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Origins of happiness: Evidence and policy implications

Author(s): Andrew Clark, Sarah Fleche, Richard Layard, Nattavudh Powdthavee, George Ward

Understanding the key determinants of people’s life satisfaction will suggest policies for how best to reduce misery and promote wellbeing. This column discusses evidence from survey data on Australia, Britain, Germany, and the US which indicate that the things that matter most are people’s social relationships and their mental and physical health; and that the best predictor of an adult’s life satisfaction is their emotional health as a child. The authors call for a new focus for public policy: not ‘wealth creation’ but ‘wellbeing creation’.

 

From VoxEU:

In 1961, the OECD organised a conference on human capital that propelled education into the centre of policy-making worldwide (OECD 1962, Schultz 1961). This month, the OECD and the London School of Economics (LSE) are holding a conference on subjective wellbeing that they hope will usher in another revolution – where policymaking at last aims at what really matters: the happiness of the people.

As Thomas Jefferson once said, “The care of human life and happiness… is the only legitimate object of good government”. But to make policy requires numbers. Human capital took off once people realised its high rate of return. Wellbeing will only take off when policymakers have numbers that tell them how any change of policy will affect the measured wellbeing of the people, and at what cost.

Key determinants of wellbeing

The first step is a clear unified account of how wellbeing is currently determined. Our book, the first draft of which will be presented as the conference, aims to provide this, using large surveys from four major advanced countries (Clark et al, forthcoming).

One key issue is to adopt a single definition of wellbeing. The right definition, in our view, should be life satisfaction: “Overall how satisfied are you with your life, these days?”, measured on a scale of 0 to 10 (from “extremely dissatisfied” to “extremely satisfied”). That is a profoundly democratic concept because it allows people to evaluate their own wellbeing rather than have policymakers deciding what is more important for them and what is less so.

Moreover, policymakers like the concept – and so they should. Work in our group at LSE shows that in European elections since 1970 the life satisfaction of the people is the best predictor of whether the government gets re-elected – much more important than economic growth, unemployment or inflation (see Table 1).

Table 1. Factors explaining existing government’s vote share

Notes: Eurobarometer data on life satisfaction and standard election data for most European countries since the 1970s.
Source: Ward (2015).

So the task is to explain how all the different factors affect our life satisfaction, entering them all simultaneously in the same equation. There are of course immediate influences (our current situation) but also more distant ones going back to our childhood, schooling and family background.  Figure 1 gives a stylised version of how our life satisfaction as an adult is determined.

Figure 1. Determinants of adult life satisfaction

We can start with the immediate causes, as shown in Table 2. The first column measures how far different factors can explain the wide dispersion of life satisfaction in the population. As can be seen, the big factors are all non-economic (whether someone is partnered, and especially how healthy they are). The partial correlation coefficient on income is 0.09, which means that less than 1% of the variance of life satisfaction is explained by income inequality.

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