Well-being over time in Britain and the USA

Abstract

This paper studies happiness in the United States and Great Britain. Reported levels of well-being have declined over the last quarter of a century in the US; life satisfaction has run approximately flat through time in Britain. These findings are consistent with the Easterlin hypothesis [Nations and Households in Economic Growth: Essays in Honour of Moses Abramowitz (1974) Academic Press; J. Econ. Behav. Org., 27 (1995) 35]. The happiness of American blacks, however, has risen. White women in the US have been the biggest losers since the 1970s. Well-being equations have a stable structure. Money buys happiness. People care also about relative income. Well-being is U-shaped in age. The paper estimates the dollar values of events like unemployment and divorce. They are large. A lasting marriage (compared to widowhood as a ‘natural’ experiment), for example, is estimated to be worth $100,000 a year.

Introduction

One thing that unites different kinds of social scientists is a concern to understand the forces that affect people’s well-being. What makes individuals happy? What leads to happy societies? These are difficult questions, but they seem important.

This paper studies the numbers that people report when asked questions about how happy they feel and how satisfied with life. It estimates what we believe to be some of the first micro-econometric happiness equations for US data. We examine their detailed structure and draw a range of conclusions. We also do a formal test of the Easterlin hypothesis that growth does not raise well-being.

There are, transparently, limitations to well-being statistics, and an inquiry of this sort suffers the disadvantage that controlled experiments are out of reach. But it seems unlikely that human happiness can be understood without, in part, listening to what human beings say. Sources of information exist that have for many years recorded individuals’ survey responses to questions about well-being. These responses have been studied intensively by psychologists,¹ examined a little by sociologists and political scientists,² and largely ignored by economists.³ Some economists may defend this neglect. They will emphasize the unreliability of subjective data—perhaps because they are unaware of the large literature by research psychologists that uses such numbers, or perhaps because they believe economists are better judges of human motivation than those researchers. Most economists, however, are probably unaware that data of this sort are available, and have not thought of whether empirical measures approximating the theoretical construct ‘utility’ might be useful in their discipline.