Over at Club Troppo, James Farrell summarises the main elements of the economic research agenda on happiness, and some of the standard objections to it. For those who came in late, and probably didn’t imagine economists ever thought about happiness, the crucial finding is that “Cross country data shows pretty consistently that on average happiness increases with income, but at a certain point diminishing returns set in. In the developed world, people are not on average happier than they were in the 1960s.”
The data that supports this consists of surveys that ask people to rate their happiness on a scale, typically from 1 to 10. Within any given society, happiness tends to rise with all the obvious variables: income, health, family relationships and so on. But between societies, or in Western societies like Australia over time, there’s not much difference even though both income and health (life expectancy, for example) have improved pretty steadily for a long time.
I’ve long argued that these questions can’t really tell us anything, and an example given by Don Arthur gives me the chance to put it better than I’ve done before, I hope.
Suppose you wanted to establish whether children’s height increased with age, but you couldn’t measure height directly.
One way to respond to this problem would be to interview groups of children in different classes at school, and asked them the question Don suggests “On a scale of 1 to 10, how tall are you?”. My guess is that the data would look pretty much like reported data on the relationship between happiness and income.
That is, within the groups, you’d find that kids who were old relative to their classmates tended to be report higher numbers than those who were young relative to their classmates (for the obvious reason that, on average, the older ones would in fact be taller than their classmates).
But, for all groups, I suspect you’d find that the median response was something like 7. Even though average age is higher for higher classes, average reported height would not change (or not change much).
So you’d reach the conclusion that height was a subjective construct depending on relative, rather than absolute, age. If you wanted, you could establish some sort of metaphorical link between being old relative to your classmates and being “looked up to”.
But in reality, height does increase with (absolute) age and the problem is with the scaling of the question. A question of this kind can only give relative answers.