There is increasing interest in the ‘‘economics of happiness’’, reflected by the number of articles that are appearing in mainstream economics journals that consider subjective well-being (SWB) and its determinants. This paper provides a detailed review of this literature. It focuses on papers that have been published in economics journals since 1990, as well as some key reviews in psychology and important unpublished working papers. The evidence suggests that poor health, separation, unemployment and lack of social contact are all strongly negatively associated with SWB. However, the review highlights a range of problems in drawing firm conclusions about the causes of SWB; these include some contradictory evidence, concerns over the impact on the findings of potentially unobserved variables and the lack of certainty on the direction of causality. We should be able to address some of these problems as more panel data become available.
Source: “Do we really know what makes us happy? A review of the economic literature on the factors associated with subjective well-being” from Journal of Economic Psychology 29 (2008) 94–122
No shocker there. Looking inside the paper we get more info on the various factors that influence happiness, like income:
…The results generally suggest positive but diminishing returns to income. Some of this positive association is likely to be due to reverse causation, as indicated by studies which show higher well-being leading to higher future incomes (Diener, Lucas, Oishi, & Suh, 2002; Graham, Eggers, & Sukhtankar, 2004; Marks & Flemming, 1999; Schyns, 2001), and some is likely to be due to unobserved individual characteristics, such as personality factors, as indicated by studies which find a reduced income effect after controlling for individual effects (Ferrer-i-Carbonell & Frijters, 2004; Luttmer, 2005).
Studies that have included relative income (defined in a range of different ways with a range of different reference groups) suggest well-being is strongly affected by relativities (Dorn, Fischer, Kirchgassner, & Sousa-Poza, 2007; Ferrer-i-Carbonell, 2005; Luttmer, 2005; Weinzierl, 2005). This suggests that additional income may not increase well-being if those in the relevant comparison group also gain a similar increase in income. However, increases in income that result in increases in tax yield, which could be used to fund public services that may themselves enhance well-being. For a given income level, having high aspirations and expectations have a negative effect on SWB (Macdonald & Douthitt, 1992; Stutzer, 2004). Aspirations themselves appear to be driven in part by past incomes, implying adaptation to higher levels of income…
Studies consistently find a negative relationship between age and SWB and a positive relationship between age squared and SWB (e.g. Blanchflower & Oswald, 2004a; Ferrer- i-Carbonell, & Gowdy, 2007). Studies suggest a U-shaped curve with higher levels of well-being at the younger and older age points and the lowest life satisfaction occurring in middle age, between about 32 and 50 years, depending on the study. Easterlin (2006) notes that this U-shaped relationship found when many age-related differences in life circumstances (income, health, employment, etc.) have been controlled for may be misleading since it says little about how the SWB of young and old compare to those at middle age.
The study is very long and comprehensive so I’ll just give you some quick bullet points. (As always: I’m not an academic or a statistician and if you want that level of accuracy, you are reading the wrong blog.)
- The effects of gender aren’t very clear.
- Whites have higher subjective well-being than blacks, but Hispanics have higher SWB than whites.
- Even when you control for social trust and religious belief, personality still affects happiness and people with high self-esteem are less likely to suffer from depression.
- Education helps but its hard to tease out of if it’s actually the schooling or the personality that motivated you to go to school or the positive health benefits tied to education, etc, etc.
- Health has a big effect on well being but some people adapt surprisingly well to being disabled.
- There’s not a lot of clear info on how work affects happiness, though being in a union and being self-employed might be beneficial. Unemployment wreaks havoc on SWB.
- As we all know, commuting sucks.
- Probably because of loss of autonomy, care-giving lowers happiness — especially taking care of family members (probably because we’re closer to them emotionally.)
- Lots of noisy data but community involvement and volunteering likely improve happiness.
- Exercise is good.
- Religion (irrespective of any particular faith) improves happiness and may reduce the effect of low income on happiness, especially for African Americans.
- “Attitudes towards circumstances” is a big one, especially with regard to money.
- Trust is huge. Trusting people and trusting the government both improve life satisfaction. “A change in social capital score of 10% of the distance between the highest and lowest score results in an increase in life satisfaction of 4.5%. An equivalent change would require a halving of inflation or increase in per capita income of about 25%.”
- Being alone is bad, sex is good and longer relationships beat numerous shorter ones. Marriage is good and being separated is even worse than being divorced or widowed. The happiness benefits of cohabitation are tied pretty tightly to how stable the union is, with the most stable being on par with marriage.
- Shockingly, “…single women may actually have higher well-being than married women.”
- Kids are a mixed bag: “…children put demands on day-to-day positive emotions (happiness) but nonetheless people consider them an important part of their overall well-being at a more cognitive level.” For single parents, divorced parents, the poor and people with sick children, kids are a negative. “In other words, if other circumstances are relatively negative, children seem to be an additional challenge to well-being.“
- Socializing with family and friends is very positive.