Brad DeLong's Semi-Daily Journal (2004)

Yes, of course. It's the Republican's fault. I'm sure once Kerry becomes President the whole thesis will be moot.

"Yes, of course. It's the Republican's fault."

Yes!

"If you want to live like a Republican, vote Democratic." - Harry Truman

This reminds me of Harrington's "Accidental Century", a book which I also didn't read. The basic idea is, if people are objectively so much better off, why don't they (subjectively) feel like they're better off.

A Finnish statesman (forgot his name) once said something like "When people's lives improve, they don't complain less. They just complain about smaller things". And likewise, prosperous, secure people take what they've got for granted and hope for, or expect, more. This is the "relative" explanation.

It's also possible that a lot of people in the olden days **weren't** very happy but knew that no one wanted to hear their complaints, and that if they acted up they'd be punished. And then, people hoping for reward in an afterlife can be delusively happy. (Not really a paradox: Imagine someone who's happy for ten years because he thinks he's saving a lot of money, when in reality the bank was stealing it. His ten years of happiness were predicated on expectations of a later greater happiness, the classic deferred gratification. The afterlife puts the payoff into the imaginary world from which the nonexistence of the reward cannot be communicated.) This I suppose is the "opiate" explanation.

And both secular society and economics bracket out a lot of "subjective" concerns which are "purely individual", of no concern to the law or to the economist and probably unreal -- individuals are welcome to think these concerns are real, but cannot expect or demand any recognition of their reality from anyone else, especially not any large public institution.

So if the "subjective, purely individual" concerns bracketed out by the secular liberal world really are not unreal (the kinds of concerns spoken of by communitarians as well as social critics of a religious or cultural background), then the problem is the secular liberal model itself, which perhaps is in some way incomplete or imperfect as an actual model of human reality.

Yes, Zizka, "happiness" is at best a fleeting condition, -(we were promised only its pursuit)-, but if taken in the older sense of "eudaimonia", "well-spiritedness", well-being, or human flourishing, perhaps it lies much more in the need for human relatedness and a sense of community, rather than in the accumulation of material goods, especially if their pursuit is isolating or predicated on invidious distinctions. And perhaps in older generations, when life was so much harder and much more prey to the heartache and all the thousand natural shocks that flesh is heir to, and expectations were less and certainly quite different, the sense of solidarity deriving from participation in a common condition, for all the suffering and unhappiness factored into it, was itself a partial compensatory mechanism.

Interesting post, good points.

"It seems to me that Richard Easterlin's relative income hypothesis is surely worth a look."

Shouldn't it encourage try to develop more economic models counting for 'keeping-up-with-the-Joneses-utility'?

I am going to be 45 in March and I do find myself wondering how my parents managed rack up the dough they now have to enjoy the kind of retirement they have.

But I also remember my first job. Right out of high school I was doing something I really loved and gettng paid $147 a week to do it. I had an expensive apartment, a book and record buying habit, and I ate out a lot. I had more money than I knew what to do with. (I actually thought about buying a boat.)

Today I make more money (about a third more in constant dollars) in my main job and I do a lot of side work. The only expense that has changed is that I now have a car, but I go to the library and my dwelling costs a bit less. So why do I spend all my time worrying about money?

Oh, right, to live in this country you have to have two incomes. Thanks Ron!

I haven't read Easterbrook's book, so maybe he touches on this, but what about the fact that we are surrounded, bombarded, by advertising designed to make us dissatisfied with some aspect or another of our lives? It seems to become more obtrusive and harder to avoid every year -- thank the gods that no one has invented a way to project thoughts directly into the brain! -- and that constant brainwashing has to have an effect. (Of course if we all became impervious to this overnight the economy would collapse.)

Why so much resistence by economists to immigration as depressant to wages, esp. by "blue collar workers"? More supply, lower price.

Prices are set at the margin, and the high rate of immigration as % population -- both legal and "undocumented" -- seems large enough to have a significant effect.

Of course, our de facto "open door" policy is bi-partisian {albeit unpopular} -- so we cannot blame it on our political enemies.

On a long term basis, the mobility of almost all factors of production might tend to equalize national wage rates. That change, perhaps in progress today, might make today's US capital-wage inequalities seem trivial.

By all means, let's continue the partisian bickering that fills so much of this site. Addressing our serious long-term problems will be more difficult and less fun.

The existence of the problem described in the note seems real to me. Whoever heard of chronic fatigue syndrome until recently. Causes are more problematic. Those posed seem to have a psychological basis.

I have been wondering if just maybe the equilibrium of our bodies is being upset by the enormous amount of pollution, the weird chemicals in our food, the microwaves that surround us?

I put this forward diffidently, because there is no way to know, and I hate to sound weird. With that in mind, here is a small point of possible justification. Our bodies are driven by a mix of chhemicals, neurotransmitters, adrenaline, steroids, other things. These are present in relatively small numbers, compared to Avogadro's number. It doesn't seem like it would take much interference with them to throw us a bit out of whack. I just wonder.

There's something in the Easterlin hypothesis, but the real answer is that happiness surveys (subjective well-being) are actually a really bad measure of the happiness attached to different states of world, since we surely must believe that happiness is relative to our own expectations (and not only relative to others' incomes).

In steady-state, it is simply impossible to meaningfully measure relative happiness since it is a mean-reverting variable.

A much better variable (although possibly harder to measure) would be to ask people to rank different states of the world in a Rawlsian fashion (i.e. would you prefer to be to be born a random US citizen in 1953 or 2003?). The answer to the latter would surely reassure us that we would prefer 2003, from behind the veil naturally.

This also deals with Mats' point. Standard economic models are fine, to the extent that they deal with expected utility - fortunately our genetic make-up ('the pursuit of happiness') makes us conveniently forget the past. If that sounds odd, just remember how pleased you were when you got a A in maths aged 18 - surely that feeling has waned by now, leaving only a slight glow?

" A lot of people who are 45 now were 15 in 1970, and are now not living much better than their parents lived."

I find this to be at least as bizarre a claim as that Harry Dexter White was responsible for winning the Cold War.

Some of the things people have today that their parents did not have in the 1970s would be microwave ovens, color television, several gazillion channels to watch on the TVs, DVD and CD players, gourmet food sold at Safeway, automobiles that go 100,000 miles without needing spark plugs changed, 300 HP engines that get over 20 miles per gallon, two car garages in which to store them, closets in their homes the size of 1970s bedrooms, multiple bathroom houses, hot tubs. And I am forgetting much else.

Btw, I live 5 minutes away from a community built around a private airstrip.

"The real answer is that happiness surveys (subjective well-being) are actually a really bad measure of the happiness".

Sort of what I was talking about. I agree that various sorts of polling and questions like "Rate your happiness on a scale of 1 to 5" are a bad measure, but that's because polling is a fairly linited tool.

However, "subjective well-being" is what happiness **is**. That's pretty much the definition of happiness. And it's also something that various sorts of objective thinkers simply want to write out of existence as unreal.

I think that a lot of people WOULD say they preferred 1953. Though, since this is just a Q&A poll, for that reason I don't think that would be a very meaningful answer either.

Happiness is when things go better than expected. When things go as well as expected that results first in satisfaction, then in boredom. Things going worse than expected result in unhappiness, even if in objective terms the standard of living is higher than previously. BUT: expectations are continuously revised on the basis of past experience. Corollary one: permanent happiness is impossible because in the long run realized progress cannot continuously outrun the ever-faster upward revised expectations. Corollary two: having a hard time in one's youth and a long memory is conducive to happiness

If, as many studies seem to suggest, income inequality tends to produce adverse health effects, then America's increasing inequality could easily offset the effects of material progress.

It would be interesting to compare happiness in the U.S. with that in other countries of comparable wealth but greater equality.

My $0.02 (in constant 1953 dollars, of course):

I think that we're measuring two very different things here. According to surveys happiness is nearly orthogonal to income at high levels of the latter. They're basically two different things. u(c) for you macro guys is not a measure of happiness; it's a measure of preferences over different states of the world over time. Let's not get the two confused.

It's nice that I can buy real tomatoes and properly ripe bananas at the supermarket these days. They add to my pleasure. They don't add much to my happiness. Pleasure and happiness are different concepts, so why do people act surprised when they find that some concave (and of course nicely differentiable) function of consumption isn't the secret to life?

Oh, and thanks for fixing the timing-out problem. I'd drink to that but I'm out of beer.

"A lot of people who are 45 now were 15 in 1970"

I find that hard to believe :)

How about Robert Frank's hypothesis, which is... well seems to a whole mix-and-max bunch-o-stuff from what I remember if his first books. But one of the main themes is that relative consumpton and resultubg utility from rekatuve status produces non-optimal market outcomes.

Houses, cars, etc. that are too big, etc.

And then I think he throws in some bad effects market segmentation when producers try to discriminate between merely big, very big, big and biggest of the big to maximize profits.

So that would be an unholy mix for the less well off: decline/stagnation in real wages for underskilled, stretching-thin of social welfare safety net, obscure and mischievous policies by New Deal haters... And to top it off people compensate by overemphasizing relative consumption and status, buying stuff that is bigger and more expensive than needed, and falling in the hands of ruthless market segmentation on the production side. And an interesting segmentation on the end of smaller affordable housing -not much at all.

So, mix in some bad luck, and I could see how some one could be unhappy.

I have many doubts about Frank's hypothesis (assuming I remember it correctly), but am wondering what others think.

I know a lot of people who have a good income with all the fun consumption that that entails, at the cost of spending long hours at a stressful, unrewarding job being abused by people you hates, etc. There's a particular kind of unhappiness that comes from that which probably does not come from working in a rice paddy.

Rice-paddy workers have this tendency to starve, etc., so you can't say that working in the rice paddy is better. But an individual peasant, when things are going well for him (no war, no famine, good crops, good health) might be happier than the guy who hates his job and co-workers.

Most farmers really do love their work in a way that I doubt that insurance adjusters or real estate lawyers ever do. Even mechanized farmers in the US.

I know of two people in my own family whose hard times in early life made them permanently anxious and resentful. It's not a simple equation.

As Thomas said, happiness is when things go better than expected, so it's intrinsically stable. You can't make people happier generation after generation because you can't outrun growing expectations forever. Besides an improvement in material conditions of living doesn't always fullfills expectations that may lie elsewhere. Sometimes things improve, only not the things we wanted to improve the most. I doubt for example that the ultimate desires of mankind in the fifties were VCRs, DVDs, bigger houses, bigger cars, etc. Overcoming racism, poverty, world peace, etc. were probably higher on the list. We have achieved so much but we haven't achieved what we really wanted.

Patrick R. Sullivan writes:
>
> Some of the things people have today that their parents
> did not have in the 1970s would be microwave ovens,
> color television, several gazillion channels to watch on
> the TVs, DVD and CD players, gourmet food sold at
> Safeway, automobiles that go 100,000 miles without
> needing spark plugs changed, 300 HP engines that get
> over 20 miles per gallon, two car garages in which to
> store them, closets in their homes the size of 1970s
> bedrooms, multiple bathroom houses, hot tubs. And I
> am forgetting much else.

One thing you have forgotten is that most people's real incomes did *not* increase fast enough to have many of the things you mention, at least in the same place they grew up. So I believe I earn just about exactly what my dad did (in constant dollars) in 1970, but I cannot afford to buy the house we had today. I do agree with you that some technological improvements have been so good (and you missed *all the really good ones, by the way) that to some extent life now is just frankly different.

So it's interesting that to some extent that happiness is to a large extent felt in comparison to one's expectations, and to the ease with which you can imagine having done better or worse. I had no expectation whatsoever in 1970 that I would one day enjoy DVDs or email. I did have an inkling that I could afford to live in the town where I was raised. I would in fact trade DVDs, the microwave oven, and the 300 HP car I don't have (and couldn't justify buying) for the house I grew up in.

Material well being is all to the good. But why do we expect things to bring us happiness? The quality of our relationships and the authenticity of our self identity must be more (at least as)important??? And so many folks I know feel so exposed, vulnerable, uncertain about what lies ahead. There is little to shelter us from insecurity in fact and feeling. And of course the jobs most of us have bring little joy. There are so many reasons why relatively affluent people feel unhappy, lost, insecure, anxious, etc.

Money can't buy happiness; but it sure helps.

Masaccio, I don't know about mental status, but certainly a VA study/survey has shown a strong correlation between exposure to Agent Orange and diabetes (also spina bifida in children of vets exposed to Agent Orange). I'd agree with you in saying that we don't really know, what's too bad is our current administration is unlikely to feel it's worthwhile to support such research.
Like some other responders, I think the correlation of more gadgetry to happiness is over-estimated--possibly because of advertising? And isn't "happiness" necessarily a subjective determination? What I hear people talk about is loneliness (even though they may feel too busy too), too much time spent commuting or driving hither and yon for whatever reason (shopping, taking kids places), not enough time to spend with family and/or friends, feeling undervalued (and underpaid) by employers (not unreasonable considering that CEOs are paid--on the average--about 500 times that of the average employee) and I think also upset by the heightened levels of noise and decrease in nearby open space. There may be alot more gadgets to own and use in one's home, but it's alot more difficult to find quiet, relatively natural places to walk or bicycle, harder to find a place to learn to ride horses. But of course things are much better if what you like is malls and strip development.

In Southern California, the air is better than it was forty years ago, but the open space is gone, the orange groves a distant memory, the traffic a constant stressor.

The open space & orange groves were sacrificed to give each family its own house and yard, granting each homeowner some measure of peace and privacy while daily taxing them with contentious commuting. The compensations - cable, big-box stores, Playstations, fast food - aren't intended to be satisfying; they're intended to feed a restless hunger for more.

We've traded rural idiocy for boundless consumerism. The striking thing, at least in America, isn't that we're not happy. It's that, with all this, we're damned angry.

>>Some of the things people have today that their parents did not have in the 1970s would be microwave ovens, color television, several gazillion channels to watch on the TVs, DVD and CD players, gourmet food sold at Safeway, automobiles that go 100,000 miles without needing spark plugs changed, 300 HP engines that get over 20 miles per gallon, two car garages in which to store them, closets in their homes the size of 1970s bedrooms, multiple bathroom houses, hot tubs. And I am forgetting much else.<<

Not exactly penicillin ...

Also note that house sizes haven't changed much in cities.

"The case that we are living a lot better than our recent ancestors in terms of health, longevity, and the goods and services we consume is a strong one."

I stopped reading at this line.

The cause of our current anxiety about the future is simple. Our nations are dying, some of our western industrial nations may not survive the next 50 years. Our nations are dying because of something we did to ourselves, something have to do with larger government I believe.

>Also note that house sizes haven't changed much
>in cities

Probably because they are the same houses. New construction occurs where there weren't houses before, aka the suburbs. Besides, households are smaller - fewer kids, fewer marrieds, so the rooms per person calculation still grows.

>Not exactly penicillin ...

Got cancer? 1970 - you die. 2004 - you have a good chance of a cure.
Got heart problems? 1970 - heart attack, you die. 2004 - angioplasty, bypass surgery, drug treatments, you have a chance.
Got an infectious disease? 1970 - penicillin and sulfa - nothing good for viruses. 2004 - a whole range of new, more effective agents, including anti-virals.
Got vision problems, ear problems? 1970 - glasses and hearing aids(if the problems aren't bad). 2004 - Lasix and cochlear implants.
Kid born 3 months early? 1970 - funeral. 2004 - he lives.

Face it, our advances in medicine since 1970 are almost as great as our advances everywhere else. Probably greater - that's part of why it is so expensive.

Yes, housing is more expensive - we are packing twice as many people into the same land area. Yes, if you have the same real income your father did 30 years ago, you can't afford the same house. You are also considerably further down the economic food chain than your father was. You've also traded that house for cable TV, and all the other stuff mentioned in previous posts.

Any measurement system which says "real wages haven't changed in 30 years" is wrong. The choice set from a given wage is far larger than it used to be.

Why aren't people happier? Happiness is a psychological condition. People EXPECT more, now, so they are unhappy in conditions which would have made most of their ancestors goggle-eyed in amazement. Maybe someone should apply an addiction/tolerance model to consumption - the more you consume, the more you need more to be satisfied. Or maybe, beyond a certain level of basic subsistence, happiness isn't affected by consumption. Comfort is, amusement is, but not happiness, which may have more to do with chemicals in your brain, and your DNA, then any goods.

Cancer mortality is flat. I have an epidimiology book around somewhere showing death rates from 1950--1995 or so. Hypertension and heart disease mortality was enormously less, but cancer mortality was about the same.

Since some cancers are more curable than before, this indicates that there are new cancers or causes of cancer, probably environmental in the medical sense (which is not exactly the same as the environmentalism politcs sense).

I doubt Easterbrook's book on this subject could be anywhere as close to as good as Robert Frank's "Luxury Fever". Which, if I had the power, I would force every economics undergraduate in the world to read.

Economics and culture types can debate this forever without getting much of anywhere, but the science is already clear. The impact of material conditions on human subjective wellbeing in first world countries has nothing to do with how much stuff you have, as an absolute amount. Once you've got basic shelter, health, enough to eat and so on, it's all basically luxuries. And the contribution of luxuries to happiness is first from having more of them from other people, and second from having more of them than you had in the recent past.

What a bizarre, bizarre claim, that people suffer anxiety because they fear that their nation-state will cease to exist in 50 years (ie, after they are dead). We currently have a skyrocketing deficit that, at the current rate, will make paying Social Security implausible in about 10 years, and that threat - to peoples' livelihoods - isn't enough to make most Americans want a new administration. Yet we're supposed to believe that dubious theories about population trends over the next half-century are making people unhappy in their daily lives? Please.

This is all idiotic. For at least 2500 years, it's been a truism in the West that stuff /= happiness. Suddenly we're surprised that even more stuff /= happiness? And it's not just stuff. Health doesn't necessarily = happiness either, so increases in public health shouldn't be expected to make a difference either. When infant mortalilty was 10x what it is now, people accepted that as part of life. It was sad, and occasionally devastating, but it was expected. And it didn't lead to culture-wide sorrow, because it was just life - as they knew it. And now we have life as we know it, and it seems better, but it's no more happy-making.

Anyone who thinks we should all be in perpetual glee over technical innovation should consider their relative responses now and as a teenager to being in bed with another person. Excitement and glee aren't sustainable emotions, and those are the expected responses to the kinds of progress being identified here as reasons for happiness.

There is no happiness - only moments of happiness.

I agree with JRoth. Except I don't understand this part "relative responses now and as a teenager to being in bed with another person." Hey speak for yourself... or is there a new technological innovation there I haven't heard about.

But to JRoth, economists feel they need to cook up little models to make the lessons of common sense as difficult as possible to understand.

So, you have Robert Frank, as recommended by Mr. Montgomerie and myself. Rank and relative prestige becomes more important elements of happiness as actual material goods. We race to buy more expensive bigger stuff, and then we find out that there can only be one first, two seconds, etc. And we are no more happier for our efforts. Except then we go do it again to avoid being on the bottom prestigewise.

The posts listing all the neat stuff we have now compared to 50 years ago are non sequitors. Technological change is consistent with rising inequality and stagnation in incomes of part of the population. That is what this thread is about. A few of these posters add the assertion that everyone can purchase these new goodies. But that is mere assertion.

I likewise recommend Robert Frank's book; as I recall he found some goods that provide a consistent happiness - wooly socks for me, personally - and some that provide only a competitive, or at best temporary, happiness.