Exam #4 Friday, Dec. 14, 8-10 a.m.

1. Exam #4Friday, Dec. 14, 8-10 a.m. Review sheet and PowerPoint lectures from Monday and today are on the website www.as.ysu.edu/~tsporter

6. Happiness Economics • Differs from mainstream approach: • Assumes some measurement of happiness is possible • Based on survey data • Survey data results consistent with physiological data

7. Happiness and Income • Studies comparing the happiness of people within a country have found: • People with higher incomes report higher levels of happiness but the relationship is weak • Increases in income result in smaller and smaller increases in happiness (losses reduce happiness more than equally-sized gains)

8. “What Can Economists Learn from Happiness Research?” Bruno Frey and Alois Stutzer

9. Happiness and Income, cont. • Marriage and friends have a larger impact on happiness (US surveys suggest that the effect of divorce on happiness is equivalent to a loss of $100,000) • Unemployment has a negative effect larger than expected from the loss of income (estimated impact of job loss: $60,000 from US data)

10. Happiness Across Countries • Comparisons of happiness across countries have found: • There is a positive relationship between income and happiness but it is weak • Democracy and level of corruption have a significant effect on happiness • Inequality can negatively affect happiness, especially if institutions are suspect

13. “What Can Economists Learn from Happiness Research?” Bruno Frey and Alois Stutzer

14. Easterlin Paradox Increases in average income in countries typically do not result in reported happiness. Happiness does not seem to change much over the lifecycle in spite of changes in income

15. Possible Explanations for the Easterlin Paradox • Thermostat hypothesis • Relative vs. absolute income levels • Aspiration theory

16. References: Frey, Bruno S. and Alois Stutzer. 2002. “What can Economists Learn from Happiness Research?” Journal of Economic Literature. 60(June): 402-435. Graham, Carol. “The Economics of Happiness.” The Brookings Institute http://www.brookings.edu/views/papers/graham/2005graham_dict.pdf

17. Wealth and Happiness Listen Now: [3 min 30 sec] Real MediaExplain these links All Things Considered, January 4, 2002 · Does money buy happiness? Economists discussed this question at a conference in Atlanta today. We hear from some people at a Washington, D.C., automatic teller machine about their thoughts on the subject. And we hear the comments of Richard A. Easterlin, an economics professor at USC, who has studied the relationship between money and happiness. http://www.npr.org/templates/story/story.php?storyId=1135830

18. Money and Happiness by Mike Pesca Listen Now: [3 min 30 sec] Real Media|Windows MediaExplain these links Day to Day, August 27, 2003 · NPR's Mike Pesca talks to USC economics professor Richard Easterlin about the economics of happiness. Easterlin has published a study which finds money does not always equal happiness. http://www.npr.org/templates/story/story.php?storyId=1413687

19. Economist Calculates the Six-Figure Value of Love by Renee Montagne and Steve Inskeep Listen Now: [2 min 20 sec] Real Media|Windows MediaExplain these links Morning Edition, February 14, 2005 · You don't have to have a lot of money to feel rich. Economist David Blanchflower calculates that being married is the emotional equivalent of an extra $100,000 a year. http://www.npr.org/templates/story/story.php?storyId=5532618