THE OF : ASSESSSING WELL-BEING THROUGH THE RELATIONSHIP BETWEEN INCOME AND HAPPINESS

A THESIS

Presented to

The Faculty of the Department of Economics and Business

The Colorado College

In Partial Fulfillment of the Requirements for the Degree

Bachelor of Arts

By

Keegan Flaherty Dollinger

May 2011

THE ECONOMICS OF HAPPINESS: ASSESSSING WELL-BEING THROUGH THE RELATIONSHIP BETWEEN INCOME AND HAPPINESS

Keegan Dollinger

May 2011

Economics and Business

Abstract

The investigation of the relationship between income and happiness can provide important insights into human’s material aspirations. By redefining the application of the term , economics can be used to understand how affects our happiness. Today and in past years at a given point in time those with higher incomes are indeed happier than those with lower incomes. However, raising the incomes of a nation does not make that nation any happier. These conclusions are suggested by data on reported happiness and income collected in the United States over the past forty years. The paradox that takes place in this relationship has important implications and raises doubts on the primary economic goal of growth in GDP. This thesis hopes to stimulate a debate that questions some of the basic tenets of economic theory that regard the use of GDP as a measure of and the simplistic and limiting role that is applied to individuals in behavior models.

KEYWORDS: (Well-being, Happiness, Income, Utility)

TABLE OF CONTENTS

ABSTRACT ACKNOWLEDGEMENTS 1 INTRODUCTION……………………………………………………………….. 1 2 LITERATURE REVIEW………………………………………………………... 10 3 RELEVANT THEORY………………………………………………………….. 19 4 HAPPINESS IN OTHER FIELDS……………………………………………… 25 5 DATA……………………………………………………………………………. 31 6 METHODOLOGY………………………………………………………………. 36 7 RESULTS………………………………………………………………………... 44 8 CONCLUSION………………………………………………………………….. 50 9 APPENDIX……………………………………………………………………… 57 10 WORKS CONSULTED………………………………………………………..... 59

LIST OF TABLES

6.1 of Population by Happiness at Various Levels of Income, United States, 2006………………………………………………………………... 10 6.2 Regression with Happiness as Dependent Variable…………………………. 40 6.3 Happiness and Real GDP per Capita, United States, 1972 – 2008………….. 41 6.4 Regression of Happiness and Real GDP per Capita from, United States, 1972 – 2008……………………………………………………………………….. 42 6.5 Regression of Happiness and Real GDP per Capita with First Difference….. 43

Acknowledgements

Esther Redmount

My Family

CHAPTER I

INTRODUCTION

―The professed object of Dr. ‘s inquiry is the nature and causes of the of nations. There is another inquiry, however, perhaps still more interesting, which he occasionally mixes with it, I mean an inquiry into the causes which the happiness of nations.‖ Malthus, 1778/1996: 303-4

Philosophers, writers, politicians, and the general public have long been concerned with the question, ―Does money increase happiness?‖ Rational arguments have been advanced on both sides of the issue. The average person is consumed with the concern for accumulating more wealth. Even the wealthiest pursue incremental wealth despite the of each additional dollar. Regardless of their respective economic situations, almost all humans are engaged in some sort of trivial pursuit of wealth. The capitalistic system has implanted into the human psyche a relentless drive to attain more money. With varying success, humans thus attempt to achieve happiness through the acquisition of more money.

The study of happiness, as it relates to economics was largely dismissed as too subjective and unnecessary for the first part of the 20th century. The term utility was used to account for the satisfaction an individual received from a good or . Now are looking at different ways to apply utility to analyze happiness through economic theory. How can economics be used to provide people more happiness? Can money buy happiness? Answering these questions is difficult, however it may be possible

1

2 through examining the relationship between income and happiness in a specific year and across a span of forty years.

Over the course of time, many philosophers and thinkers have observed life and concluded it for the most part represents a great tragedy. Sophocles thought it better not to live at all, and wrote, ―Not to be born surpasses thought and speech. The second best is to have seen the light and then to go back quickly whence we came.‖ Nevertheless, studies across every , including , , philosophy, and economics have largely disagreed with Sophocles and found for the most part that people are generally happy, despite varying economic factors. This begs the question of economists and academics: how do people judge happiness and how happiness is related to income? As Malthus stated in the epigraph above, even Adam Smith inquired beyond and the wealth of a nation and conducted a more imperative investigation of the well-being or happiness of a nation.

Scholars are generally in agreement about economic theories of and how they drive consumer behavior. Economics as a discipline is based upon empirical research. This thesis will use empirical evidence to investigate the relationship between happiness and wealth, reconsidering the theory of utility in standard economic thought. There is general agreement that economic growth leads to the growth of well- being within a country. The United States appears to be a classic example of this hypothesis, given the apparent satisfaction of a materialistic and money-oriented society in the tangible gains of a capitalist economy. Both government and their populations have generally accepted economic indicators as measure not only of the economic condition but also of overall well-being of the country. Our capitalist economy has 3 reinforced the societal notion that money can buy happiness and that increases in income will ultimately lead to higher levels of happiness at the aggregate and individual level.

The exclusive focus on economic growth that the United States and much of the world appear to share and the widespread belief that economic growth is the first priority in orchestrating has not come without its own problems. The capitalist is successful to a certain extent but still maintains certain flaws. The way we construct our capitalist system should be adjusted to incorporate a more comprehensive and conscientious understanding of the positive and negative implications economic growth can have. The capitalist system that the United States adheres to focuses too heavily on GDP and accumulation of money. If the government and the people of the United States establish the importance of well-being before the primary goal of growth, the United States may become happier.

The most significant complication in investigating happiness is determining an appropriate and standard definition of happiness. Given the subjectivity of happiness as experienced by the individuals and the variance of how each individual defines their own happiness make it difficult to apply or establish a consistent definition.

The mind in its own place and in itself Can make a Heaven or a Hell, a Hell or a Heaven Paradise Lost John Milton

An argument can be made in agreement with Milton that happiness is controlled exclusively by the mind; the conditions in which we live can be made into a Hell or a

Heaven. But many still believe that it is not the mind that makes our world a paradise or 4 a purgatory, that makes us happy or miserable, but the conditions in which we live.1

Happiness is dependent on a combination of internal circumstances of a person‘s mind and the external conditions in which the person lives. The dependence on external or internal conditions is different for each person. Although each of our minds is distinct and our happiness is sensitive to our individual psychological circumstances, external conditions play a large role in our individual happiness.

Happiness is very difficult to measure among people and difficult for people to even measure for themselves. The accuracy of measuring well-being has been under much scrutiny. Reliability and validity issues can occur depending on whether respondents report their true feelings or report feelings that may be impacted by biases resulting from the context in which the question is asked. Extensive research has been conducted in the study of psychology and economics attempting to test the validity of different well-being measures (see Diener (1984) and Veenhoven (1993)). Psychologists have been developing different measures of a person‘s happiness with the simple question of ‗Taken all together, how would you say things are these days.‘ Although the answers to these questions may not be completely accurate, they provide an important indicator to a society‘s well-being. The general conclusion of such assessments is that the subjective indicators can provide reliable reports of a person‘s general happiness due to the substantial amounts of valid variance between the respondent‘s reports (Diener,

1984).2

1 Angus Campbell and University of Michigan, "The sense of well-being in America : recent patterns and trends," (1980): 263.

2 R. A. Easterlin, "Income and happiness: Towards a unified theory," Economic Journal 111, no. 473 (2001): 465.

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Happiness is conceived here as the degree to which an individual judges the overall quality of his life favorably.3 In other words how well he/she likes the life he/she leads. Throughout this thesis, I use the terms happiness, subjective well-being, , utility, and welfare interchangeably. ―Reported subjective well-being‖ is the scientific term used in psychology for an individual‘s evaluation of the extent to which an individual judges their life as ―happy‖. Subjective well-being (SWB) is a far more reliable measure of a person‘s well-being or a society‘s well-being than income or any other measure.

Standard economic theory accounts for happiness through the theory of utility.

The definition and use of utility has undergone significant changes since the origin of economics. The definition that has been accepted into common economic thought is the one promulgated by Robin during the 1930s.4 Standard economic theory applies utility as a measure of relative satisfaction but maintains the view that utility cannot be measured.

Utility is based on the simple notion of relative satisfaction from a certain good or product. In the 1930s, economic theory was fundamentally changed by two ideas advanced forcefully in the ―ordinalist revolution‖: that utility cannot be measured and that it is not necessary to measure utility to derive the major microeconomic propositions.

At the time, these ideas were rightly considered to be a successful ―revolution‖ in economics. thereafter adopted them as a major element—perhaps even the essential element of microeconomic theory.

3 R. Veenhoven, "Is happiness relative?" Social Indicators Research 24, no. 1 (1991): 1-34.

4 R. Cooter, "Were the ordinalists wrong about ?" Journal of economic literature 22 (1984): 507. 6

Recent literature contradicts the conceptual application of happiness in standard economics. Using measures established by psychology, economists have made strides into developing an indicator that combines economic growth with the growth of well- being. Many economists are beginning to accept the notion that utility can be measured and applied to economic and political decisions. The studies conducted by Easterlin that proposed the happiness paradox were groundbreaking in the study of well-being. The seminal study conducted by Easterlin in 1973 reported, on the basis of studies of happiness in some 19 countries: ―In all societies, more money for the individual typically means more individual happiness. However, raising the incomes of all does not increase the happiness of all.‖5 To ascertain the effect of money per se, one must examine the average level of happiness in a poorer person versus a richer person. Thus, according to this explanation of the data, money does not make people happy because it gives them more buying power per se; rather they tend to become happier if they have more money relative to others. Economists have examined the relationship between income and well- being through different methods in countries all over the world. Economists have looked at accident victims and lottery winners to understand the impact money can have on an individual. Developing new ways of measuring happiness and different ways of examining the impact of income on happiness is essential to the study of economics.

Studying the relationship between wealth and happiness involves combining many different disciplines of the social sciences, principally economics and psychology.

Although it is impossible to perform the study without using the study of psychology, this study will focus on economics and how it can be used to demonstrate the negative

5 R. A. Easterlin, "Will raising the incomes of all increase the happiness of all?" Journal of economic behavior organization 27, no. 1 (1995): 35.

7 relationship between wealth and happiness. The study of happiness is a relatively new concept, especially in economics. Some argue that wealth is not a meaningful factor in happiness. Robert Lane makes an argument that happiness is not based on income whatsoever, but in fact based on family life and social support namely companionship.6

Lane argues that in any tradeoff between two , money and companionship, where money is relatively plentiful and companionship relatively scarce, companionship will add more to SWB than money. Michael Argyle in his book, ―The Psychology of

Happiness‖ finds that the establishment of a satisfying state of affairs in social relations, work and leisure do not depend much on wealth, either absolute or relative, or on the material conditions of life.7

Happiness theory reverses the two claims: Happiness theory posits that it is possible to use measures of subjective well-being as a (reasonably) good proxy for the theoretical concept of utility as satisfaction and measurement is sometimes needed and can be used effectively to deal with important issues addressed by economics.

Happiness research opens new avenues and suggests new aspects that have so far been disregarded or found to be unproductive at the microeconomic and macroeconomic level.

Economic theory lacks a subjective measure of people‘s well-being. Incorporating SWB into economic theory will have a profound effect on objective measures like Gross

Domestic Product.

GDP is a measure of productivity rather than which gives a rather skewed perception of the economy because economic growth is based on consumption

6 R. E. Lane, "Diminishing Returns to Income, Companionship and Happiness," Journal of happiness studies 1, no. 1 (2000): 103.

7 Michael Argyle, The psychology of happiness, (London; New York: Methuen, 1987), 208. 8 rather than growth. There is a significant gap in current economic theory given the lack of tools that that account for the subjective components driving happiness beyond the monetary income of an individual. Although GDP is largely successful in representing the growth and decline of a nation it has serious flaws and lacks necessary indicators in measuring the well-being of the citizens. The research of happiness through economics hopes to encourage a debate to some of the basic tenets of economics; dissatisfaction with the use of GDP as an accurate measure and the simplistic role that individuals play in economic models.

In past few years countries are beginning to acknowledge the lack of subjective measures in their policy decisions. Humans and individuals are not treated like people but like utility maximizing machines. The country of adopted a measure of Gross

National Happiness rather than a measure of . Even in developed countries like Great Britain, the Prime Minister David Cameron has decided to create a national happiness index providing quarterly measure of how citizens feel. Certain cities in the United States have begun incorporating questions of happiness in their census.

Beginning to develop an understanding of the relationship between income and our general well-being is important in developing ways to improve our overall well-being.

Moving beyond the traditional measures of economic growth to promote policies that offer more than just material well-being. We would do well to revisit the famous words of the constitution and instead of pursuing the narrow goal of mere incremental wealth redirect our efforts towards the ―the pursuit of happiness.‖

CHAPTER II

LITERATURE REVIEW

Economists as well as the general public have generally accepted that economic growth and wealth will increase the overall level of well-being in a country. It is still generally acknowledged that the moral justification of the ‘s job is to be found in the persuasion that increases wealth, income, or goods to create the preconditions for greater well-being and happiness.1 To a certain extent wealth has a positive correlation with happiness but recent findings have found that this is not always the case.

Understanding the role that happiness plays in economics is important and helpful in providing a more accurate portrait of humans. The conception and application of utility has undergone significant changes in classical economic theory and perhaps the accepted notion that happiness and utility cannot be measured is erroneous. Extensive literature has been published regarding the relationship of wealth and happiness. This literature review will begin with how the concept of happiness has progressed in economics, provide a better understanding of how happiness is defined, and then examine recent research that has been done regarding the relationship between wealth and happiness.

Some economists, albeit not directly, have acknowledged the relationship between wealth and well-being. The study of well-being can be traced back to the developments of the Italian and Scottish writers in the Classical Period; in particular, it found fertile ground in Adam Smith‘s Theory of Moral Sentiments. We can trace a line of

1 Luigino Bruni and Pier Luigi Porta, Economics and happiness: framing the analysis, (Oxford; New York: Oxford University Press, 2005), 1-366. 9

10 thinking, linking up, for example, Malthus‘s Essay on Population, Marshall‘s social economics, Veblen‘s ―conspicuous consumption‖, Galbraith‘s criticism of the ―affluent society‖, and more recently Duesenberry‘s (1949) social theories of consumption based on interpersonal comparisons. These early conceptions of well-being are important to understand and have had a profound impact on the most recent research on economic well-being.

A pivotal study was conducted by Moses Ambramovitz (1959) on the effect income and wealth had on a nation‘s well being. In ―The Welfare Interpretation of

National Income and Product‖ he concluded that, ―we must be highly skeptical of the view that long term changes in the rate of growth of welfare can be gauged even roughly from changes in the rate of growth of output.‖2 , in his doctoral thesis

(1968), showed an unusual and heterodox in investigating wealth and well being amidst the almost complete indifference of mainstream economists. Van Praag rejected contemporary economic theory and believed that utility could be cardinally measured and accepted interpersonal comparability—as the first Utilitarians had done.3 Although studies of happiness were creating revolutionary conclusions, many were dismissed and largely unacknowledged by . Although these studies were revolutionary contemporary studies challenges these studies and in line with the economic school of thought, still found that happiness was dependent on income and

2 Easterlin, "Will raising the incomes of all increase the happiness of all?" 89-93.

3 Bruni and Porta, 3-5.

11 economic growth.4 Economic theory has still rejected the ideas proposed by studies of happiness, leaving the subject highly controversial.

Only until the influential work of (1974) did an economist undertake a direct investigation of the idea of happiness. Easterlin began using happiness indexes in certain countries to explore the relationship they had to income levels at a point in time and over a longer period of time.5 Tibor Scitovsky further expanded the ideas promulgated by Easterlin in the Joyless Economy where he uses the research conducted by Easterlin to develop the relationship between income and happiness.6

Easterlin accumulated his data on subjective well-being (SWB) through two different measures.

The first was through the poll with responses from a subjective evaluation of well-being where the individual respondent was asked the direct question; ―In general, how happy would you say that you are—very happy, fairly happy or not very happy?‖7

Easterlin also used data from a more sophisticated procedure, devised by the psychologist

Hadley Cantril that uses a ―Self-Anchoring Striving Scale‖ with a happiness scale across numbers 1 through 10.8 Both sets of data revealed that within a single country at a given moment in time, the correlation between income and happiness exists and is robust. But across time there is ―empirical evidence for the US showing that income growth does not

4William D. Nordhaus and James Tobin,‖Is Growth Obsolete?‖ The Measurement of Economic and Social Performance (1973): 510-532. 5 Easterlin, "Income and happiness: Towards a unified theory," The Economic Journal (2001): 465-484.

6 T. Scitovsky, The joyless economy: An inquiry into human satisfaction and consumer dissatisfaction, 1976)

7 Richard Easterlin,‖Does Economic Growth Improve the Human Lot? Some Empirical Evidence.‖ The Economic Journal (1974): 91-122.

8 Ibid. 12 lead to higher levels of happiness, a finding that has been supported by further studies

(Caporale, Georgellis, Tsitsianis, Yi, 2009). In cross sectional differences among countries the positive association between wealth and happiness, although present, is neither general nor robust and poorer countries do not always appear to be less happy than richer countries. The most significant finding from the data in Easterlin‘s study was the time series analysis. At the national level over 25 years (from 1946 to 1970 in the

US) per capita real income rose by more than 60 percent, but the level of happiness showed no significant increase.

There is consistency among the studies and national surveys that that there is a significant positive bivariate relationship between income and happiness. The absolute income hypothesis establishes this idea: it states that the level of utility varies positively with the level of income up to a threshold level beyond which utility remains largely invariant9. The absolute income hypothesis has only been found to have significant results within a certain country at given time. Along with Easterlin (1974) economists

(Diener, 1993; Frey & Stutzer, 1993) have come to the same conclusion that income has significantly positive relationship with happiness.

Recent studies have also shown that once people reach a certain income, they do not receive any additional significant utility or happiness with increased income; this line of thought is consistent with the economic theory of diminishing marginal utility of income. Research done by Kahneman and Deaton came to the conclusion that there is no further of happiness or well-being once a person achieves an annual income of

9 G. M. Caporale, "Income and happiness across Europe: Do reference values matter?" Journal of economic psychology 30, no. 1 (2009): 42.

13

$75,000.10 Related to Kahneman and Deaton Dan Pink has found that income and money may not be the best motivator for productivity. He found that for tasks that are above mechanical and call for rudimentary cognitive skill a larger reward led to poorer performance. He makes the argument that once you pay employees a salary that satisfies their financial security, any incremental income is superfluous and does not affect their productivity.11 This idea is incongruent with economic theory and encourages the idea that people care for things more than just money.

The idea that human well-being in terms of income is not based on an absolute income but on an income relative to others‘ income is not new. (1899) noted ―conspicuous consumption‖ to describe how individuals compared themselves to others with respect to income, consumption, status, or utility. A growing body of empirical evidence supports the relative income hypothesis. The theory was first introduced by Easterlin basing his ideas on Duesenberry‘s (1949) idea of ―relative consumption‖ which argues that persons are not completely concerned with their absolute income but their income relative to others. As Clark and Oswald (1996) show, controlling for standard individual and demographic characteristics, utility depends on income relative to some reference or comparison income, based on the predicted income of

‗people like you‘.

An alternative theory for the happiness paradox has been explained by the

―treadmill‖ hypothesis. The ―treadmill‖ hypothesis was first introduced by Easterlin and is similar to the relative income hypothesis. The treadmill theory is based on the ―set

10 D. Kahneman, "Would you be happier if you were richer? A focusing illusion," Science 312, no. 5782 (2006): 1908.

11 Daniel Pink, Drive: The surprising truth about what motivates us. (New York: Riverhead, 2005), 1-85. 14 point theory‖ which is the idea that there is a level of happiness that remains constant during the life cycle. This is due to personality and temperament variables that seem to play a strong role in determining the level of happiness of individuals; such characteristics are innate to individuals. Kahneman writes, ―Individuals exposed to life altering events ultimately return to a level of well-being that is characteristic of their personality, sometimes by generating good or bad outcomes that restore this characteristic level.‖12 The set-point theory helps explain the , which describes why people have not grown happier with economic growth.

The ―hedonic treadmill,‖ a metaphor coined by Brickman and Campbell, means that one is running constantly and yet remains in the same place because the treadmill runs at the same place—or even faster but in the opposite direction.13 Van Praag (1971) was the first economist to explore the hypothesis of adaptation but under the name ―the preference drift‖ phenomenon.14 Krueger (2006). Stutzer analyzed the role aspirations played in terms of well-being and found that the higher income aspirations reduce people‘s satisfaction in life.15 Kahneman makes an important distinction between two types of treadmill effect, namely, the hedonic treadmill and the satisfaction treadmill.

The hedonic treadmill depends on adaptation, while the satisfaction treadmill is reliant on

12 Daniel K. Kahneman and , "Economic analysis and the psychology of utility: Applications to compensation policy," American Economic Review 81, no. 2 (1991): 341.

13 Philip Brickman, Dan Coates, and Ronnie Janoff-Bulman, "Lottery winners and accident victims: Is happiness relative?" Journal of personality and social psychology 36, no. 8 (1978): 917-927.

14 B. Van Praag, "Ordinal and :: An integration of the two dimensions of the welfare concept," Journal of 50, no. 1-2 (1991): 69-89.

15 A. Stutzer, "The role of income aspirations in individual happiness," Journal of economic behavior organization 54, no. 1 (2004): 105. 15 aspiration. The satisfaction treadmill works in such a way that one‘s subjective happiness remains constant even when one‘s objective happiness improves.

Economists, in measuring well-being, have largely abandoned the term happiness.

Veenhoven defines happiness as the degree to which an individual judges the overall quality of his life favorably. In other words: how well he likes the life he leads.

Happiness in this context can be called ‗life satisfaction‘.16 Emotional well-being refers to the hedonic and emotional quality of an individual‘s everyday experience—the frequency and intensity of experiences of joy, stress, sadness, anger, and affection that make one‘s life pleasant or unpleasant. Life evaluation or satisfaction can be differentiated referring solely to a person‘s thoughts about his or her life17. Economic studies have focused more on an individual‘s life satisfaction as a closer estimate of a person‘s well-being. Psychologists draw a distinction between the well-being from life as a whole and the well-being associated with a single area of life: these they term

‗context-free‘ and ‗context-specific‘.18 Mariano Rojas uses the conceptual-referent theory to explain the weak relationship between income and happiness. The study defines eight conceptual types of happiness from philosophical essays on happiness; stoicism, virtue, enjoyment, carpe diem, satisfaction, utopian, tranquility and fulfillment.19 Developing a universal definition of happiness is difficult but not impossible and can provide useful insights into the psyche of a society.

16 R. Veenhoven, "Is happiness relative?" Social Indicators Research 24, no. 1 (1991): 1-34.

17 Kahneman, 16489-16493.

18 D. G. Blanchflower, "Well-being over time in Britain and the USA," Journal of 88, no. 7-8 (2004): 1359-1361.

19 Mariano Rojas, "Heterogeneity in the relationship between income and happiness: A conceptual-referent-theory explanation," Journal of Economic Psychology 28, no. 1 (2007): 1-14. 16

An important component to the theory of utility is the law of diminishing marginal utility. The idea of marginal utility was perhaps introduced by in

Politics, ―External goods have a limit, like any other instrument, and all things useful are of such a nature that where there is too much of them they must either do harm, or at any rate be of no use.‖ The law of diminishing marginal utility of income describes the utility a person derives from a stock, as the utility increases it does so at a decreasing rate. This is important to understanding happiness and supports the theories behind a progressive income tax. The amount of utility that the very wealthy receive from an extra $100 is minimal compared to the utility to a person with a lower income. Studies have been done to try to determine a minimum income level where a person is able to comfortably meet all their economic needs with additional income providing little or no additional utility.

Studies have been conducted at the individual level looking at the way people have been affected by winning large sums of money. The results vary significantly from individual to individual and contradict expectations. A study in Great Britain of 191

British football pool winners, all of whom won more than 160,000 pounds, found that many of them claimed to be a little happier than before, but many experienced quite serious problems: the winners were pestered with requests for money; some were more lonelier due to quitting their jobs, proving that a purely financial view of happiness had failed to capture the positive affect the consistent that a steady job provides.20 Studies by Brickman and Coates have used the unique situations of lottery winners and accident victims in measuring the relativity of well-being in the context of wealth. They found that in general quadriplegics reported lower present happiness and greater past happiness compared with controls, which does not encourage the idea that

20 Michael Argyle, The psychology of happiness, (London; New York: Methuen, 1987), 253. 17 people‘s well-being adapts to new situations. The findings are significant because they are able to analyze a unique situation in terms of well-being and do not completely agree with the psychological theory of adaptation.

Although there are many critics of studying happiness through economics, the literature is extensive. The findings of Richard Easterlin have been the most significant, encouraging many other economists to examine happiness across all parts of the world to truly test the accuracy of existing hypotheses. Many recent findings diverge away from standard economic theory. The next chapter will follow how the study of economics has dealt with the idea of well-being through the term utility.

CHAPTER III

RELEVANT THEORY

The term ―happiness‖ in economics was abandoned for ―ophelimity‖ and later on for ―well-being‖, or ―welfare‖, and then for the even less emotionally loaded term

―utility‖ or ―satisfaction‖.1 Now the closest standard economics comes to accounting for happiness is through the concept of utility. Utility is the measure of satisfaction; the number of utils one receives from a certain good represents the amount of satisfaction provided by that good. Utilitarians, and , developed the idea of utility during the 18th century encouraging society to maximize the total utility of individuals. The first thorough introductions of the concept were those by Gossen

(1854), Jevons (1871) and Edgeworth (1881).2 The development of utility theory in economics has undergone two definitive episodes; the ―marginalist revolution‖ of the

1870s and the ―Hicksian‖ or ―ordinalist revolution‖ of the 1930s. The ideas of utilitarianism and the development of utility in economic theory are essential in understanding the role of happiness in economics.

Utilitarianism is a broad tradition of thought that was advanced during the19th century with the notion that morality and politics are centrally concerned with the promotion of happiness. Jeremy Bentham, an English utilitarian, introduced the utilitarian

1 Luigino Bruni and Pier Luigi Porta, Economics and happiness: framing the analysis, (Oxford; New York: Oxford University Press, 2005), 1-366.

2 B. Van Praag, "Ordinal and cardinal utility:: An integration of the two dimensions of the welfare concept," Journal of Econometrics 50, no. 1-2 (1991): 69-89. 18

19 principle (the greatest happiness principle). He believed that the legislator‘s job is to use her knowledge of human nature to design laws that maximize the happiness of her people. An important clarification is that Bentham‘s definition of utility is equivalent to

―instrumental for happiness.‖3 Bentham also coined the phrase, ―the greatest happiness of the greatest number‖. John Stuart Mill, another utilitarian, followed some of the same ideas as Bentham and was interested in the idea of what happiness is and what makes humans happy? Mill followed a more empirical approach to answering these questions, differing from Bentham. He made a shift in focus from individual happiness to aggregate happiness and posited the claim that happiness is the only end objective: that everything we desire is either a part of happiness, or a means to happiness.

Bentham was largely criticized for his assertion that happiness can be measured on a quantitative level. Mill addressed the issue of measuring utility and happiness by replacing the quantitative approach with a qualitative measure. In defining happiness

Mill asserts,

―By happiness is intended pleasure, and the absence of pain; by unhappiness pain, and the privation of pleasure. It is quite compatible with the principle of utility to recognize the fact, that some kinds of pleasure are more desirable and more valuable than others. It would be absurd to assume that while, in establishing all other things, quality is considered as well as quantity, the establishment of pleasure should be supposed to depend on quantity alone.‖ 4

Bentham focuses on the intensity of pleasure while Mill believes there are different kinds of pleasure and only someone who has experienced both can decide which one provides

3 Tim Mulgan, Understanding utilitarianism, (Stocksfield: Acumen, 2007), 194. p.10

4 John Stuart Mill and Inc NetLibrary, Utilitarianism, (Oxford: Oxford University Press, 1998), 55.

20 more happiness.5 The insights that Bentham and Mill made with the tradition of utilitarianism were important steps in trying to incorporate the idea of happiness into the political sphere.

Until the Marginalist Revolution classical economic theory lacked a systemic approach to the idea of utility; a direct approach for accounting for consumer preferences was largely, although not completely, absent from the works of Adam Smith and David

Ricardo. The disinterest in utility theory can be explained by the paradox of ; since water during this period had a high use-value but a low , and the reverse held for diamonds, utility theory did not prove to be a theory capable of explaining and was thus disregarded. Although they lacked a systemic account of utility, Smith and Mill still acknowledged the idea of utility and its application. The material welfare school followed the ideas promoted by the marginalist revolution and evaluated social welfare on a comparability convention. Utility rankings were not seen as coextensive with preferences orderings, nor were they derived from them. Essentially, goods were seen as having utility if they contributed to a person‘s physical well-being (physical well-being as an objective measure opposed to a person‘s enjoyment or emotional well-being which is more subjective).

During the latter half of the 19th century economists began to construct a theory around utility. Economists agree that individuals strive for the greatest happiness. Let us assume two situations x1 and x2 and let us assume that the two situations generate happiness values W1 and W2 where W2 > W1. Then the individual will choose x2, if that situation is a choice set, and it follows that the function W(x) describes a very basic

5 Van Praag, 71. 21 aspect of human behavior.6 Choice between scare things is the core subject of economics.

Francis Edgeworth in his book Mathematical Physics (1881) proposed a function where

W can be cardinally measured. If W(x1) = 1 and W(x2) = 2, then the individual derives twice as much utility (or happiness) from x2 as from x1. Pareto (1909) was the first to raise doubts about the practical possibility of observing and estimating the function W.

Moreover, he showed that in the case of static consumer behavior we do not need to know the function itself but only its contour lines, the so-called indifference curves.7 An is a representation of the utility that can be provided to an individual consumer across a bundle of goods. Pareto articulated a theory of markets based upon constrained optimization, and successfully integrated production in the marginal framework. Pareto‘s idea of efficiency and optimization is still used in standard economic theory; the concept being that an economy is ―Pareto efficient‖ only when any changes in the allocation of goods can no longer be made without making at least one individual worse off.

The ordinalist revolution took place in the 1930s when Robins published his

Essay on the Nature and Significance of Economic Science attacking the material welfare school of thought.8 The ordinalist school of thought differed from the material welfare school in that they emphasized the of goods while the material welfare school emphasized the importance of material welfare and the application of utility. Opposed to the objective definition of utility under the material welfare school, the ordinalists

6 Ibid.

7 Ibid.

8 R. Cooter, "Were the ordinalists wrong about welfare economics?" Journal of economic literature 22 (1984): 507-525. 22 adopted the more subjective definition of utility as satisfaction of desire. followed Robins in1934 with ―A Reconsideration of the Theory of Value,‖ provided an alternative theory for consumer behavior using utility strictly to determine revealed preference.9 Robbins assembled the elements of a new economic framework by joining the scarcity definition of economics with the positivist conception while Hicks completed the conception of utility10. Houthaker (1950) provided explanations of demand behavior without applying the utility concept. Deaton and Muellbauer (1982) made similar observations in terms of utility allowing the utility concept to be used solely as a handsome tool to describe choice behavior.11 The definition and application of utility for standard economic theory was established during the ordinalist revolution.

Standard economic theory applies utility in two major ways; through the budget constraint and indifference curves. The budget constraint represents the combination of the that a consumer can attain given current prices with his or her income. The indifference curves can be applied to the budget constraint and show at the point of tangency between the indifference curve and the budget constraint the maximum utility that can be achieved for the consumer. Although narrow, this application of utility is useful in predicting consumer behavior.

The ordinalist revolution restricted the concept of utility acceptable to economics by rejecting the cardinal measurements and interpersonal comparisons of utility and restricting the inquiry to consumer behavior. The conception of utility espoused in the ordinalist revolution has been generally accepted into . Some

9 Ibid.

10 Ibid.

11 Van Praag, 70. 23 economists especially in the study of happiness are beginning to question the dogma established by Robbins and Hicks during the ordinalist revolution. Cooter and Rappoport argue ―that the ordinalist revolution represented a change, not progress in economics.‖

Many economists have disagreed with the limiting doctrine established by the ordinalist revolution (Shubik, 1982; Harsanyi, 1986). A study conducted by Van Praag (1991) argues for the cardinal dimension of utility of by analyzing two instruments to measure utility.12 Perhaps utility can be measured and provide useful insights into the complex economics of human desires and wants.

This thesis will critique the view established by the ordinalists that utility and happiness cannot be measured. The next section will show the breakthroughs in other fields of study that will allow the study of economics to apply cardinal measures to the idea of happiness. This thesis will also still employ commonly accepted theories of modern economics like diminishing marginal utility. The rejection of the ordinalist concept of utility will allow for a more intricate and expansive understanding of a person‘s well-being in an economic perspective.

12 Ibid. CHAPTER IV

HAPPINESS IN OTHER FIELDS

Mainstream economics has only just begun to make insights into the field of happiness and well-being, while other social sciences have been studying the subject for years. During the 1920s sociologists made the first steps into studying happiness by attempting to understand social indicators that could assess a person‘s .

William Ogburn launched a social research program on the quality of life that went beyond GDP per capita by examining certain social indicators to predict social behavior.1

In 1954, the nominated a commission with the task of defining more precisely the items, which make up the standard of living concept.2 Happiness inherently is a subject that crosses the boundaries of individual fields of the social sciences, requiring the integration of different fields of study. Economics can only reveal how certain economic concepts relate to the idea of happiness. Experts in other fields are confronting the same obstacles faced by economists. Although economists can provide important research in the study of happiness, the integration of different fields of study is required to make progress in understanding why certain people are happier than others and how to improve social well-being.

The subjective nature of assessing happiness makes it difficult to apply an objective definition. The question, ―How are you?‖ may seem simple, but the answer can

1 Luigino Bruni and Pier Luigi Porta, Economics and happiness: framing the analysis, (Oxford; New York: Oxford University Press, 2005), 5.

2 Ibid. 24

25 become very complicated drawing attention to the very personal and controversial elements of well-being. Well-being is a complex construct that concerns optimal experience and functioning. Current research in psychology on well being has been derived from two general perspectives: the hedonic approach, which focuses on happiness and defines well-being in terms of pleasure attainment and pain avoidance; and the eudaimonic approach, which focuses on meaning and self-realization and defines well-being in terms of the degree to which a person is fully functioning.3 The latter approach emphasizes the idea that there is more to well-being than just hedonism.

The subjectivity of happiness is a major obstacle in trying to ascertain a person‘s true well-being. Psychologists have progressed substantially in utilizing different techniques in assessing an individual‘s well-being. Smith (1979) examines trends in psychological well-being in the United States since the Second World War. To measure these trends, Smith used a series of surveys with questions on subjective, personal happiness. He assessed the stability of happiness measures by comparing the measurement of happiness with the stability of other items; years of education and health and relatively unstable items like civil liberties of socialists and homosexuals. He concluded that, ―In sum, it appears that happiness shows a high enough level of temporal stability to indicate that it is being meaningful and consistently understood by respondents (see also Wilson, 1967:294; and Robinson and Shaver, 1969:17).‖4

Many behavioral scientists believe that humans are predominantly dissatisfied and unhappy. Extensive evidence, however suggests otherwise. Subjective well-being

3 R. M. Ryan, "On happiness and human potentials: A review of research on hedonic and eudaimonic well-being," Annual Review of Psychology 52 (2001): 141.p.142

4 Tom W. Smith, "Happiness: Time Trends, Seasonal Variations, Intersurvey Differences, and Other Mysteries," Social psychology quarterly 42, no. 1 (1979): pp. 18-30.p.20 26

(SWB), referred to colloquially as ―happiness,‖ is a person‘s evaluation of his or her life.

This evaluation is both cognitive and affective. Most life satisfaction scales that are used by economists have a neutral point at which the person reports equal amounts of satisfaction and dissatisfaction. Above this point, response alternatives are labeled with varying degrees of satisfaction, and below this point, the options indicate dissatisfaction.

Gurin, Veroff and Feld (1960) provide data from a U.S. national that found most people have reported a positive level of SWB; 89% placed themselves in the ―very happy‖ or ―pretty happy‖ groups with only 11% saying they were ―not too happy.‖

Diener and Diener by evaluating a number of studies, Andrew and Withey (1976),

Veenhoven (1993), and Diener, Fujita, & Sandvik (1994), found not only at the national level but at the global level from poor to rich countries there are more happy than unhappy people.5

Determining what causes people to be happier or have a higher well-being is more complex and difficult to assess. The study of psychology has explored happiness from a different perspective and investigated the way individual characteristics impact a person‘s well-being. An important component in the field of psychology largely left absent from the field of economics is the role certain characteristics or personality factors play in determining an individual‘s well-being. DeNeve (1999) suggested that subjective well- being is determined largely by genetic factors and argued that SWB is relatively stable across the life span. DeNeve & Cooper reported that extraversion and agreeableness were consistently positively associated with SWB, whereas neuroticism was consistently

5 Ed Diener and Carol Diener, "Most People are Happy," Psychological Science (Wiley- Blackwell) 7, no. 3 (1996): 181-185.

27 negatively associated with it.6 Other psychological studies have highlighted the importance of supportive interpersonal relationships for well-being; Baumeister & Leary argue that relatedness is a basic human need essential to well-being.

Psychologists have studied the relationship between wealth and happiness. The conclusions they have come to are largely consistent with economic findings but are important in providing a more holistic approach. At the basic level, psychologically money can reduce distress, for instance caused by hunger, and it can add to joy, for example by making possible expensive forms of leisure.7 Those people who have larger incomes are a little more satisfied with their incomes and their standard of living than other people. However, this is a surprisingly weak relationship—corresponding to a relationship of .15 or .20 (Campbell, Converse and Rodgers, 1976; Liang and Fairchild,

1979; Michaelos, 1980). A psychology study by Bradburn (1984) found that income made more difference to positive than to negative effects, and the positive effects were more marked at the upper end of the income range, while the reduction of negative affect was more marked at the lower end. Some studies have found that greater wealth or income does not necessarily provide greater happiness. Greater wealth can lead to the removal of material worries, but perhaps the focus of worry shifts to personal and interpersonal problems, which cannot be solved by money.8 Richard Lane found that there is a tendency for poor people to worry about problems which are more soluble, for

6 Ryan, 149.

7 Michael Argyle, The psychology of happiness, (London; New York: Methuen, 1987), 93-98.

8 Ibid.

28 richer people to worry about less insoluble problems—like satisfaction with self and interpersonal problems.9

Diener & Diener (1995) examined the relations of family, friends, and finance to life satisfaction and concluded that financial status was more correlated with life satisfaction in poorer nations than wealthier nations.10 Kasser and Ryan (1993, 1996) related money and materialism to well-being, highlighting the difference between people who are focused on wealth rather than relationships and personal growth. Several studies have supported this model, showing that people more focused on financial wealth and materialistic goals have lower levels of well-being. Schmuck (2000) confirmed the findings in Germany while the same conclusions were made in less developed countries like Russia and (Ryan et al 1999).11 Veenhoven examined the relativity of happiness discovered in economics from a sociological perspective. Veenhoven concluded that happiness in the sense of life-satisfaction depends only partly comparisons to people or the neighborhood of a specific person. He found that even the standards of comparison do not fully adjust to circumstances and environment of an individual.12

The psychological theory of adaptation is applicable in examining the relativity of income and satisfaction. If someone is asked to judge the weights of a number of objects weighing between 2 and 6 ounces, and is then given a one-pounder it will seem

‗heavy‘, whereas if he had been judging 3 to 6 pound objects it would seem ‗light‘.

Stimuli are judged against a standard based on the range of stimuli which have been

9 R. E. Lane, "Diminishing Returns to Income, Companionship and Happiness," Journal of happiness studies 1, no. 1 (2000): 103.

10 Diener and Diener, 181-185.

11 Ryan, 151.

12 R. Veenhoven, "Is happiness relative?" Social Indicators Research 24, no. 1 (1991): 1-34. 29 experienced in the past. The process of adaptation is likely to occur in the same objective conditions of income and could be sources of pleasure or pain depending on the previous adaptation level. The idea of adaptation is more fully explored by studies conducted on lottery winners. Adaptation theory provides a further explanation, if one is needed, for the small difference in satisfaction between countries and classes, and for the relatively high happiness of the seriously handicapped. It makes a number of interesting and unexpected, predictions about how to enhance satisfaction. There is one possibly fatal objection however; some people are very happy, while others are very depressed. Why has adaptation not taken place (Freedman, 1978)?13

A multi-disciplinary approach is essential to any study of happiness because the findings from other social sciences are so closely related to studies by economists.

Theories introduced by psychologists like adaptation theory can be directly applied and used to explain studies by economists. This thesis will employ the more developed and elaborate measures of well-being from psychological studies.

13 Argyle, 154. CHAPTER V

DATA

―The notion of happiness is so indefinite that, although every man wishes to attain it, yet he can never say definitely and consistently what he really wishes and wills.‖ Immanuel Kant

Although some like Kant, believe happiness is so indefinite that it cannot be measured, there are measures that are not only valid but also useful. Since the early

1900s sociologists and psychologists have been attempting to develop ways to accurately measure happiness or well-being. The process is complicated; everybody has different definitions of happiness. At the most basic level, well-being can be measured by the satisfaction that an individual has with their current life. Certain measures of well-being include social indicators that go beyond just life satisfaction and include physical health and more complicated procedures to determine a person‘s overall well-being. Being able to measure society‘s well-being as a whole is very important and determining what makes people happy has significant implications for the government policy. Policies that increase overall happiness are arguably more important than policies that increase economic growth. Progress in determining what makes people happy has forced economists to abandon a rigid definition of utility. Surveys and studies by economists and psychologists have been making progress in developing more accurate measures.

Social indicators can be classified into two broad types: (1) those based on reports about experiences and characteristics of the reporter‘s own personal life, and (2) those based on reports of events or situations which are not part of the reporter‘s own life.

30

31

Sometimes these two types of indicators have been referred to as ‗subjective‘ and

‗objective‘ respectively, though it can be argued that certain experiential measures are at least as objective as many of the so-called objective measures. Examples of the first class of social indicators would include reports by respondents of their sense of safety when they go out alone at night, or their sense of satisfaction with the amount of safety they perceive. Examples of the second class would include crime reports for a particular neighborhood or measures of street lighting and police patrols. This thesis will focus on the individual‘s personal assessment of subjective well-being.

The theory that happiness is relative is based on three postulates: (1) happiness results from comparison, (2) standards of comparison adjust, (3) standards of comparison are arbitrary constructs. On the basis of these postulates the theory predicts: (a) happiness does not depend on real quality of life, (b) changes in living-conditions to the good or the bad have only a short lived effect on happiness, (c) people are happier after hard times, (d) people are typically neutral about their life. Together these inferences imply that happiness is both an evasive and an inconsequential matter, which is at odds with core beliefs in present day welfare society1.

Hadley Cantril, a psychologist, developed a sophisticated and influential measure of well-being. Cantril, a social psychologist carried out an intensive survey in fourteen countries with highly diverse cultures and at widely different stages in socio-economic development, asking open-ended questions about what people want out of life. Cantril calls the technique the ―Self-Anchoring Striving Scale‖:

A person is asked to define on the basis of his own assumptions, perceptions, goals, and value the two extremes or anchoring points of the spectrum on which some scale

1 R. Veenhoven, "Is happiness relative?" Social Indicators Research 24, no. 1 (1991): 1-34. 32

measurement is desired—for example, he may be asked to define the ―top‖ and ―bottom,‖ the good and ―bad,‖ the ―best‖ and ―worst.‖ This self-defined continuum is then used as our measuring device. While the Self-Anchoring Striving Scale technique can be used on a wide variety of problems, it was utilized in this study as a means of discovering the spectrum of values a person is preoccupied or concerned with and by means of which he evaluates his own life. He describes as the top anchoring point his wishes and hopes as he personally conceives them and the realization of which would constitute for him the best possible life. At the other extreme, he describes the worries and fears, the preoccupations and frustrations, embodied in his conception of the worst possible life he could imagine. Then utilizing a nonverbal ladder device [showing a scale from 0 to 10], symbolic of ―the ladder of life,‖ he is asked where he thinks he stands on the ladder today, with the top being the best life as he has defined it, the bottom the worst life as he defined it.

The concept of the ladder to gauge an individual level of happiness has been utilized by many economic studies and well-being indexes.

The National Data Program for the Sciences (NORC) at the University of Chicago has provided the most extensive data of happiness levels in the United States. The

NORC has been conducting the General Social Survey (GSS) since 1972 providing the most longitudinal data for happiness. The GSS assesses well-being through the direct question of, ―Taken all together, how would you say things are these days--would you say that you are very happy, pretty happy, or not too happy?‖ The GSS, although a simpler and smaller scale, provides the same responses as the more complex Cantril measures. Easterlin (1974) used the data from the GSS applying a 1 to 3 scale to the question; 1 being unhappy and 3 being the happiest. The idea is the same, subjective well-being is provided by the individual in their context of happiness. Although the procedures differ in the Gallup poll and Cantril approaches, the concept of happiness underlying them is essentially the same. Reliance is placed on the subjective evaluation of the respondent—in effect, each individual is considered to be the best judge of his own feelings. He is seen as having a frame of reference that defines for him the range of well- being most applicable to himself. 33

Recently (2008), Gallup and Healthway collaborated to develop the all-embracing well-being index for the United States. The Gallup-Healthway Well-Being Index

(GHWBI) measures six domains of well-being. Each domain is determined based on scientific study of responses to the survey questions and include life evaluation, emotional health, physical health, healthy behavior, work environment, and basic access.

The life evaluation domain is based on the ladder scale developed by Cantril (1965).

Emotional health index measures respondents‘ daily experiences with feelings of stress, laughter, sadness, anger etc. Physical health measures the person‘s health by levels of sickness, obesity, energy, etc. Healthy behavior measures lifestyle choices like smoking tobacco or drinking alcohol. Work environment refers to employment status and job satisfaction. Basic access measures the ability of the individual to attain basic needs like water and food. Although all these domains arguably should be acknowledged in an index for well-being, this thesis will focus on life satisfaction as the sole judge of happiness.

The surveys conducted through the GSS, Self Anchoring Scale, or the GHWBI have been found effective in measuring well-being and happiness. Well-being indexes that are rational and have an empirical basis for measuring perceived quality of life, at any of several different levels of broadness, generality, and abstraction have been found to be accurate. Substantial data has been collected from representative national samples which can provide statistical baselines for any of a wide variety of possible quality-of-life measures which may ultimately seem most appropriate (Andrews and Withey 1973, p.24). The accuracy of studies that attempt to assess perceived life quality has been revisited again and again. Andrews and Withy embarked on a major effort to develop 34 measures of perceived life quality. The effort is part of a larger movement within the

United States and a number of other countries to develop an expanded set of social indicators which can be monitored over time. Studies and surveys on well-being have continually encouraged the idea of looking at social indicators like income to understand outside factors in the assessment of well-being.

The data that will be used for the first regression will come from the GSS survey conducted in 2006. The data will use the answers from the respondents for the questions on general happiness, income, general health, and the respondent‘s education level (see survey questions in appendix). The data for the second regression will come from surveys conducted by the GSS from 1972 to 2008 (missing years: 1979, 1981,1992, 1995, 1997,

1999, 2001, 2003, 2005. 2007). To account for income real GDP per capita for the

United States will be used for each year corresponding with the data accumulated from the GSS on happiness. The real GDP per capita was collected through the ERS

International Macroeconomic dataset.

CHAPTER VI

METHODOLOGY

Many studies have been conducted examining certain indicators of happiness or well-being and comparing them with different indicators of income or wealth. A general consensus has been reached that at a point in time those with more income are, on average, happier than those with less. Over the life cycle however, it has been found that those with increasing incomes show no increase in average happiness. Easterlin was the first to assess this paradox that takes place between income and happiness for nations under an extended period of time. The phenomenon that takes place although proven in legitimate studies, has its critics and has not been accepted into standard economic theory. The regressions ran in this study provide an additional examination of the paradox for the United States specifically. By examining the relationship with different data and different approaches we can discover if studying this relationship can provide the theory of economics with valuable insights.

The first hypothesis predicts there will be a positive statistically significant relationship between income and happiness. The hypothesis expects that as you climb from the lower income levels to higher income levels there will be a significant difference in the average mean happiness level. The data studied in the first regression examines data strictly from the year 2006 and the hypothesis is in concurrence with studies examining the point in time relationship. The regression being run on data from

2006 will provide the most recent research done on the relationship for the United States.

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36

The data studied from 1972 to 2008 also offers the most recent evaluation of the relative income theory by using data from 2008. The average mean happiness is predicted to also level out and not increase past the income of $75,000. Meaning the coefficient of the highest income bracket ($110,000 and above) is not expected to be greater than the coefficient of the preceding income bracket ($75,000-109,999). We expect the happiness levels to reach threshold due to the assumption of diminishing marginal utility of income.

The theory of marginal utility describes how the first unit of income yields more than the second and subsequent units. A plethora of research has been conducted analyzing the relationship between income and happiness at a point in time. There is a general agreement in the field of happiness that concurs with the hypothesis. Although the hypothesis is generally accepted the results of the first regression are necessary to conduct the second regression.

The second hypothesis predicts that there will be a statistically significant relationship between the real GDP per capita and the average happiness levels over the period of 1972 to 2008. The regression will use the happiness ratings from the GSS and the real GDP per capita from 1972 to 2008. The hypothesis is similar to the first hypothesis in that it expects the happiness levels to increase with increases in income. As

United State‘s real GDP per capita grows from the year 1972 through 2008 we expect the average happiness level to rise proportionally. We expect this hypothesis due to many of the same reasons for the expectations of the first regression. Even as time passes if an individual‘s income increases then they have an ability to satisfy their basic material needs and achieve financial security. 37

The research done in economics on the relationship between income and happiness over a period of time or life cycle is not in concurrence with the hypothesis.

Many studies have found a paradox between the two relationships, happiness and income at a point in time and over a longer period of time. The hypothesis breaks away from relevant research but is aligned with standard economic theory. Standard economic theory contradicts relevant research and assumes that economic growth is fundamental in achieving higher levels of well-being.

There is an ongoing debate as to the success of economic growth in increasing general well-being. The empirical analysis conducted here employs a different approach using different datasets to examine the relationship. Many of the critics of happiness research argue that studies using happiness indexes are inaccurate and cannot be used authoritatively. The data and the analysis here refute the claim that happiness measures are inaccurate and therefore inconsequential. Happiness has been found to have important implications in previous economic studies. This thesis maintains the value of happiness ratings and seeks to prove their value by establishing their effectiveness.

Using the program STATA 11, a simple linear regression analyzed the data accumulated from the GSS including happiness ratings, income levels, health ratings, and education levels. The second regression analyzed the years between 1972 and 2008 conducted on data from the GSS on happiness ratings and from the ERB on the United

State‘s real GDP per capita.

Using the data from 2006 of the GSS certain income levels are grouped together for a more clear representation of the data. The income groups are grouped into seven categories: less than $10,000; $10 -19,999; $20-29,999; $30-49,999; 50-74,999; $75- 38

110,000; and $110,000 and above. The respondents based their happiness on scale of not too happy=0, pretty happy = 2, and very happy = 4. The average mean happiness is calculated for each income status. The following table reports the distribution of the happiness ratings for each income level:

TABLE 6.1

DISTRIBUTION OF POPULATION BY HAPPINESS AT VARIOUS LEVELS OF INCOME, UNITED STATES, 2006

Total Household Mean income (1996 Happiness Very Pretty Not too (Number of dollars) Rating* happy happy happy cases) All income groups 2.355 37.822 208.143 111.857 2576

Less than 10,000 1.754 43 128 73 244 10-19,999 2.092 86 192 70 348 20-29,999 2.123 69 190 50 309 30-49,999 2.223 131 355 69 555 50-74,99 2.534 170 262 43 475 75-109,999 2.772 140 180 17 337 110,000 and above 2.844 144 150 14 308 Source: National Opinion Research Center (1996). ―Don‘t know‖ and ―no answer‖ responses omitted. *Based on score of ‗very happy‘ = 4, ‗pretty happy‘ = 2, ‗not too happy‘ = 0.

The regression uses happiness as the dependent variable. The independent variables are income, health, and education. The respondents for the GSS regarding income were only required to respond in sets rather than providing their actual data requiring the use of dummy variables. There are eight dummy variables with 7 representing each of the different income brackets and the eighth dummy variable representing all respondents that did not answer the question.

For the health variable respondents reported their general health on a scale of excellent = 1, good = 2, fair = 3, poor =4. The variable of education required respondents to report the highest level of education they received in terms of years from a scale of 1 to 39

20 (1 being 1 year of school completed and 20 being 20 years completed). These two variables were incorporated into the regression to provide context to the dependent variable of happiness. The well-being function used in the regression appears as follows:

H = income1_8 + income1_1 + income1_3 + income1_4 + income1_5 + income1_6 + income1_2 + health + educ

H represents the average mean of the respondent‘s self-reported happiness. The dummy variables are represented as follows; income1_8 = Less than $10,000; income1_1 = $10-

19,999; income1_3 = $20-29,999; income1_4 = $30-49,999; income1_5 = $50-74,999; income1_6 = $75-109,999; income1_2 = $110,000 and above. The variable of health = respondents general health, educ = highest level of education respondent achieved.

A heteroskedasticity test of the regression shows a chi-square of 9.71. The problem of heteroskedasticity was fixed by implementing robust standard error.

TABLE 6.2

REGRESSION WITH HAPPINESS AS DEPENDENT VARIABLE

Linear Regression

Number of observations 1994 F ( 9, 1984) 24.59 Prob > F 0.0000 R-Squared 0.1029 Root MSE 1.12248

Happiness Coefficient t-statistic Less than $10,000 -.518 -0.380 $10-19,999 -.249 -2.19 $20-29,999 -.248 -2.17 $30-49,999 -.241 -2.43 $50-74,999 .058 0.57 $75-109,999 .247 1.36 $110 and above .284 2.44 health -.374 -10.57 education -.00098 -0.11 _constant 3.230 19.62 40

The real GDP per capita was used as a measure to represent average income for the years of 1972 to 2008. The average mean happiness was accumulated through the

GSS by finding the average mean happiness for each year using the same scale used in the first regression of very happy = 4, pretty happy = 2 and not too happy = 0. The following chart presents the real GDP per capita, average man happiness for each of the following years:

TABLE 6.3

HAPPINESS AND REAL GDP PER CAPITA, UNITED STATES, 1972 -2008

Real GDP per Capita Average Mean First Difference (2005 Year (2005 dollars) Happiness Dollars 1972 22,104 2.275 1973 23,155 2.456 1051 1974 22,827 2.496 -328 1975 22,563 2.396 -264 1976 23,536 2.431 973 1977 24,376 2.458 973 1978 25,462 2.496 1086 1980 25,621 2.412 159 1982 25,259 2.321 -362 1983 26,163 2.367 904 1984 27,798 2.436 1635 1985 28,690 2.345 892 1986 29,416 2.418 726 1987 30,139 2.313 723 1988 31,101 2.493 962 1989 31,899 2.459 798 1990 32,135 2.489 236 1991 31,657 2.402 -478 1993 32,713 2.410 1056 1994 33,618 2.331 905 1996 34,906 2.366 1288 1998 37,112 2.393 2206 2000 39,187 2.423 2075 2002 40,050 2.358 863 2004 41,137 2.358 1087 2006 42,725 2.355 1588 2008 43,250 2.281 525 Source for real GDP per capita: ERS International Macroeconomic Dataset 41

A simple time-regression using average mean happiness as the dependent variable, the independent variables were real GDP per capita and the year for each average mean happiness level. The equation for the time-series regression appears as follows:

H = gdppercapita + year

The following chart displays the results of the regression.

TABLE 6.4

REGRESSION OF HAPPINESS AND REAL GDP PER CAPITA FROM, UNITED STATES, 1972 – 2008

Time-series regression

Number of observations 27 F ( 9, 1984) 2.66 Prob > F 0.0908 R-Squared 0.1812 Root MSE 0.06055 Average mean happiness coefficient t-statistic real GDP per capita 0.0000191 1.31 year 0.00884 -1.56 constant 17.250 1.71

Due to a very low R-square, very low coefficients and lack of significance a first difference variable was incorporated into the regression. The first difference may provide a better representation of the significance between the difference in real GDP per capita and the happiness levels from year to year. The following chart displays the results for the first difference regression:

42

TABLE 6.5

REGRESSION OF HAPPINESS AND REAL GDP PER CAPITA WITH FIRST DIFFERENCE

Time-series regression

Number of observations 26 F ( 9, 1984) 4.22 Prob > F 0.0275 R-Squared 0.2048 Root MSE 0.05406 Average mean happiness coefficient t-statistic real GDP per capita -5.43e-06 -2.90 first difference 0.000023 1.31 constant 2.552 47.03

CHAPTER VII

RESULTS

The data shown in Table 1 between income and happiness reveals the positive relationship between the two variables following the predictions made in the hypothesis.

The lowest income bracket has the lowest average mean happiness and the income increases consecutively to a higher income bracket the average mean happiness increases.

This does not establish causality or significance but offers an intriguing view of the two variables. The results of the regression do not follow the hypothesis in regards to the theory of diminishing marginal utility.

The results for the regression conducted using happiness as a dependent variable and the income, health and education levels as independent variables are shown in Table

2. The coefficients and t-statistics of the regression indicate that being a respondent in the four lowest income brackets or having a household income lower than $50,000 has a negative relationship with happiness. The lowest income bracket ($10,000 or less) has the highest significance of all the income dummy variables, -3.80, and the highest coefficient of -.518. This indicates that respondents with the lowest income bracket have the highest dependency upon income to achieve happiness.

The next three income brackets ($10,000 to 49,000) have very similar coefficients and t-statistics with one another. All three variables are statistically significant and have negative coefficients. The coefficients indicate that the respondents for these three income levels share similar characteristics in relation to income and happiness.

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Respondents in each of these income brackets are not as unhappy as the respondents from the lowest income bracket but still maintain a negative relationship between the dependent variable of happiness and the independent variable of income. The following income level ($50,000 to 74,999) lacks significance and has the lowest coefficient of all the independent variables besides education. The income level of $75,000 to 109,999 also lacks significance but still falls just below achieving significance and has a much higher coefficient. The highest income level ($110,000 and above) has a relatively high coefficient and a high significance with a t-statistic of 2.84.

The variables of health and education were included to provide context for the dependent variable, happiness. Health, as expected achieved a high coefficient of -.374 and was very significant with a t-statistic of -10.57. The high coefficient and high t- statistic are to be expected; the reason that they are negative is due to the input of data.

The rating system ranked the highest level of health at 1 with the lowest at 4. The variable of education had a very low coefficient and lacked significance with a t-statistic of -.11. Education was expected to have a positive relationship with happiness. The results of the regression suggest that there is not a relationship between education and happiness.

The reason that the lower income brackets were so dependent upon income for happiness can be explained by the fact that these income brackets cannot achieve enough money to satisfy their financial security. The income bracket of $110,000 and above is statistically significant reinforcing the conclusion that higher income levels produce higher levels of happiness. The highest income bracket also had a higher coefficient than the preceding income bracket rejecting the predicted hypothesis. The results do not 45 follow the law of diminishing marginal utility that expected the coefficients of the two brackets to show no significant difference.

There are certain problems due to the subjective nature of the happiness level as well as the relatively small sample pool. In the lowest income bracket there are respondents that describe themselves as very happy and respondents in the highest income bracket that describe themselves as not too happy. Certain individuals do no nee high levels of income to be happy. But the data shows that for most people a higher income leads to higher level of happiness.

Secondly, data was accumulated from the GSS for the years of 1972 to 2008 for the variable happiness and an average mean happiness was calculated for each year. A more accurate depiction of happiness over time would have required that the same respondents were surveyed year after year. Unfortunately, the GSS does not survey the same respondents for each year requiring an average mean to be calculated for each year.

To account for income, instead of using the incomes of each respondent, data was accumulated for each year for the real Gross Domestic Product per capita. The real GDP is a more accurate measure of the average income of a United State‘s citizen than averaging the income of each of the respondents.

The data presented in Table 3 shows a lack of a relationship between the income

(real GDP per capita) and the happiness levels. The real GDP per capita nearly doubles from the year 1972 to 2008 but the average mean happiness level merely increases from

2.275 to 2.281. A discrepancy is shown between the clear relationship of income and happiness during 2006 and a lack of any relationship across the time span of 1972 to

2008. 46

A time series regression was conducted on the real GDP per capita and the average mean happiness. The results of the regression are displayed in Table 5. The real

GDP per capita has a very low coefficient, which is to be expected, while the t-statistic lacks significance. From 1972 to 2008 there is no statistically significant relationship between income and happiness rejecting the hypothesis predicted. To try and account for differences between years a regression was conducted including the first difference for each year of real GDP per capita.

The data displayed in Table 5 reflects the results of running the regression for each year after applying a first difference. The first difference was used to determine if there was a significant relationship between the changes in the real GDP per capita for each year. Surprisingly, there was a significant relationship with a t-statistic of -2.90.

Although it is significant, the fact that the t-statistic is negative rejects the null hypothesis suggesting the opposite of what was expected.

In general, the change in the real GDP per capita should result in a positive t- statistic indicating that with a one unit increase in the change in the real GDP per capita would mean a unit increase in the average mean happiness level should increase by one unit as well. The coefficient was also practically negligible, -5.43e-06. Although the coefficient is significant the rate at which it is significant is so small that the significance loses merit. By multiplying the real GDP per capita coefficient with real GDP per capita to provide the incremental difference in the happiness level we can achieve a better idea of scope:

-5.43e-06 x $22,104 = 0.120 47

Multiplying the coefficient of the income variable with the real GDP per capita of 1972 results in a small number but is significant to the average mean happiness level. This is explained not by the actual significance in the change in the happiness level but by the constant change of the real GDP per capita. The significance of the t-statistic is determined significant but not clinical in that the significance does not reflect the relationship between income and happiness accurately.

The discrepancy found between happiness over time and a point in time can be explained by a number of different reasons. Happiness is affected by many different variables; the regression only accounts for one of those variables, income. A more detailed approach that incorporates variables and understands year-by-year fluctuations is necessary to understand why the average mean happiness is lower in some years than in others. An argument can be made to justify the lack of significance against the measure of happiness. The measure of happiness proved to be valid for the regression run in

2006; why would the measure not be valid over the almost forty years time period? This may be due to changed preferences of the respondents. A deeper analysis of how happy people consider themselves each year is necessary to account for the subjective nature of happiness. The culture and the people surveyed changed dramatically from 1972 to

2008 and could explain fluctuations of the happiness levels.

Although there are many different variables that need to be accounted for using happiness as a dependent variable, the data and the results are still useful and compelling.

The comparison between average mean happiness and real GDP per capita presents a rather stark difference to the comparison between income and happiness just in 2006.

This discrepancy is consistent with relevant time-series economic research done on time- 48 series and cross-sectional data from Europe and countries in Asia. In almost every study done there is a significant positive bivariate relationship between happiness and income.

The question that remains is as GDP grows substantially in countries why is the level of happiness not growing?

One reason that has achieved popularity is the idea of relative income. People judge their income relative to the incomes of people around them. This would explain the phenomenon that as GDP is doubling; people‘s levels of happiness are not. No matter how much money you receive it is dependent on how much money people receive around you. As everyone‘s income levels grew there is no change in their level of happiness even though they have more wealth and material things. This concept has serious policy implications; do we really need to continue to make policies that attempt to accelerate our growth? Is an increase in GDP per capita an actual measure of well-being or strictly a measure of the amount of good/services produced within a country? The next chapter will provide a more detailed explanation behind the mystery of the paradox of happiness.

CHAPTER VIII

CONCLUSION

―We must acquire a life style which has at its goal maximum freedom and happiness for the individual, not a maximum Gross National Product.‖ Paul Erlich

By analyzing human well-being through the relationship between income and happiness we can refine our judgment of social well-being while also opening the debate to basic and accepted principles of economics. Economic theory is founded on the objective of economic growth, efficient allocation and fair distribution of resources; even though this -based neo-classical ideology is effective it is limited by certain assumptions. Economic growth serves as an ideology that promises financial security and a higher level of well-being. The body of research reviewed here examines the successfulness of economic growth but also raises serious questions with respect to the use of GDP as a measure of our welfare, and the limiting and inhuman role assigned to individuals in economic models. Recognizing certain shortcomings in economic theory is critical for the United States and the way we utilize the study of economics.

Examining the relationship between respondents‘ measure of their own happiness and their household income has established that those with higher incomes are for the most part happier. Then by analyzing respondents‘ measures of their own happiness over the past 40 years against the United States real GDP per capita we can observe that higher income is not tied to greater happiness at a macro-level. Economists and government officials both use economics to construct policies that increase our GDP on the basis that

49

50 this will increase our national well-being but a rigid application of this economic theory may be erroneous.

A strong relationship between income and happiness is to be expected. Results from the regression conducted on data from 2006 reveal that individuals with higher incomes are generally happier. Although many do not like to believe that money buys happiness, the reasons for this to occur may be rather simple. Earning enough money is necessary to provide basic human needs like food and shelter. Beyond our basic needs money can provide material things that increase our happiness. Earning a higher income can also provide people with a feeling of status and superiority over people around them.

Interesting, the law of diminishing marginal utility of income was not evident in the results. One hypothesis to explain this absence is that once people can satisfy their basic human needs and free of the stress and discomfort of struggling to survive they are free to be happy. Therefore the correlation we observe between income and happiness may be driven by the impact on personal well-being of reaching a threshold survival-enabling income, which allows individuals to experience happiness regardless of the incremental monetary value they obtain from income past this threshold. Given this hypothesis we would expect money, or income, past a certain point, is in fact immaterial to happiness.

The strong relationship found between happiness and income in 2006 is incongruent with the non-existent relationship found between the two variables between the years 1972 and 2008. The results found that there was a statistically significant relationship between income and happiness in 2006 and a lack of significance for the years 1972 to 2008. The apparent paradox that occurs between the two variables at a point in time and the two variables over time is important and disconcerting. The results 51 suggest that our tremendous growth in GDP does not in fact improve our subjective well- being. These findings are congruent with findings in past studies that analyze different indicators for income and happiness throughout the United States, across Europe, and into Asia.

Determining exactly why the paradox occurs between happiness and income at a point in time and over time is difficult. There are many theories attempting to explain the puzzling anomaly. A prominent and accepted theory of relative income suggests that utility depends on income relative to some reference or comparison income of individuals or households in similar economic circumstances as your own. Samuel Johnson was accurate when he declared, ―Life is a progress from want to want, not from enjoyment to enjoyment‖.1 This would explain that as households receive higher incomes they are not becoming happier.

The theory of relative income suggests that because of our human nature as we become richer we do not become happier. The theory encourages questions about both economic science and economic policy for blind obeisance to aggregate material

―progress,‖ and for neglect of its costly side effects. Disillusioned critics indict economic growth making the claim that it distorts national priorities, worsens the distribution of income, and irreparably damages the environment.2 A critical assumption of economic growth disregarding its negative implications stated above is an increase in economic well-being. Economic growth is charged by the notion that it sustains our market,

1 Easterlin, "Income and happiness: Towards a unified theory," The Economic Journal (2001): 465-484.

2 William D. Nordhaus and James Tobin,‖Is Growth Obsolete?‖ The Measurement of Economic and Social Performance (1973): 510-532. 52 increases the wealth, and ultimately promotes our well-being. But what if this assumption is wrong and that economic growth does not truly have the desired effects?

Ideally economic growth provides more money, more jobs and spurs technological advancement. The neoclassical model institutes measures that advance technological knowledge and measures that increase the share of potential output devoted to accumulation of physical or human capital. Capitalism is essential to advancing but there needs to be a balance between the capitalistic drive to advance in science and technology, and using sustainable practices and accounting for our social well-being.

This thesis intends to raise questions that examine the effect of economic growth on our happiness as well as the impact it has on our environment. The idea is to put value on aspects of our economy that do not have price tags but are invaluable like open space and air, our oceans and forests.

How can we account for our natural resources and well-being while sustaining our economic growth? Governments should strive to incorporate more personal and socially conscientious measures within their policies. Economic growth is not the only avenue to increased well-being; we have to understand how to increase our well-being through sustainable economic development.

Along with criticisms of economic growth as the sole objective, economists have raised doubts to the accuracy of Gross Domestic Product as measure of economic welfare. An obvious shortcoming is that it is an index of production rather than consumption, while the goal of economic activity is consumption. Nordhaus and Tobin constructed an alternative to GDP and propose a ―measure of economic welfare‖ (MEW) in an attempt to account for certain discrepancies that occur between the GDP and 53 economic welfare.3 Their adjustments to GDP fall into three major categories: reclassification of GDP expenditures as consumption, investment, and intermediate products; imputation for the services of consumer capital, for leisure, and for the product of household work; correction for some of the disadvantages of urbanization. Although the MEW still does not provide a measure of happiness, it is arguably a better measure than the GDP or GNP.

The study of well-being through the lens of economics hopes to make progress not only through the application of utility but in the limiting and simple form of that economics applies to individuals in models of behavior. Departing from the narrow application of utility instituted during the Ordinalist revolution, utility can offer more than insights into the preferences of a consumer and can allow us to examine the relation of a human being to a good or service. The historical use of utility in standard economics did not allow for the measurement of well-being or happiness because of its subjective nature. The results discovered in this thesis demonstrate how the narrow application of utility can be expanded and provide useful insights into the interaction between the study of economics and human nature. The expansive structure of economics allows economists to break away from the traditional economic studies and use empirical evidence to measure more subjective matters like happiness.

Beyond the term utility, the real limiting agent of economics is found in an excessively restrictive portrait of human nature and human motivation; namely in individualistic anthropology, which states that behind economic action there is an individual who has no other determination than that of homo oeconomicus (the

3 Ibid. 54 assumption that an individual will only pursue his selfish economic gain).4 More specifically, the ineptitude of conventional economic theory to adequately address the happiness issue is to be attributed to a philosophical stance for which individuals are isolated in an atomistic theoretical construct.5 As a result, models are generated where what is analyzed is essentially selfish and egotistical behavior: the understanding of mental states of the other is simply not considered at all, nor are the sympathy and empathy given a proper role in the explanation of economic decisions in interactive contexts.

Emma Rothschild reports from the 1770s regarding how ―economic life was intertwined, in these turbulent times, with the life of politics and the life of the mind.

Economic thought was intertwined with political, philosophical, and religious reflection.

The life of cold and rational reflection was intertwined with the life of sentiment and imagination.‖6 Perhaps we need to refer back to these times and understand that economics is more effective and accurate when it is applied using tools and knowledge gained from other disciplines.

In applying economics to the investigation of happiness, economics can utilize a more holistic approach that incorporates human nature into models of human behavior.

This radical notion is simple and logical—treat humans like humans. Incorporating findings of the human psyche from psychology, sociology, and politics into economic models of behavior creates a more valid and realistic model. Studying happiness through

4 Luigino Bruni and Pier Luigi Porta, Economics and happiness: framing the analysis, (Oxford; New York: Oxford University Press, 2005), 1-366.

5 Bruni and Porta, 303.

6 Emma Rothschild, Economic Sentiments: Adam Smith, Condorcet, and the Enlightenment, (Cambridge: Havard University Press, 2002), 1-366. 55 economics should allow governments to incorporate a more mindful approach to constructing public policy. All academics strive to progress and make advancements in their particular study. Important in progression is challenging fundamental accepted truths. The research here strives to challenge the accepted notion that money buys happiness and that economic growth promotes the betterment of society. The ultimate goal is to prompt a debate that questions the anthropological foundations of economic discourse and to make the inquiry into not simply the wealth of nations but rather the happiness of nations.

CHAPTER IX

APPENDIX

Survey:

Questions from the General Social Survey for each variable used in the regression:

HAPPY: Categorical (Single) Taken all together, how would you say things are these days--would you say that you are very happy, {response to happytxt1}, or not too happy?

Categories: {very_happy} Very happy {pretty_happy} {response to happytxt2} {not_too_happy} Not too happy {dontknow} DON'T KNOW {refused} REFUSED

Variable income06 : TOTAL FAMILY INCOME Literal Question In which of these groups did your total family income, from all sources, fall last year – 2005 – before taxes, that is. Just tell me the letter.

Categories: {a} A. UNDER $1,000 {b} B. $1,000 to 2,999 {c} C. $3,000 to 3,999 {d} D. $4,000 to 4,999 {e} E. $5,000 to 5,999 {f} F. $6,000 to 6,999 {g} G. $7,000 to 7,999 {h} H. $8,000 to 9,999 {i} I. $10,000 to 12,499 {j} J. $12,500 to 14,999 {k} K. $15,000 to 17,499 {l} L. $17,500 to 19,999 {m} M. $20,000 to 22,499 {n} N. $22,500 to 24,999 {o} O. $25,000 to 29,999 {p} P. $30,000 to 34,999 {q} Q. $35,000 to 39,999 {r} R. $40,000 to 49,999 {s} S. $50,000 to 59,999 {t} T. $60,000 to 74,999 56

57

{u} U. $75,000 to $89,999 {v} V. $90,000 to $109,999 {w} W. $110,000 to $129,999 {x} X. $130,000 to $149,999 {y} Y. $150,000 or over {dontknow} DON'T KNOW {refused} REFUSED

HEALTH: Categorical (Single) Would you say your own health, in general, is excellent, good, fair, or poor?

Categories: {excellent} Excellent {good} Good {fair} Fair {poor} Poor {dontknow} DON'T KNOW {refused} REFUSED

Variable educ : HIGHEST YEAR OF SCHOOL COMPLETED Literal Question Now just a few more background questions.

15 - 22. ASK ALL PARTS OF QUESTION ABOUT RESPONDENT BEFORE GOING ON TO ASK ABOUT R'S FATHER; AND THEN R'S MOTHER; THEN R'S SPOUSE, IF R IS CURRENTLY MARRIED.

A. What is the highest grade in elementary school or high school that (you/your father/ your mother/your [husband/wife]) finished and got credit for? CODE EXACT GRADE.

B. IF FINISHED 9th-12th GRADE OR DK*: Did (you/he/she) ever get a high school diploma or a GED certificate? [SEE D BELOW.]

C. Did (you/he/she) complete one or more years of college for credit--not including schooling such as business college, technical or vocational school? IF YES: How many years did (you/he/she) complete?

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