Economics - General

The key to happiness

Today we are going to figure out the key to happiness.  As our guide, we won’t use the Dalai Lama or self-help guru.  Instead, we will look at the research of economists Richard Easterlin and Onnicha Sawangfa (what did you expect…this is an economics blog after all).

Their study is unique as it not only measures overall happiness, but also respondents life satisfaction across four domains: finances, family life, work, and health.  Previous research has used these domains cross sectionally to examine how different European countries value each of these domains and how the domains are correlated with overall happiness.  The paper we will discuss to today is focused on the U.S., but unlike the previous research is also able to capture changes in happiness over time.

The authors use 1973-1994 data from the United States General Social Survey (GSS) conducted by the National Opinion Research Center. Using these data, the authors use an ordered logit regression to regress happiness—both overall and the four dimensions considered—on the individual’s age, birth cohort, education, gender, race, and survey year. The authors also examine the relationship between life satisfaction on the four domains (finances, family, work and health) on overall happiness.

Using this technique, the authors reach the following conclusions:

  • Rich people are happier. Happiness and socio-economic status are positively correlated (when measured cross sectionally across people)
  • Happiness levels have not changes much across time. Happiness levels have been fairly flat between 1973 and 1994.
  • Myth of the midlife crisis? The authors find that happiness rises slightly to midlife and declines slowly thereafter. Previous literature have found that happiness declines in middle age, however, the authors explain that this is often the case because those analyses control for other factors (e.g., income, work status, health) which are likely to achieve their highest levels at middle age. Thus, happiness is higher at middle age objectively, but perhaps lower than what we would expect given people’s income levels and marital status.
  • People are less happy than the used to be. In the words of the authors “For cohorts born between the late nineteenth century and the 1970s, the relation of happiness to cohort is negative and curvilinear, with the lowest happiness levels found in the cohorts born in the mid-1950s.

Another question is how the four individual components of life satisfaction are related to overall happiness. The authors find the following:

  • More educated people are more satisfied across all domains. Satisfaction with family life, finances, work and health are positively correlated with how much education on has.  Note that more education is much more likely to result in more satisfaction with finances, but the effect of more education on satisfaction with family life is more modest.
  • In middle-age, increased satisfaction with family and work outweigh less satisfaction with finances and health.   After middle age, however, overall happiness declines, as satisfaction with family, work and health all decline after middle age.

So after all that analysis, do we know the key to happiness?  Unsurprisingly, the answer is no. As the authors conclude that:

…no single domain is the key to happiness. Rather, happiness is the net outcome of satisfaction with all of the major life domains, and the domain patterns frequently differ from each other. Moreover, the importance of any given domain varies depending on the happiness relationship being studied — cross sectionally by education, over time, through the life cycle, or across generations.


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