Is the quality of life in New Zealand over-rated?

Some New Zealanders might say that this is a question that only an Australian could ask, but it seems to me to be a good way to raise the issue that I want to discuss. (I hope that when I look back on this in a few days time it will still seem like a good idea!)

The ratings that I am writing about are the ladder of life ratings from the Gallup World Poll – the top step of the ladder represents the best possible life and the bottom step represents the worst possible life. But I could be referring to any of a range of surveys that ask people to place a numerical rating on how happy they are or on how satisfied they are with their lives.

I do not intend to argue that New Zealanders have a peculiar propensity to over-rate their satisfaction with their lives. The issue I want to discuss is what it means when surveys show that New Zealanders are just as satisfied with their lives as people in the U.S. even though average incomes in NZ are only about two-thirds of the U.S. level. I propose to compare the impact of income differences and other factors on the survey measures of subjective well-being in order to enable readers to consider whether the impacts attributable to income differences provide an accurate measure of its impact on the quality of lives.

It is now possible to make fairly accurate comparisons of the impact of income and other factors on average ratings of subjective well-being at a national level. Recent research by John Helliwell, Christopher Barrington-Leigh, Anthony Harris and Haifang Huang has shown that a high proportion of differences in average life evaluations between countries can be explained statistically by differences in a relatively small number of variables reflecting social, institutional and economic circumstances of life (See Table 3, ‘International Evidence on the Social Context of Well-being’, Working paper 14720, NBER, 2009). The most important variables are income (log of per capita GDP), friends (the proportion of survey participants who have relatives or friends they can count on for help when they are in trouble), freedom (the proportion who satisfied with their freedom to choose what they do with their lives) and corruption ( responses to questions relating to whether corruption is widespread throughout government and business).

In the Figure below I have used these research results to show reasons why average survey measures of subjective well-being in several countries differ from the U.S. ratings.



The net differences from U.S. ratings are shown next to the label for each country. If you focus on New Zealand you can see that the perception of NZers that their country is relatively free of corruption outweighs the negative impact on survey responses of the fact that average incomes in NZ are substantially lower than the U.S. average.

If you consider that corruption is as big a problem in the U.S as, for example, in Greece, you might think that this provides an accurate depiction of the relative impacts of income differences and corruption on the quality of life in New Zealand and the U.S. However, when I look at the expert ratings of corruption levels in Transparency International’s corruption index, the U.S. doesn’t look too bad. The rating of the U.S. in this index (7.3) is lower than Denmark and NZ (both on 9.3) and Australia (8.7) but well above Italy (4.8) and Greece (4.7). (It is also interesting that Greeks do not perceive that their corruption problem to be any worse than that in he U.S. and that NZers do not perceive themselves to be as free of corruption as the Danes).

The point is that the influence of various factors on the survey ratings of quality of life depends on the way they are perceived. The ratings are more like emotional responses than dispassionate evaluations. It seems to me that self-reports of how people feel about their lives tell us about their emotional states - which are an important component of well-being but do not tell the whole story.

One way to test survey ratings is to ask ourselves to what extent we would be prepared to rely on them in making decisions affecting our own well-being. It seems to me that income may be more important to people when they make decisions affecting their well-being than when they answer questionnaires about the quality of their lives. If you were in Europe contemplating a choice between moving your family to either the U.S. or NZ, would you consider the importance of differences in average income levels to be adequately reflected in survey ratings of the quality of life?

Postscript:
Survey ratings can also be tested by comparing them with actual migration patterns where free migration is allowed - as between New Zealand and Australia. Migration statistics for New Zealand show that in recent years permanent and long-term departures to Australia have exceeded arrivals from Australia by a factor of more than 3:1.

Does contagion explain the clustering of happiness among friends?

A few months ago a couple of researchers - James Fowler and Nicholas Christakis -published some findings that were reported around the world in the popular media under the headline: “Happiness is contagious”. At the same time another article cast doubt on these findings by claiming that similar social network effects could be detected for acne, height and headaches.

Having thought about it, the headline “Happiness is contagious” seems to me to have about the same news content as “Influenza is contagious”. We don’t need research to tell us that we obtain pleasure from associating with happy people. But once the headline has grabbed our attention we may feel a desire to read on to find out why the item was considered newsworthy.

Why is there controversy over the research finding that happiness is contagious? The study (‘Dynamic spread of happiness in a large social network’, BMJ, 338, Jan ’09) actually claims to be providing evidence for something more substantial than the emotional contagion in which the mood of one person fleetingly influences the mood of others. The results, based on surveys of a large social network (the Framingham heart study), suggests that if you have a friend who lives within a mile who becomes happier, this increases the probability that you will also become happier. Similar effects were also noted with regard to spouses, siblings and next door neighbours.

The authors claim that their results show that “changes in individual happiness can ripple through social networks and generate large scale structure in the network, giving rise to clusters of happy and unhappy individuals” (p338).

However, in his comment on the Freakonomics blog, Justin Wolfers suggested the most likely reason a person might become happier when a friend becomes happier isn’t because happiness is contagious, but because friends tend to share similar interests and to be influenced by similar things.

Justin Wolfers is right a lot of the time and he might be right about this. It seems to me, though, that the observed tendency for the happiness of friends to increase at the same time could be attributable to more complex processes than either direct emotional contagion or the influence of some factor that is independent of their own actions – such as the football team they support in the national league winning more frequently. It is possible, for example, that their increase in happiness could be an outcome of their involvement in some voluntary community activity.

Recent research on empathy and collective action may be relevant to the clustering of happiness of people involved in social networks. An important characteristic of voluntary collective action is the need to place trust in volunteers who promise to participate for motives other than personal reward for effort. Research by Paul Zak, using the trust game (explained in detail here), indicates that a sense of being trusted results in release of oxytocin (OT) and that increased OT results in more trustworthy behavior. In a recent paper (“Empathy and collective action”) Paul Zak and Jorge Barraza note that release of OT potentiates the release of dopamine (making prosocial behavior more rewarding) and causes synaptic serotonin to rise (reducing anxiety and helping people to sustain altruistic collective action over an extended period of time).

Zak and Barraza suggest that this brain circuit promoting altruistic collective action is stimulated when volunteers do things like spending time together to build empathy, exchanging gifts, sharing meals and sharing adventures. They also cite evidence that people who volunteer to help others report higher levels of happiness.

What determines whether we have successful lives?

Your chances of success in life depend on your intelligence, your family background and your temperament, don’t they? Yes, to some extent. But over the last few days I have read about research findings which suggest that beyond a threshold IQ doesn’t make much difference, the important aspects of family background are only superficially related to wealth and the predictive importance of childhood temperament tends to diminish over time.

In “Outliers” Malcolm Gladwell tells the story of research conducted by Lewis Terman who identified 1,470 Californian children with very high IQs (over 130) in the 1920s. Terman believed initially that members of this group were destined to be among the future elite of the U.S. When they grew up, however, the majority had careers that could only be considered ordinary. It turns out that the relationship between IQ and success works only up to a point. Additional points of IQ beyond about 120 (remember the population average equals 100) don’t seem to have much impact on success.

Further analysis divided these genius subjects into three groups and looked for reasons for differences between the achievements of the most successful and least successful groups. The main difference seemed to be that the most successful performers came from the middle and upper class – the most successful group contained almost none of the children from the lowest socioeconomic class. Later in his book Gladwell points to evidence which suggests that the link to socioeconomic class has little to do with things that are directly associated with wealth or even with the quality of schooling. Research by Karl Alexander shows, for example, that the main difference between reading scores between elementary school children emerge during the summer vacation period while they are not at school. The wealthier parents tend to cultivate the interests of their children in reading etc. even during the summer vacation period. The difference seems to have more to do with culture than with income.

Gladwell’s main point is that it is impossible for superstars in any field to look down from their lofty perches and say with truthfulness, “I did this all by myself”. Gladwell argues: “They are the products of history and community, of opportunity and legacy. Their success is not exceptional or mysterious. ... The outlier, in the end, is not an outlier at all” (p 285).

Something else I have read recently that relates to the determinants of successful lives is Joshua Wolf Shenk’s article “What Makes Us Happy” (The Atlantic Online, June 2009). Shenk’s article discusses George Vaillant’s research, based on the Harvard Study of Adult Development. This study of healthy, well-adjusted Harvard students began in 1937 and followed its subjects for more than 70 years. As with Terman’s study, the leading researcher originally involved in the Harvard study thought he would be studying a group of people who would have successful lives. Many did in fact achieve dramatic success, but by age 50 almost a third of the subjects had at one time or another met Vaillant’s criteria for mental illness.

One of Vaillant’s findings is that the predictive importance of childhood temperament diminishes over time: shy, anxious kids tend to do poorly in young adulthood, but by age 70 they are just as likely as the outgoing kids to be happy and well. One of the factors that he found to predict healthy aging is “employing mature adaptations” to life’s troubles. Mature adaptations include altruism, humour, anticipation (planning for future discomfort) and delaying attention to an impulse or conflict. The second most important factor that he found to predict healthy aging was the quality of relationships, including with siblings, friends and mentors.

Will Wilkinson comments on his blog: “What I liked so much about this essay, and about Vaillant, is the recognition that the complexity of human psychology, the complexity of coping and adapting to the challenges life throws up, makes relationships or “social aptitude” no simple thing.” I agree.

This brings me back to Gladwell’s book. One of the things from “Outliers” that will stick in my mind is Gladwell’s account of the Roseto mystery. In brief, in the 1950s the inhabitants of Roseto (Pennsylvania), whose ancestors came from a town of the same name in Italy, had a very low incidence of heart disease and their death rate from all causes was 30 to 35 percent lower than expected. Researchers ruled out all the obvious causes such as diet, exercise, genes and location. Their explanation was that Rosetans had created a powerful, protective social structure capable of insulating them from the pressures of the modern world. In Gladwell’s words, it was about “the mysterious and magical benefits of people stopping to talk to one another on the street and of having three generations under one roof” (p 10).

This is very interesting and very complex. I find myself reacting in three different ways. First, in statistical terms “outliers” are chance events; before getting too excited about sociological implications we should establish whether there is evidence that other communities which share similar characteristics to Roseto in the 1950s have similar health outcomes. Second, leaving aside the “mysterious and magical” factors, the most useful place to look for an explanation would be in the links between happiness (emotional health) and physical health. Third, perhaps it is time I had a closer look at the research findings behind those headlines a few months ago which claimed that scientists now have evidence that happiness is contagious.

Where will the productivity growth come from?

In the Australian federal budget delivered earlier this week, forward estimates of revenue and spending were based on Treasury projections of economic growth rates in excess of 4 percent coming out of the current recession. This projection has attracted attention because the projected growth rates are higher than those experienced in Australia during recent boom years.

It seems reasonable to me to suppose that growth rates might be somewhat above trend when an economy comes out of a recession. An economy that is not limited by capacity constraints obviously has potential to grow more rapidly than one approaching full employment.

However, the Treasury’s optimism about future economic growth prospects in Australia seems to me to sit oddly with their more guarded views about prospects for the world economy. In discussing the outlook for the world economy Treasury states: “Even when growth returns, the recession will leave a legacy of significant policy challenges across the world. The extraordinary measures being taken to combat the current crisis will have to be unwound carefully.” Governments will not find it easy to unwind these extraordinary measures. This means that commodity exporting countries like Australia should expect the world economy to give them a fairly bumpy ride in the years ahead.

Why is Treasury so optimistic about Australia’s growth prospects? The Treasury forecasters base their optimism on the growth rates experienced in Australia following recessions in the 1980s and 1990s. Their projected growth rate is about the same as that following the 1990s recession.

Even if it is reasonable to expect world economic growth in the 2010s to be as robust as in the 1990s, is it reasonable to expect that Australia’s productivity growth in the 2010s to be as high as in the 1990s? The 1990s was a period in which multifactor productivity growth in Australia was more than double the rate experienced in recent years. High rates of productivity growth in the 1990s stemmed to a large extent from productivity improvements in the services sector, which were associated with micro-economic reforms (neo-liberalism in the terminology favoured by Australia’s current Prime Minister).

Where will comparable productivity improvements come from during the 2010s? Perhaps the government has plans for extensive microeconomic reforms that it has yet to announce. But I wouldn’t bet on it!