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Transcript of PCLONDON\FIRMWIDE\Sugrue, Eileen\FW-7392\Lord Layard presentation 02.pptx 90 81 82 123 154 99 231...
How to make policy when happiness is
the goal14th Journées Louis-André Gérard-Varet,
Aix-en-Provence, 15 June 2015Richard Layard
2
Assumption1. Happiness is the overarching good“The care of human life and happiness… is the only legitimate object of good government”.
Thomas Jefferson 2. For a given , we prefer a lower SD(H) (social justice)
1+2. Social welfare = H cardinal (Concave)
3
Agenda
Measurement Causes Policy evaluation Some policy implications
Happiness:
4
1. MeasurementTypical Question: Overall, how satisfied are you with your life nowadays?(where 0 means ‘not at all’, and 10 means ‘completely’)
5
1. MeasurementEvidence of validity of answers1. Correlate with objective measurements of
brain function2. Tally with friends’ assessments3. Predict (e.g. life expectancy, productivity)4. Can be explained (by e.g. income,
unemployment, family situation, health)H cardinal
6
1950 1960 1970 1980 1990 20005.5
6.0
6.5
7.0
7.5
Reported happiness over time in the United States
Mea
n H
appi
ness
in S
urve
y (0
-10
Scal
e)
AIPO (1950-1970)
NORC (1963-1976)
GSS (1972-2006)
Year
7
1970 1980 1990 2000 20105.5
6.0
6.5
7.0
7.5
Reported life-satisfaction in West Germany
Mea
n H
appi
ness
in S
urve
y (0
-10
Scal
e)
Source: Eurobarometer and German Socio-Economic Panel. Mean life satisfaction reported on a 0-10 scale
Eurobarometer 1973-2007
GSOEP 1985-2006
Year
8
Reported life-satisfaction in France
9
2. Causes: IncomeAcross individuals within countries (CS + panel)
Income has a positive effect and explains under 2% out of the 20% of explained cross-sectional variance.Comparators’ income has a negative (and often equally large) effect, especially in richer countries. Confirmed by neuroscience.So relative-income effect helps explain flat time-series.
10
Diminishing marginal utility of income
Best functional form
H = α log Y etc.
Argues for greater equality.
Source: Layard, R., Nickell, S.J. and Mayraz, G. (2008). 'The marginal utility of income', Journal of Public Economics, Special Issue: Happiness and Public Economics, vol. 92(8-9), pp. 1846-1857.
Y
H
11
2. Causes: Income cont.Across countriesCross-section. Poor countries are less happy but for many reasons besides income.Time series. Uncertain. Wolfers v. Easterlin.
World happiness up .15 of a within-country SD over last 40 years.
0 5000 10000 15000 20000 25000 30000 3500030
35
40
45
5055
60
65
70
7580
85
90
95100
Income and HappinessComparing Countries
RussiaUkraineZimbabweMoldova
GeorgiaRomania
BulgariaBelarusAlbaniaLatvia
PakistanMacedoniaTanzania
BangladeshAzerbaijan Turkey
LithuaniaEstonia
SlovakiaPoland
IranIndiaJordanUganda
Morocco Peru
EgyptAlgeria
ChinaPhilippines
VietnamNigeria
Indonesia
South AfricaDominican Republic
CroatiaBrazil
VenezuelaEl Salvador
Colombia Mexico
Chile
Uruguay
HungaryGreece South KoreaIsrael
SpainPortugal
New Zealand
SloveniaArgentina
Czech RepublicItaly Japan
GermanyFrance
BelgiumNorway USA
SwitzerlandNetherlandsIreland
Canada
Austria
DenmarkFinlandAustralia
UKSingapore
Sweden
Ave
rage
of p
erce
nt “
happ
y”
and
perc
ent “
satis
fied”
Source: Layard (2011), Happiness: Lessons from a New Science (2nd Ed)
Income per head ($ per year)
Differences Between Countries
Partial correlation coefficients
Life-satisfaction
Positive feelings
yesterdayLog GDP per head 0.28 –Healthy life expectancy 0.25 0.24Social support 0.29 0.43Freedom 0.15 0.49Absence of corruption 0.18 –
14
2. Causes: Income cont.Conclusion(1) Long-run growth valuable but no more
than many other things.N.B. Higher growth does not provide
finance for more doctors, nurses, teachers and social workers.
(2) Short-run economic fluctuations are very bad and should be avoided even it reduces LR growth.
15
2. Other CausesExternal
WorkFamily lifeCommunity engagement
InternalPhysical healthMental health
Individual life-satisfaction at 34: Current influences
Physical health
(recorded 8 years earlier)
Emotional health
(recorded 8 years earlier)
LIFE-SATISFACTION AT 34
IncomeNot
unem-ployed
Education level
Married/ Cohabiting
Crimi-nality
.06 .09 .04 .12 -.07 .07 .20
Source: Layard, R., Clark, A.E., Cornaglia, F., Powdthavee, N. and Vernoit, J. (2014). 'What predicts a successful life? A life-course model of well-being', The Economic Journal, vol. 124(F720-738).
ECONOMIC SOCIAL PERSONAL
(partial correlation coefficients)
17
Physical health problems (bottom 10%)
Ever diagnosed with depression/anxiety
Unemployed
Poor (bottom 10%)
0 10 20 30 40 50 60
22
48
7
20
Percentage of those in misery having the stated characteristicsAustralia
Physical health problems (bottom 10%)
Ever diagnosed with depression/anxiety
Unemployed
Poor (bottom 10%)
0 10 20 30 40 50 60 70
14
61
13
27
United States
Flèche and Layard (2015) “Does more of those in misery suffer from poverty, unemployment or mental illness?”, CEP Discussion Paper
Individual life-satisfaction at 34: Influences from childhood
Emotional develop-
ment of child
LIFE-SATISFACTION
Family socio-economic features
Family psychological
features
Cognitive development
of child
Behaviour of child
Source: Layard, R., Clark, A.E., Cornaglia, F., Powdthavee, N. and Vernoit, J. (2014). 'What predicts a successful life? A life-course model of well-being', The Economic Journal, vol. 124(F720-738).
.06 .03 .05 .09 .17
(partial correlation coefficients)
20
Background+
Childhood
Adult characteristic
s
Life-satisfaction
A model of the life-course
21
3. Policy evaluationAssume public expenditure is given. Therefore cost-effective- ness analysis, with a cut-off.
Undertake project if
> λ
3. Policy evaluationIssues1. Hopefully an RCT gives SR effect, which
combined with the model gives .
2. Calculating Net Cost also requires a life-course model.
3. Weighting is a political issue.
4. Life-course model is priority for social science.
This could ultimately be main approach for
HealthSocial CareEmploymentLaw and orderEnvironmentRedistribution
where choice provides little evidence.
But revealed preference approach provides much better evidence on
TransportBusiness policyEducation
Health evaluationQuality-adjusted life years require ratio scale for H
27
4. Policy implications: new priority for mental health and social engagement
1.Mental illness should get parity of treatment in healthcare
2.Preventive mental health vitalParentingCouples therapySchools should promote wellbeingYouth services
3. Employment policy crucialApprenticeship guarantee + youth job guarantee.
NOT EXPENSIVE (ESPECIALLY IN NET TERMS).
28
Economic cost of mental illness
40% of all disability
40% of all absenteeism
40% of all incapacity benefits
The main illness of working age.
Mental illness is
29
Degree of disability in each age group (Numbers per 1,000)
Source: World Health Organisation (WHO). (2008). The global burden of disease: 2004 update. Geneva: World Health Organisation. Western Europe
0-14 15-29 30-44 45-59 60+0
10
20
30
40
50
60
70
Mental
Physical
30
Treatable: e.g. Cognitive Behavioural Therapy (CBT)
Cost €1,200 for 10 sessionsRecovery rates within 4 months Anxiety 50% mostly
permanent (better than pills)
Depression 50% (with lower risk of relapse than
pills)
31
Implication: no net cost to government
Gross cost < Savings on disability benefits + lost taxes
Gross cost < Savings on excess physical healthcare if person has given physical condition + mental illness
Savings due to psychological therapy91 U.S. trials
Cut annual physical healthcare costs by 20% (equivalent to €1,400).
In 28 studies, data on cost of therapy showed savings exceeded cost in 26/28 cases.
Chiles, J.A., et al. (1999), "The impact of psychological interventions on medical cost offset: a meta-analytic review", Clinical Psychology: Science and Practice, 6(2): 204-220.
33
Improving Access to Psychological Therapy
2008 No evidence-based treatments available in National Health Service
2008-15 6,000 therapists trained
2015 400,000 patients treated
35
The case for more health expenditure
• In Britain we only authorise treatments which cost less than £40,000 per Quality-Adjusted Life Year (QALY).
• That cost reduces total life-satisfaction by 0.06 SDs of one year’s life-satisfaction.
• One extra QALY increases life-satisfaction by 5 SDs of one year’s life-satisfaction.
• We should spend more.
36
Will politicians listen?Life-Satisfaction (LS) affects voting Incumbent vote share
= 0.64 LS + 0.36 Economic Growth
- 0.06 Unemployment + 0.15 Inflation.
Source: Eurobarometer. All variables standardised. Controls include previous vote-share. See Ward, G (2015) “Is happiness a predictor of election results?”, CEP Discussion Paper No. 1343.
37
Individuals
www.actionforhappiness.org