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Masters of Degrowth: Week 12.2 Happiness application and case studies on income loss


 

Income loss (consumption decline) and happiness

Hapiness can evolve in two directions in a degrowth setting:

1: Hedonic adaptation: if happiness tends to adapt to income increases perhaps it adapts to (redistributive) decreases in excess income (consumption) (as long as basic material needs are still provided)?

  • Di Tella et al. (2010) do not find proofs for automatic increases in subjective well-being after a rise in earnings, nor for a decline in happiness following income decreases in longitudinal data on income.
  • Graham et al. (2003) (data on Russia) find that those who suffered income losses suffered no additional effect of the income loss (apart from the effect of losing per se)
  • Sekulova & Van den Bergh (2013) Having a lower income in the present year (2011) in comparison with last year does NOT reduce happiness.
    • More (free) time for meaningful activities?
    • Basic needs still served? (savings, social benefits)
    • Declining reference income/income aspirations?
But in the case of extreme climate events, there is no evidence of adaptation to trauma or non monetary losses.  A case study is the impact on happiness of the floods that happened in Bulgaria in 2011.

  • Flood intensity/scale matters: severe damage leads to a permanent decrease in subjective well-being by almost one unit,heavy damage reduces life-satisfaction by approximately half a point.
  • Recent episodes of flooding have a more pronounced effect.
  • Worrying about extreme climate events has a strong negative effect on happiness
The effect of extreme climate effects like floods (on life satisfaction) does not completely disappear with time. Evaluating climate change through the lens of subjective wellbeing allows for a direct assessment of the intangible and key aspects of life (emotional, psychological, and social) which are virtually meaningless when represented in monetary terms. The damage caused by surpassing the planetary biophysical thresholds can be considered irreversible not only biophysically, but also in terms of human well-being. The discomforts of living in a state of climatic instability cannot be simply offset by material growth.



2: Social comparison: if increasing the income of everyone does not increase the happiness of everyone,
redistributive decreases in excess income (consumption) might not reduce happiness?

Easterlin (2021)
  • When GDP is increasing, what is a ‘good’ income (our internal and external reference income level) is determined primarily by social comparison.
  • In periods of GDP decline, people are aware that most others are in the same financial predicament, and if social comparison predominates, or their income ranking (reference level) stays the same there would be no change in happiness.
  • Yet, knowing that others are in the same boat does not help deal with the necessity of meeting one’s own basic needs and bills. Hence financial hardship actually drives happiness losses in periods of macroeconomic decline.

Should SWB guide public policy (towards degrowth)? In what ways?

  • Should we judge countries’ progress upon the level of SWB rather than the market value of all goods and services produced?
  • Movement Beyond GDP, following a report by Stiglitz, Sen, and Fitoussi (2009)
  • The 2015 World Happiness Report argues that “Happiness is increasingly considered a proper measure of social progress and a goal of public policy“
  • “Happy people live longer, are more productive, earn more, and are also better citizens. Well-being should be developed both for its own sake and for its side-effects.” 
  • The World Happiness Report, (Helliwell et al. 2013) “We provide evidence, for a classic piece - rate setting, that happiness makes people more productive” (Oswald 2014) 
  • The Korean Five-Day Working Reform (from 6 working day) resulted in greater working hours satisfaction but not with higher life-satisfaction (Rudolf 2013)
  • A wealth of research shows that materialistic values (focusing on income growth) have been associated with low self-esteem, emotional well-being and various other psychological paramenters; People’s well-being improves as they place relatively less importance on materialistic goals and values, whereas orienting toward materialistic goals relatively more is associated with decreases in well-being over time. (Kasser et al. 2013)
On the validity of self reported SWB accounts:

  •  the variability in global SWB judgments and personality ratings is relatively small and much smaller than the variability in mood. (Eid and Diener (2003)
  • Kruger and Schkade (2008) analyze the persistence of subjective well-being indicators over a two-week period for a sample of 229 working women. They found that both overall life satisfaction measures and affective experience measures derived correlate in the range of .50–.70. While these figures are lower than the reliability ratios typically found for education or income, they are probably sufficiently high to yield informative estimates for much of the research that is currently being undertaken on subjective well-being,
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