Money vs. Happiness
Context: The article studies the relationships between subjective wellbeing, which is narrowly defined to focus on economic wellbeing in India, based on the panel survey in India Human Development Survey (IHDS).
Approaches to measure well-being:- Standard approach: based on decision utility – observations of decisions made supposedly by rational (utility maximising) agents.
- Subjective-Well Being (SWB) Approach: based on experience utility.
- E.g. data collected under IHDS including questions like compared to seven years ago, would you say your household is economically doing the same, better or worse today?
- It notes a broader view that is influenced by several factors other than income, assets, and employment, like age, health, caste, etc
Background: The question whether the rich are more satisfied with their lives is often taken for granted, even though surveys, like the Gallup World Poll, show that the relationship between subjective wellbeing and income is often weak, except in low-income countries in Africa and South Asia. Plausible reasons -
- Growth in income mostly has a transitory effect: on individuals’ reported life satisfaction, as they adapt to material goods.
- Relative income has more relation to wellbeing: earning more or less than others looms larger than how much one earns.
- Marginal effectivity: Low increase in life satisfaction once Gross Domestic Product(GDP) per capita exceeds $10,000 (in purchasing power parity).
Some features of Subjective-Well Being (SWB)
- Positive relationship with per capita expenditure
- Higher expenditure results in higher SWB: E.g. the higher the expenditure in 2005 and the greater was the SWB in 2012.
- Higher SWB will result in higher expenditure: higher well-being means better performance that will result in higher expenditure.
- Negative relationship with widening gap of aspirations and achievements (that result in resentment and frustration): sense of resentment and frustration will result in lower SWB.
Way forward: For improving well-being or happiness
- Focus on growth of expenditure or income.
- Check widening of the gap between aspirations and achievements.
- Provide economic opportunities to poor: by taxing rich.
- Balancing the focus on objective welfare as well as subjective well-being measure.
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