said, it's got a certain symmetry to it, but I doubt it would have all that much of a social effect -- what percentage of men paying child support attempted to disavow responsibility at that stage? I don't know, but my guess is pretty low.
WW's version, that men should bear no responsibility whatsoever for extramarital children (barring a specific contractual assumption of responsibility), leaving women's legal responsibility for the children they parent intact, is quite a bit more extreme. (And, to the extent that my sarcasm isn't as thinly veiled as I think it is, wildly unjust to the children, as well as to the women, involved.)
Now, I am so radically pro-choice, that I think fathers should not in fact have any legal responsibility for a child they have sired unless they have entered into an agreement, such as a marriage.
Seems to me that, by engaging in sexual intercourse, which even the dimmest of males must associate with a risk of pregnancy and the subsequent existence of a child, said father has entered into a constructive contract to provide for any issue that results. Playing Russian roulette and then complaining one has been shot is idiotic. Ducking responsibilty for the results of one's actions got old when Adam whined 'the woman tempted me'.
Also, there used to be a way to set up a permanent link to NYTimes articles, but it seems to have either changed or gone away. Anyone know anything about this?
Carol Graham at the Center for Global Development and Brookings has done some interesting stuff on happiness in the developing world, and how it relates to social and economic mobility. She has a couple of books out that cover this pretty well, and are good reads, for policy-wonk texts.
Posted by mike d | Link to this comment | 06-17-05 8:19 AM
New Markets, New Opportunities? had just come out when I studied (undergrad) with her, and she was doing the research on Happiness and Hardship, which I think is more germane to what you're looking for.
Posted by mike d | Link to this comment | 06-17-05 8:23 AM
This is a great paper, and has an especially nice bibliography.
http://www.wcfia.harvard.edu/conferences/talloires/talloires2001/helliwell.htm#N_1_
See also this series of LSE lectures:
http://cep.lse.ac.uk/events/lectures/layard/RL030303.pdf
http://cep.lse.ac.uk/events/lectures/layard/RL040303.pdf
http://cep.lse.ac.uk/events/lectures/layard/RL050303.pdf
Posted by msw | Link to this comment | 06-17-05 8:32 AM
Will Wilkinson has been blogging a lot about the subjective well being studies lately. In particular, he's been critiquing Layard's happiness. I haven't actually been reading it, but it's there if you want it for some reason.
Posted by washerdreyer | Link to this comment | 06-17-05 8:33 AM
I don't come with references but I'm full of opinions if you want them.
Posted by Tripp | Link to this comment | 06-17-05 8:41 AM
There was a dude at Chicago who taught a class on happiness. The class was called "Happiness". I almost took it. I think I still have the syllabus.
Posted by ben wolfson | Link to this comment | 06-17-05 8:49 AM
Seriously, there is a vast literature on this. I assume you know some of the basics, but there is the collection,
Ed Diener and Norbert Schwartz (eds.) Well-Being: The Foundations of Hedonic Psychology, New York: Russell Sage Foundation, 2000.
which includes an essay by Daniel Kahneman, who's worked a lot on this. There's Daniel Gilbert at Harvard. There's another guy, Loewenstein.
Posted by slolernr | Link to this comment | 06-17-05 8:56 AM
There was a dude at Chicago who taught a class on happiness.
The ghost of Leo Buscaglia?
Posted by apostropher | Link to this comment | 06-17-05 8:57 AM
More at the usual level of discussion around here, I endured an extensive line of argument once about how there is properly no phenomenon known as "well-being," there is only the reduction of "ill-being." Discuss.
Posted by slolernr | Link to this comment | 06-17-05 8:57 AM
You're saying you once read Schopenhauer?
Posted by ben wolfson | Link to this comment | 06-17-05 9:02 AM
Or the Epicureans?
Posted by ben wolfson | Link to this comment | 06-17-05 9:02 AM
No, this was dinner-table aggression from an economist. A good, and actually very pleasant one. The argument was actually that if you want to measure well-being, you can't do that, because the axes, or vectors on which well-being increases beyond a bare minimum diverge so widely (this is the color-tv problem).
(I was going to stick in the physics analogy here, but I defer it until requested to provide it.)
But you can measure reductions in ill-being, because we agree on its axes, or vectors -- disease, poverty, etc. These are clearly Bad Things and also susceptible of measurement. And we might construe their reduction as an approximation of well-being.
Posted by slolernr | Link to this comment | 06-17-05 9:09 AM
I see your point about well-being, but you're making a mistake when you talk about the increasing availability of cheap consumer goods. If real income falls, that means there is less purchasing power -- prices have been controlled for. That's what real means. So TV's may be cheaper, but overall, we can purchase less. In fact, if overall prices have risen, but cheap goods are even cheaper than before, then the stuff that's not crap must be *really* expensive now.
So your question contains a basic contradiction.
Posted by Ian D-B | Link to this comment | 06-17-05 9:17 AM
It's not really a basic contradiction, more a recognition that there's no market-basket that can really unambiguously set the level of inflation. The level of inflation we use is determined by looking at prices of a number of commodities whose prices are fairly stable, and averaging how much those prices have crept up. (I actually find that I have no specific idea what's in that market basket, so I'm mostly talking through my hat here.)
However, the prices of consumer electronics have dropped like a rock over the last few decades relative to the price of everything else. So Family X, whose income has dropped in real terms over the last decade, and finds it therefore just a little harder to pay for food, shelter, healthcare, etc., nonetheless now has access to all sorts of cool toys that they couldn't have afforded a decade ago. FL's question is how the hedonic effect of the increased access to cool toys affects happiness in light of otherwise falling real incomes.
Posted by LizardBreath | Link to this comment | 06-17-05 9:28 AM
Gilbert's good on what you might call the Sheryl Crow question. "If it makes you happy, why the hell are you so sad?" Happiness -- even, apparently, the happiness that comes with buying a new car -- evanesces.
Posted by slolernr | Link to this comment | 06-17-05 9:39 AM
Off-topic, but probably of interest (and maybe old news) to the regulars here: the BBC wants you to vote on the greatest philosopher.
Posted by apostropher | Link to this comment | 06-17-05 9:43 AM
You might think of it more profitably as Krugman vs. Krugman. His "Viagra and the Wealth of Nations" contains a good discussion of why real income is underestimated by usual measures.
http://web.mit.edu/krugman/www/viagra.html
Also, try skimming the Boskin Report from the mid-nineties, which made some adjustments to the measurement of the CPI. You'll get a good sense of the many ways in which inflation is overestimated and thus real wages are underestimated.
Virginia Postrel's article, here, does a nice job of illustrating one dimension of the problem:
http://www.dynamist.com/weblog/archives/001656.html
You've framed the question less than ideally... They way we measure the price and availability of consumer goods determines the way we adjust nominal income to get a measure of real income. So the problem is that current BLS techniques fail to track adequately the availability of cheap consumer goods and therefore misrepresent adjusted income as having declined when it has not.
Posted by Will Wilkinson | Link to this comment | 06-17-05 9:47 AM
Lizardbreath --
That's why we use chain weighted deflators. As the basket changes, so does the weighting. When relative prices change, so do relative quantities. Furthermore, many parts of the CPI now do use hedonic inexes, which should correct for your point (which I think is subtler than what FL was saying).
I mean, say what you want about cheap electronics, but essentisally the question now is, "is it bad that people who can't afford food and shelter are now making less money than they used to?" Right? Or are we asking if a cheap TV will make them feel better? It seems like the question no longer has any content.
Posted by Ian D-B | Link to this comment | 06-17-05 9:50 AM
I think the best overview of the economics and SWB lit is Frey & Stutzer's _Happiness & Economics_.
Posted by Will Wilkinson | Link to this comment | 06-17-05 9:50 AM
Rereading, maybe I missed your point. Maybe what you're saying is that the question is, "Is the decline in welfare from the fall in real income offset by the change in relative prices of goods?" More cool electronic toys means fewer of some other sort of toy. I don't see the a priori reason for thinking that a change in relative prices should in any way increase welfare.
Posted by Ian D-B | Link to this comment | 06-17-05 9:53 AM
I found "The Two Income Trap" interesting.
It says, as LizardBreath points out, that the price of crap has dropped while the cost of housing, healthcare, and education have skyrocketed.
I'd point out that "job security" has plummeted, too.
There was some other book whose name I forget which pointed out that personal happiness has fallen while consumer goods have gotten cheaper.
Posted by Tripp | Link to this comment | 06-17-05 9:56 AM
Maybe what you're saying is that the question is, "Is the decline in welfare from the fall in real income offset by the change in relative prices of goods?"
Pretty much. While my prejudices in the matter do line up with what yours appear to be (for example, I don't think a plasma-screen TV makes the owner any happier than the B&W 12" TV that could have been bought for the same inflation-adjusted price in 1957), I don't think the question is entirely empty.
Posted by LizardBreath | Link to this comment | 06-17-05 10:00 AM
Ian,
The TV show "30 Days" on FX tried to show what it was like living on minimum wage.
They found free furniture and TVs and microwaves, but the grind of barely affording food, shelter, and having no healthcare swamped them.
In my opinion cheap consumer goods have brought us no happiness.
Posted by Tripp | Link to this comment | 06-17-05 10:02 AM
Couldn't you compare wages to a Paasche index, like the GDP deflator, which underestimates deflation, to get the most optomistic view of the actions of real wages? The real movement of wages is likely somewhere between that and the movement of wages calculated compared to the CPI.
Posted by Michael | Link to this comment | 06-17-05 10:03 AM
This sounds very much like an income inequality question. The people living on minimum wage are getting screwed no matter what relative prices here. When we're talking about the poor, even if some electronics weren't cheap, they would still be poor and not be able to afford stuff. That's what being poor is. And if their real incomes fall then they're even more poor.
As to the rising cost of healthcare, that's less of an issue because of medicaid.
In any situation, some goods will be cheaper than others. If you weren't pointing at electronics, it would be something else. So is it true that the fact that not all goods have the same prices raises welfare? Obviously not, but who cares? Maybe you're upset because the relative prices of some stuff has been falling. Again, so what? So some electronics are now cheaper? There are price indexes for just food. Go find data on that, deflate nominal income with it and come back. But just saying that some goods are cheaper than others it's much of a revelation.
Posted by Ian D-B | Link to this comment | 06-17-05 10:11 AM
If the B&W 12", which used to cost as much as a plasma screen, but which you can now get for $1 at a garage sale, makes you as happy as having a plasma-screen, and if that extra $1499.00 you saved by buying a set at a garage sale could buy you something that would improve your sense of well-being (a bond for your child's education, or whatever), then the decline in prices have certainly made you better off.
The data show that avg. happiness in the US has not gone up over the past several decades. Individually, however, more money predicts more happiness.
There are both strong a priori and a posteriori reasons for thinking that a decline prices positively affects welfare.
Posted by Will Wilkinson | Link to this comment | 06-17-05 10:13 AM
Sure, a decline in overall prices. But you're talking about with a fixed nominal income, whihc would imply higher real income. I only mean a change in *relative* prices. Sure, the tv's cheaper, but if we know there's inflation then something else is more expensive. Relative prices always change, who cares?
Yes, there are a priori and posteriori reasons for thinking a fall in overall prices raises welfare (ceteris paribus) but that's not what we're talking about here. In our situation, we can consider fixed nominal income, rising overall prices, and falling relative prices of electronics. Again, what's so special about electronics that makes their relative decline matter? What about airplane tickets? *nominal* prices are now less than they were in the 80's. Who cares?
Posted by Ian D-B | Link to this comment | 06-17-05 10:20 AM
Ian-
I think you're still oversimplifiying. Mind you, I think you're ending up in the right spot, I just think that there's some value to asking the question posed above, and working out with as much rigor as possible that the answer is 'no, falling prices for some consumer goods don't offset the decline in welfare due to falling real incomes.'
For example, even fairly poor people have cell phones these days. 20 years ago, they didn't. It is possible, albeit very unlikely from my point of view, that the act of speaking on a cell phone brings the owner such ineffable delight that the fact that he now has a harder time paying his rent than he used to doesn't bother him. He has a cell phone.
I think this argument is bogus, but it's not self-evidently bogus, it's the kind of bogus that should really be investigated with surveys and such to confirm its bogosity. There are perfectly respectable people out there who believe that something like this is true, and it's worth carefully refuting them rather than just dismissing them.
Posted by LizardBreath | Link to this comment | 06-17-05 10:25 AM
Food, shelter, and healthcare are consumer goods, by the way. The prices of food and shelter have plummeted dramatically, and continue to do so.
Robert Fogel, Nobel-winning economic historian: ""A century ago, the typical household on OECD nations spent over 80 percent of its income on food, clothing, and shelter. Today these commodities account for less than a third of consumption."
Tracking the cost of health care is trickier, because health care really isn't anything in particular. It is a suite of services. The very nature of those services have fundamentally altered over the years, such that they aren't strictly comparable. The price of an MRI hasn't gone up over the past 30 years, because 30 years ago, you couldn't get an MRI at any price. And so on. There is, in any case, good reason to believe that todays price for a 1985 suite of treatments is much cheaper than in 1985. The problem is that the insane structure of govt.-mandated employer-based insurance makes pretty much wipes out consumer cost-sensitivity, and so no one offers cheaper quality services that are in principle available. That's a big problem.
Posted by Will Wilkinson | Link to this comment | 06-17-05 10:26 AM
Ah, we're talking past each other a bit. My contention is overall prices are not rising, and that the standard measurement techniques fail to capture this.
Posted by Will Wilkinson | Link to this comment | 06-17-05 10:31 AM
The prices of food and shelter have plummeted dramatically
Shelter? Over what time horizon? I don't actually know the facts here, but I'm very surprised to hear this.
Posted by LizardBreath | Link to this comment | 06-17-05 10:31 AM
Ah, here's what I was talking about, "the GDP deflator takes account of purchaser's ability to substitute away from items that have increased prices, it does not take account of the reduction inutility--the implicit cost to consumers--of settling for second best." -DeLong
On the larger issue, I think Wilkinson is getting at the point when he implies that what one should really do is look at how the typical family divides up their money between luxury and necessity. My intuition that the biggest factor in determining happiness is how much work it takes to produce not just necessary goods but a socially acceptable lifestyle.
Posted by Michael | Link to this comment | 06-17-05 10:38 AM
http://faculty-web.at.northwestern.edu/economics/gordon/p360_forpub_040729.pdf -- *Downward* bias in the CPI for housing.
Also, my point about falling relative prices is that there's no point to a study because you can't design one. There can never be a situation where some things aren't cheaper than others. So we can't test whether some things being cheaper (electronics) has any effect on welfare. There's no alternative.
Posted by Ian D-B | Link to this comment | 06-17-05 10:41 AM
I live in Washington, DC, and it's certainly not decreasing for me!
Here's a useful passage from Cox & Alm's _Myths of Rich & Poor_:
"In 1997 a single-family home cost six times what it did in the early 1970s--in dollar terms. After adjusting for the increase in the size of new homes and higher pay, however, most of the inflation disappears. A 1,975-square-foot, median-priced, new home cost 9,961 hours [of labor] in 1970 and 11,039 hours in 1997, or 1,078 additional hours. Over 27 years, then, the average work time required to buy a new home rose only 10 percent, or the equivalent of six months. Mortgage rates are a percentage point lower than they were in the early 1970s. On a housre with a 5 percent down payment, the break in interest payments will trim the work cost of a new house over a 30-year purchase by 1,561 hours, a reduction of nine months on the job needed to pay for the house.
"Another consideration involves a decrease in household size during the past quarter century. Each residence today houses, on average, fewer people than it did in 1970, so in buying a median-sized home, each person is getting more square feet. If we take into account shrinking household size, then an individual's living space is actually 6 percent cheaper than it was in 1970. The adjustments show that housing is more affordable, but they still haven't captured all the added value in most of the homes coming on the market. . . New homes are more likely to contain central heating, air conditioning, kitchen appliances, extra bathrooms, garages, better insulation, and many other extras. The prices of new home includes these amenities, so an accounting of what's happened to the real cost of housing remains elusive."
So there you have it.
Posted by Will Wilkinson | Link to this comment | 06-17-05 10:46 AM
Since I assume Will wouldn't have shown up here without my link to his blog in the comment thread (though he can correct me if he came here by a different route), I take credit for this being an interesting discussion despite (because of?) my non-participation.
Posted by washerdreyer | Link to this comment | 06-17-05 10:52 AM
Controlling for square-footage, without controlling for the desirability of location of a house of that square-footage, seems indefensible. Your quote acknowledges that new houses tend larger -- a likely consequence, then, is that the small house you're comparing as if on an apples-to-apples basis is probably older and in a less desirable area (crime rates, schools, etc.) than a house of the same size was in 1970. Your quote also doesn't address the rental market, where the poor or lower middle class are more likely to find their housing.
Posted by LizardBreath | Link to this comment | 06-17-05 10:58 AM
Also, you're putting forth a quote saying that "an accounting of what's happened to the real cost of housing remains elusive," as support for a contention that the cost of shelter has plummeted dramatically?
Posted by LizardBreath | Link to this comment | 06-17-05 11:06 AM
This is a good topic, although I tend to agree with Will that the framing of the question makes a difference. If we simply stipulate that real wages have stagnated, there are at least three questions that can be asked:
1. have lowered prices of consumer goods made up for this stagnation
2. have the availability of qualitatively new goods made up for this stagnation
3. what do we mean by "made up for"
Number two is of course immensely compelling. For a patient with rheumatoid arthritis, there is really no comparing the "basket" of health care available in 1970 with the basket available today. The pharmaceutical solutions are order of magnitude superior. This is true across numerous disease states, and is part of the point of Krugman's Viagra article. How does one value technological innovation that provides advantages simply different in kind from what came previously?
This is hard to do. It becomes even harder when one realizes that subjective happiness is only one measure (and not the best measure) by which policies can be compared )point number three). Via technologies available now I can accomplish ends (keep up with elderly relatives and friends who live ex-US, e.g.) that I could not in 1970. Does this make me subjectively happier? I don't know, and in fact, I don't much care. There are some ends that I think should be accomplished, and I am grateful for technology that allows me to do that.
Posted by baa | Link to this comment | 06-17-05 11:08 AM
But of course I realize the endgame is that:
a) despite obvious returns to market capitalism in terms of costs of goods and services
b) despite obvious returns to market capitalism in terms of new technologies that cannot be adequately captured in costs
c) despite the dubious nature of "real wages" calculations
d) despite the fact that technological innovation (which leads to one and two above) is widely cited as the most powerful factor (or one of two most powerful factos) depressing wage growth and increasing employment volatility among the bottom half of the population
Nonetheless we must regulate captialism in fundamentally illiberal ways because to market capitalism does not maximize self-reported happiness. And fortunately, we all agree that maximizing self-reported happiness is the signal goal of a liberal society.
I call chairman of the government coucil overseeing new condiment production!
Posted by baa | Link to this comment | 06-17-05 11:16 AM
baa, I like 2 and 3, but number 1 is giving me trouble. Consumer goods aren't cheaper, that's what the CPI says. Goods are more expensive. There are just some goods that we notice as relatively cheaper. Others are relatively more expensive. On average, everything is more expensive. That's inflation. The well known bias caused by new goods is, as you say, an issue, but it's simply not the case that consumer goods are cheaper.
Posted by Ian D-B | Link to this comment | 06-17-05 11:18 AM
Can you work on pickle relish? I find it's mostly too sweet.
Seriously, your 39 assumes (roughly, and for comic effect, of course) that technological advance is a priori incompatible with increased economic equality. While that's the sort of thing that could conceivably be true, it's a heck of an axiom to start from.
Posted by LizardBreath | Link to this comment | 06-17-05 11:21 AM
editing:
a) despite obvious returns to (regulated) market capitalism in terms of costs of goods and services.
Posted by Michael | Link to this comment | 06-17-05 11:32 AM
LB,
I would love to accede to your request, but I am afraid that having an overwhelming choice of the sweetness of relish will make you unhappy. There will be only two relishes, both sweet, and we are removing mango pickle entirely.
Re: 39. Fine, too glib by half. Stick with 38 for now. And in general, ignore me and pay attention to Will, as he's the high end vendor of economic liberalism in this thread.
Ian D-B: "On average, everything is more expensive". You mean in nominal or real terms.? In real terms, this simply cannot be true. What "everything" : a car? a computer? a cross-country flight? a pair of pants? a pound of hamburger? Education, health care, and (maybe) real-estate are the only items where I have seen literature suggesting price increases in real terms, and as Will points out these are often very vexed calculations. Why is Will's #29 Robert Fogel, Nobel-winning economic historian: ""A century ago, the typical household on OECD nations spent over 80 percent of its income on food, clothing, and shelter. Today these commodities account for less than a third of consumption." not immediately decisive here?
Posted by baa | Link to this comment | 06-17-05 11:33 AM
Baa,
Happiness research isn't neccessarily a step on the road to serfdom. One of the things that happiness research has determined is that unemployment makes people very unhappy. Noone wants to feel useless.
The US's realitively low unemployment rates need to kept into consideration when comparing US levels of happiness with European levels of happiness.
Posted by Joe O | Link to this comment | 06-17-05 11:38 AM
downward bias in housing price indexes doesn't mean they say there's inflation, what it means is that they aren't keeping up with inflation -- housing prices rise faster than the CPI says.
Posted by Ian D-B | Link to this comment | 06-17-05 11:40 AM
Real price changes essentially are price changes relative to everything else. So yes, everything can't have a positive real price change. I just mean nominally. What I was saying all along is that there will always be some things with positive real price changes, and some with negative. As to the fogel quote, all that shows is that real incomes have risen. It's well known that as real income rises, spending on food, clothing, and shelter falls. That doesn't mean that their real prices are any different, just that real incomes rose.
As to why there's no literature on real price increases, it's because nobody cares, which is my point. Fine, some stuff has a different relative price. Give me a good a priori to think that would have any effect on general welfare.
I disagree with DeLong's point about choosing second best. I don't believe it. People always make decisions based on price, and always substitute between goods, there's never a decision where that doesn't happen -- remember your micro. If that's the case, I find it had to believe that every substitution contains disutility because then every purchase would.
Posted by Ian D-B | Link to this comment | 06-17-05 11:47 AM
JoeO -- I agree with "neccessarily."
Seriously, though, I am a big fan of happiness studies. I even try to model "satisficer" behaviors in my own life. What worries me is the (completely transparent) attempt to deploy happiness studies against economic liberalism. Technical/theoretical market failures that madate government "fixes" are a hardy perennial. Today, the paradox of choice, yesterday, the QWERTY keyboard.
Ian D-B: gotcha. My misreading.
Posted by baa | Link to this comment | 06-17-05 11:49 AM
The US's realitively low unemployment rates
I've heard that one factor here is that the US and European countries don't measure unemployment the same way. Apples-to-apples, I think the US still has lower unemployment, but it's less noticeable.
Posted by Matt Weiner | Link to this comment | 06-17-05 11:51 AM
Ian,
As to why there's no literature on real price increases, it's because nobody cares, which is my point.
Am I understanding you correctly? I can't be. Certainly people very much care how much "work" it takes to produce a day's nourishment. If it takes more than a day's effort then we will starve.
Posted by Tripp | Link to this comment | 06-17-05 11:56 AM
It's tough on a number of levels to compare US and EU employment data. First, they work far fewer hours per year, 100 or more if memory serves. Second, they have much more restrictive labor laws. Third, teens are far less likely to enter the labor force, people ofter don't enter until they're wll out of college. Fourth, marginal tax rates on a second entrant from a family (the wife) are enormous. Fifth, the retirement income you give up by staying in the labor force after the retirement age amounts to a shadow tax of up to 80%.
But really, it's tough to say what employment rates say about welfare. Fewer workers means less output, but more leisure. What's optimal? I'd argue that Europeans would rather work more, but restrictive labor laws and powerful unions don't let them.
Posted by Ian D-B | Link to this comment | 06-17-05 11:58 AM
Plus, it isn't particularly clear that average per capita
happiness is the right measure of happiness to compare societies. The US has got the repugnant conclusion on its side.
Posted by Joe O | Link to this comment | 06-17-05 11:58 AM
tripp --
a real price increase is a relative price increase. nothing more. Short of famine, it's tough to envision a situation in which the real price of food rises so much that nobody can eat.
It's very rare for economists to talk about the real prices of individual goods. They'll talk about the relative inflation of various sectors, they'll talk about the real price level of the whole economy, but generally not real prices of individual goods.
Posted by Ian D-B | Link to this comment | 06-17-05 12:00 PM
Will,
The data show that avg. happiness in the US has not gone up over the past several decades. Individually, however, more money predicts more happiness.
I'd sure like to see a reference for this, because my understanding is that more money does tend towards more happiness, to a point ($40K/yr) after which additional money will provide small or no increases in happiness.
Put another way, I doubt Bill Gates is a million times more happy than I am.
Posted by Tripp | Link to this comment | 06-17-05 12:05 PM
Ian,
It's very rare for economists to talk about the real prices of individual goods.
Why should they? It's all just theoretical numbers in a universe of their invention.
It's not like we actually have, have had, or will have famine here on the real Earth.
Do you honestly think the real price of individual goods does not matter to people?
Posted by Tripp | Link to this comment | 06-17-05 12:11 PM
the real price of a good is its nominal price divided by the price level. The average real price of all goods must be equal to the price level. We can talk about total inflation -- that's what counts when looking at real income. But real prices of individual goods only refers to the price of a good relative to all other goods. Nobody calls that a real price change. This is all basic microeconomics, relative price changes, income and substitution effects, etc. Yes, people study this stuff. But on a macro scale, it all evens out. People study individual choices, but we're asking a macro question here -- general welfare. In that case, the relative prices of a few goods just don't matter.
Ok, you're right, if we had a famine, then it would matter that food is much more expensive than electronics. We don't. The question is about modern day america. We have lots of food, nobody is starving. My point is that the relative prices differences are benign, and I see no evidence to the contrary. There will always be some cheap goods. So what.
Posted by Ian D-B | Link to this comment | 06-17-05 12:24 PM
I admit to being a bit confused by the question, originally, because I thought that real income falling is equivalent to less purchasing power. But, the above discussion is good and even if I'm right about that, the questions that are raised about well-being are worthwhile.
One way to think of the question: Are people feeling better off than they should be? I've often heard people say in all seriousness that there is no real poverty in the U.S. because even poor families can have color TVs. This is absurd; but the people making these statements usually have in mind something like 'Well, my grandparents had to worry about putting food on the table during the Depression; that's poverty.'
So maybe the angle we're looking for is more "Does the 'happiness' caused by the accessibility of [cell-phone, TV, airline tickets] for low-income families offset the problems caused by falling real wages?" Are we measuring 2005 with a Depression-era yardstick and concluding that everything's fine, subjectively?
Posted by Cala | Link to this comment | 06-17-05 12:38 PM
FL, a bit unrelated, but another thing to look at might be satisficing vs. optimizing theories of well-being. Not that I can think of any good references off the top of my head.
Posted by Cala | Link to this comment | 06-17-05 12:40 PM
Some large part of this is whether we should be defining "acceptable" levels of consumption of goods and services by reference to an absolute standard or a relative standard.
Posted by SomeCallMeTim | Link to this comment | 06-17-05 12:43 PM
Tripp, Pick any non-totally-arbitrary cohort of people (say, Californians). The richer people are happier than the poorer. This may be because of preferences of over relative position. But if income buys higher relative position, and relative position buys happiness, then money buys happiness.
If you get a raise tomorrow, odds are, you will be happier. You'll lose most of the gain due to habituation or adaptation effects, but you won't lose all of it.
Frey and Stutzer in Happiness & Economics: "After running many regressions with all kinds of data, the general result seems to be that happiness and income are indeed positively related."
The interesting point is that while income does positively effect happiness, it is not a large effect compared to the quality of one's personal relationships, etc. Which should come as no surprise.
Posted by Will Wilkinson | Link to this comment | 06-17-05 12:55 PM
Will,
There is an awful lot of wiggle room in happiness and income are positively related.
I'd really like to see a graph of the relationship between happiness and income. I'm sure it is not linear.
Posted by Tripp | Link to this comment | 06-17-05 12:59 PM
By the way, my last point above relates to an interesting implication of the happiness research I've been seeing, but to which the researchers seem ideologically allergic.
Stable marriage has a huge effect on happiness. An increase in income has a relatively much smaller effect, even for the poor. So it seems that policies that were intended to increase the incomes of the poor, but which turned out to have a negative effect on family stability, have likely done much much more harm in hedonic terms than the benefit of the added income.
Superficially, it would seem to follow that Bushian initiatives to strengthen marriage are much more plausible candidate policies for enhancing welfare than redistributive cash transfers. I have seen little discussion of this, however, from the happiness mavens.
That said, Lykken has proposed that we implement licensing requirements for parents, and Layard has suggested, more moderately, mandatory state-funded parenting classes. No doubt he is imagining a class with a curriculum written by good technocratic parenting "experts." I wonder what the reaction to parenting classes with a more politically likely curriculum written by, say, Focus on the Family would be.
Posted by Will Wilkinson | Link to this comment | 06-17-05 1:11 PM
Tripp, It is far from linear. The effect grinds to a crawl past a certain level of income. But the point remains. Pick a person at random, give them a dollar, and you make them happier. How much happier depends on how much they already have.
Posted by Will Wilkinson | Link to this comment | 06-17-05 1:13 PM
It seems at least plausible that iniatives to strengthen marriage will not raise happiness because of a correlation/causation error (I do note that you said "superficially"). That is, a meaningful and well-functioning relationship leads to a stable marriage and also to happiness. But a stable marriage caused by welfare/ tax incentives and not by the relationship could, I imagine (though I'd love to see data on this) lead to less happiness than the same situation with the marriage absent.
Posted by washerdreyer | Link to this comment | 06-17-05 1:18 PM
Bushian initiatives to strengthen marriage
But isn't there substantial reason to think that they wouldn't actually strengthen marriage? Compare: Abstinence education, relation of more or less every other Bush policy to its stated goals.
For instance, many Bushians profess to think that banning gay marriage and civil unions is a way of strengthening marriage, a view which is dumber than dogshit.
Posted by Matt Weiner | Link to this comment | 06-17-05 1:19 PM
Also, what w/d said.
Posted by Matt Weiner | Link to this comment | 06-17-05 1:19 PM
Matt, Yes, which is why I said "superficially." Similarly, the principle of diminishing marginal superficially implies that downward redistribution is utility maximizing, but the actual structure of many actual redistributive programs are, as you say, "dumber than dogshit."
I'm of the Sullivan/Rauch opinion that we'd strengthen marriage by allowing gays to do it. So here's a new argument. Allowing gay people to marry will make poor people happier! What's not to like?
Posted by Will Wilkinson | Link to this comment | 06-17-05 1:23 PM
[redacted]
Posted by [redacted] | Link to this comment | 06-17-05 1:36 PM
three feet from my head
Is it before you or behind you?
Posted by Matt Weiner | Link to this comment | 06-17-05 1:44 PM
w/d, I don't disagree. My point was really that the happiness folk are very critical of superficial implications of the research that does not point toward their policy preferences, and that they are amazingly cavalier about superficial implications that do. That is to say, I'm not defending Bushian marriage promotion schemes. Although I would defend proposals that would remove already existing perverse family incentives.
Right now, to change the topic, I think there is something really screwed up about draconian child support laws. Among other things, it is a huge tax, and therefore a disincentive to work, which makes these men less "marriageable" than they might otherwise be. If we abolished child support in certain kinds of cases, there would be a huge disincentive for some women to conceive or give birth, many men would have a greater incentive to work, and less incentive to work in the black market economy, and to constantly elude the law, etc... This is not well thought out, but probably worth thinking through.
Posted by Will Wilkinson | Link to this comment | 06-17-05 1:53 PM
Supporting your children is a tax these days? (not that I'm defending the child-support laws in detail -- I don't know much about family law -- this just seemed like a peculiar turn of phrase.)
Posted by LizardBreath | Link to this comment | 06-17-05 2:12 PM
I think Will's using the word "tax" to mean "income taken from you by government regulation." That is, if you had explicitly contracted with the woman at some point to take care of the kid - not a tax. Absent such a contract - a tax.
Posted by SomeCallMeTim | Link to this comment | 06-17-05 2:17 PM
Agreeing with LB: don't we usually use taxes to describe payments going to the government and then being redistributed or used to pay for some service or pork or what have you, rather than payments which laws require from one citizen directly to another specific citizen due to the prior relationship between those citizens.
I think Will is slightly too used to equating disincentive and tax, but I'd imagine Cato will do that to you. :)
Posted by washerdreyer | Link to this comment | 06-17-05 2:17 PM
The thoroughly thought-out version sounds interesting. Would it incorporate a race to the courthouse, such that the first parent to disavow legal responsibility for their kids would leave the other parent holding the baby, or would we just walk away from the concept that parents are legally responsible for their children?
Posted by LizardBreath | Link to this comment | 06-17-05 2:26 PM
Maybe "Race to the Court House" be a new reality show?
Posted by washerdreyer | Link to this comment | 06-17-05 2:34 PM
LB:
As a one-time Republican (I told you your embarrassing stories weren't in a league with mine), I've seen a few of these arguments in the distant past. I don't think there's a standard model, but IIRC the idea is that both men and women can opt out of caring for kids prior to the birth of kids - women by aborting, men by disclaiming responsibility prior to the point of no return. I'd be really surprised if that's the version Will's hewing to, but that's at least one version I've seen (this was 15-odd years ago).
Posted by SomeCallMeTim | Link to this comment | 06-17-05 2:36 PM
Yes, y'all, I just meant it has a disincentive effect like unto a tax.
This is a truly fascinating issue, once you start turning it over. I of course agree with idea that we ought to "take responsibility" for our children. But the incentive effects of things like child support policy partly determine whether there will exist a child that needs supporting. Suppose you're a young woman, and you know no child support would be mandated or forthcoming. What does this do to your sexual behavior, birth control choices, etc? If a period of marriage was necessary before entitlement for child support kicked in, would you be more likely to get married before getting pregnant?
Now, I am so radically pro-choice, that I think fathers should not in fact have any legal responsibility for a child they have sired unless they have entered into an agreement, such as a marriage. This is, I think, the flipside of the idea that a man should have no legal say in the reproductive choices of his sexual partners.
I find this kind of policy much harder to talk about without making myself feel uncomfortable. But, truly, family policy does have a much greater effect on the welfare of the poor than the funding level of TANF.
Posted by Will Wilkinson | Link to this comment | 06-17-05 2:46 PM
I'd seen that before. It's got a certain parallelism going on, but I've got to doubt that it covers any substantial percentage of child-support cases.
Posted by LizardBreath | Link to this comment | 06-17-05 2:46 PM
[redacted]
Posted by [redacted] | Link to this comment | 06-17-05 2:47 PM
Now, I am so radically pro-choice, that I think fathers should not in fact have any legal responsibility for a child they have sired unless they have entered into an agreement, such as a marriage.
Fascinating. Hell of a matriarchical family structure you're setting up there.
Posted by LizardBreath | Link to this comment | 06-17-05 2:49 PM
Will, no small part of the problem with such an argument is a lack of attention to transitioning from the current regime to the one you are proposing. It's not just a matter of setting a date certain in time after which fathers get to disclaim any future kids; it's making sure everyone understands this and isn't swayed by blandishments to the contrary, etc.
I'm also not sure it will be that much of a disincentive. You'd want to look at the actual contributions of fathers to the care of unwanted kids - I'd bet it's pretty small.
Posted by SomeCallMeTim | Link to this comment | 06-17-05 2:50 PM
This has been fun and stimulating, folks. I should come here more often. Taking off now to an Institute for Humane Studies conference at UVA. So, peace.
Posted by Will Wilkinson | Link to this comment | 06-17-05 2:53 PM
FL:
You are extending the undue burden argument beyond its generally acknowledged scope. Once the mother has had the kid, she (I assume) has the same material obligations to the kid if she were to leave its care to the father and go off to do as she wanted.
Posted by SomeCallMeTim | Link to this comment | 06-17-05 2:54 PM
Well, yes. I'd seen the version of the 'paper abortion' argument that SCMT identified before -- that either parent can disavow responsibility for a pregnancy before, say 20 weeks: the mother by aborting, and the father by signing a paper. As I said, it's got a certain symmetry to it, but I doubt it would have all that much of a social effect -- what percentage of men paying child support attempted to disavow responsibility at that stage? I don't know, but my guess is pretty low.
WW's version, that men should bear no responsibility whatsoever for extramarital children (barring a specific contractual assumption of responsibility), leaving women's legal responsibility for the children they parent intact, is quite a bit more extreme. (And, to the extent that my sarcasm isn't as thinly veiled as I think it is, wildly unjust to the children, as well as to the women, involved.)
Posted by LizardBreath | Link to this comment | 06-17-05 3:04 PM
Now, I am so radically pro-choice, that I think fathers should not in fact have any legal responsibility for a child they have sired unless they have entered into an agreement, such as a marriage.
Seems to me that, by engaging in sexual intercourse, which even the dimmest of males must associate with a risk of pregnancy and the subsequent existence of a child, said father has entered into a constructive contract to provide for any issue that results. Playing Russian roulette and then complaining one has been shot is idiotic. Ducking responsibilty for the results of one's actions got old when Adam whined 'the woman tempted me'.
Posted by DominEditrix | Link to this comment | 06-18-05 8:45 PM
But the incentive effects of things like child support policy partly determine whether there will exist a child that needs supporting.
That seems to be true, but in the opposite way to what Will is claiming:
Tough child support laws may dissuade men from becoming unwed fathers, as states with the most stringent laws and strict enforcement have up to 20 percent fewer out-of-wedlock births, a new study shows.
Also, there used to be a way to set up a permanent link to NYTimes articles, but it seems to have either changed or gone away. Anyone know anything about this?
Posted by Mitch Mills | Link to this comment | 06-19-05 6:10 PM
The link generator is here but they've been having technical difficulties.
Posted by eb | Link to this comment | 06-19-05 7:55 PM