Subjective Wellbeing and Economic Development ...

Subjective Wellbeing and Economic DevelopmentContent Analysis from Review Satabdi Roy Choudhury Research Scholar, Department of Business Administration, Assam University, Silchar-788011

& Dr. Arup Barman, Associate Professor, Department of Business Administration, Assam University, Silchar-788011 Email: [email protected]

Abstract The paper focuses on the connection between economic development and its influence on subjective well-being. It comprises of the effects of income growth on cognitive life satisfaction and affective experience of a person. It also talks about the impact on subjective well-being levels of a developed economy and a developing economy due to income growth. The paper conceptualizes an overview of how absolute income and relative income influences subjective well-being. The paper also focuses on the various estimates of absolute income which are within country, cross-country and time series analysis. In this study the domain satisfactions like job satisfaction, financial satisfaction etc. are dependent variables and income is the independent variable. These domain satisfactions again sum-up to give the whole life satisfaction measure. The affective experience is also considered as a dependent variable.

Introduction: Definition and Inter-linkages between Subjective Well-Being and Economic Development The dream of living a happy life free from misery has always fascinated the human minds. Everyone wants to live a happy life. But people are confused of whether they are happy or not. So, gradually they formed measures to calculate the quality of their lives. In this quest, conceptions of subjective well-being or happiness have a distant tradition as key elements of „quality of life‟. Subjective well-being is often measured by life evaluations which capture a reflective assessment on a person‟s life or some specific aspect of it. This can be an assessment of “life as a whole” or something more focused. Such assessments are the result of a judgment by the individual rather than the description of an emotional state. Another process termed as affect measurement, captures personal feelings to measure subjective well-being. Beside life evaluations and affect measurement, people‟s psychological processes are also assessed for measuring subjective well-being, which is known as eudaimonia. But quality of life is often confused with „standard of living‟, which is primarily based on income. Rather standard of living is a part of quality of life, which is influenced by economic development. This paper deals with the affect of economic development on subjective well-being. The Easterlin paradox suggests that there is no link between the level of economic development of a society and the overall happiness of its members (Stevenson B. and Wolfers J., 2008). According to Robbins, the main component of economic development is income growth. While exploring about the facts of income, income was found to be categorized into two types: absolute income and relative income. In the absolute income interpretation, greater income is associated with greater well-being because of the advantages of greater prosperity: higher

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consumption, more choices, and fewer constraints for survival. In the relative income interpretation, having more money than others within a country matters because we like having more money than other people: we want to have bigger bank accounts, bigger houses, and fancier cars than our peers. If only absolute income matters, then when everyone gets richer, everyone‟s well-being should rise. But if only relative income matters, then when everyone gets richer, no one‟s well-being should rise, since no one gets richer relative to the average. [Sacks D. W., Stevenson B. and Wolfers J., (2012)] Many researchers cast a doubt on the Easterlin Paradox. Thus, they form three parameters for analyzing the effects of absolute income and relative income on subjective well being. These three parameters were within-country, cross-country, and time-series estimates. According to studies, “all point to a quantitatively similar relationship between subjective well-being and income” [Sacks D. W., Stevenson B. and Wolfers J. (2010)]. This fact also suggests that absolute income is more important and relative income is less important. Thus, the findings also show that Easterlin Paradox suggesting there is no long-term relationship between well-being and absolute income is irrelevant. Although the results are not precise enough to rule out the importance of relative income in well-being. A question arises that whether subjective well-being influences economic development or economic development influences subjective well-being. The first case can be considered as topdown causation where subjective well-being produces certain outcomes and the second case can be considered as bottom-up causation where particular variables cause subjective well-being. The article of [Heady B., Veenhoven R. and Wearing A., (1991)]

talks about a two-way causation, which means both variables are causes and consequences of each other. Conceptualising Subjective Well-Being: Subjective well-being involves “a multidimensional evaluation of life, including cognitive judgments of life satisfaction and affective evaluations of emotions and moods” (McGillivray and Clarke, 2006). “Subjective well-being is a function of both the individual‟s personality and his or her reaction to life events.” (Stevenson B. and Wolfers J., 2008) Subjective well-being is multifaceted; it includes both how happy individuals are at a point in time and how satisfied they are with their lives as a whole. (Sacks D. W., Stevenson B. and Wolfers J., 2010) “Subjective well-being is a broad category of phenomena that includes people‟s emotional responses, domain satisfactions, and global judgments of life satisfaction.” [Diener E., Suh E. M., Lucas R. E. and Smith H. L. (1999)] “The happy person is a young, healthy, well-educated, well-paid, extroverted, optimistic, worry-free, religious, married person with high self-esteem, job morale, modest aspirations, of either sex and of a wide range of intelligence” (Warner Wilson, 1967) Happiness vs. Subjective Well-Being: Some economists use the phrase “subjective well-being” as a synonym for “happiness” but in psychology, happiness is a narrower concept than subjective well-being. Some researchers provide clarification on the differences between happiness and subjective well-being. “Three separable components of subjective well-being have been identified: positive affect, negative affect, and life satisfaction. The first two components refer to the affective-emotional aspects of the construct; the latter to the cognitive-judgmental aspects.” [Diener E., Emmons R. A., Larsem J. R., & Griffin S. (1985)] Other explanations tell us that: “Subjective well-being can be measured with the satisfaction levels of a person. Satisfaction can be divided into two broad categories: General Satisfaction and Domain Satisfaction. General satisfaction is „satisfaction with life as a whole‟ and domain satisfactions can be health satisfaction, financial satisfaction, and job satisfaction.” [Van Praag B.M.S., Frijters P., Ferrer-i-Carbonell A. (2001)] Happiness is different from life satisfaction. “Although both happiness and life satisfaction are components of subjective wellbeing, life satisfaction reflects individual‟s perceived distance from their aspirations while happiness results from a balance between positive and negative affect. Subjective well-being is a synonym of “being happy” (the Aristotelian approach of happiness as eudaimonia) whereas concepts such as “satisfaction” and “happiness” are considered “feeling happy” (a hedonic approach).” (Conceicao P. and Bandura R., 2008)

Conceptualizing Economic Development: A successful theory of economic development needs mechanics that are consistent with sustained growth and with sustained diversity in income levels.

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There is no one pattern of growth to which all economies conform, so a useful theory needs also to capture some forces for change in these patterns, and a mechanics that permits these forces to operate. Economic growth and economic development are two distinct fields. Growth theory is defined as those aspects of economic growth which we have some understanding of, and development is defined as those we don‟t. (Lucas Jr. R. E., 1988) Nowadays, economic development is used in the sense of the „theory of production‟, which relates to the movements in real income per head and to potential in this respect. Real income is conceived as a stream of availability of goods and services as distinct from the experiences or satisfactions to which it gives rise. (Robbins L., 1968) Influence of Economic Development on Subjective Well-Being (Conceptual Review): There are several conceptual models that purport to explain the relation between income and subjective well-being. Livability theory1 is based on the idea that income increases subjective well-being only insofar as it allows people to meet their inborn needs. In this model, income should have large effects on subjective well-being in poor countries, and at lower levels of income within wealthy nations, because it is here that income influences whether a person can meet needs such as for food, shelter, and clothing. According to this theory, however, subjective well-being should not differ between most income groups in affluent countries, or between the most affluent groups in poor nations, because above a certain level of income all individuals will have met the needs for which money can buy fulfillment. Another variable standard on which people might judge their income is their past riches. Range-frequency theory2 tells that people‟s reactions to current events are based on the context provided by past events happening to that person. Because circumstances in the person‟s past life provide the context against which new events are judged, events that are better than this context will be judged positively. In this general approach, one would be satisfied with one‟s material standing if it were higher than one‟s past income. The culture approach provides yet another explanation for national differences in subjective well-being relative to income. In this tradition, differences in happiness are likely to be partly due to what people value. If people highly value happiness are likely to be partly to earn more of it. Furthermore subjective well-being would result from an interaction between values and money, with high income producing high happiness only in those societies (or individuals) where money is highly prized. Thus a key in the culture approach to explaining the relation between income and subjective well-being is to understand the value people in different cultures place on material prosperity, since this is likely to moderate the effects of income on subjective well-being. An approach that combines elements of each of the other approaches is the material desires concept. In this model, people will be happy to the extent that they can obtain the things they desire, or at least make progress toward those aims. If there is 1

Livability theory proposed by Veenhoven (1991, 1995) describes the livable conditions of a given city or nation, which determines whether the nation is fit to live in or not. 2 Range-frequency theory proposed by Parducci (1995) describes how judgments reflect a compromise between a range principle that assigns each category to an equal subrange of contextual stimuli and a frequency principle that assigns each of the categories to the same number of contextual stimuli.

no possibility of ever obtaining something that is highly desired, it is predicted that dissatisfaction will result. However, desires can change, and therefore a person may adjust their goals to cope with a situation in which an aim cannot be reached. Similarly a person might raise their aspirations if they have been very successful in an area. The goal model can accommodate the needs approach because it is recognized that a person‟s physical needs usually have a strong influence on his or her desires. People usually want good food, appliances, clothes, and protective housing, for example, because of the needs they fulfill and comfort they provide. The goal approach can also subsume the relativistic approach because it is recognized that what others possess sometimes influences what a person desires. However, a person may desire to give up some of the goods of the past, and in this case having fewer material possessions might be related to higher subjective well-being. Finally, the material desires approach can subsume the aspects of the culture approach related to people‟s values and goals for material goods and services. In sum, the material desires approach predicts that the relation between income and happiness will depend on the number of people‟s material desires that can be met, and this approach predicts that needs, social comparisons, and past income are relevant insofar as they influence current desires. (Diener E. and Oishi S., 2000) The relationship between income and life satisfaction is well known and admits at least two interpretations. The first interpretation is that greater earning capacity makes people satisfied with their lives: it purchases health care; allows people to enjoy their leisure time with fancier food and TVs; and affords them freedom from financial stress. A second interpretation, however, is that people care less about money than about having money relative to some reference point (Sacks D. W., Stevenson B. and Wolfers J., 2010). One concern about economic development is the potential for ruining the environment. Not only does wealth production require the use of natural resources such as trees, minerals, and oil, it also produces byproducts that can pollute water, air, and land. Another concern with material prosperity as a major goal is that it might redirect attention from more important aims such as love, selfdevelopment, and spirituality. Perhaps the pursuit of money will distract us from endeavors that are essential to human well-being. (Diener E. and Oishi S., 2000) A positive happiness-income relationship typically turns up in international comparisons. A developing country which has low levels of GDP per capita and whose basic needs are not satisfied only shows a positive happiness-income relationship. But, in the view of (Stevenson B. and Wolfers J., 2008) the positive incomehappiness relationship holds for both developed and developing nations.

Review of Research: The early researches were concentrated on understanding the notion which was known as subjective wellbeing or happiness. The study made by Conceicao P. and Bandura R. (2008) on “Measuring Subjective Wellbeing: A Summary Review of the Literature” provides an overview of the growing literature on subjective well-being or more commonly known as “happiness”. In this work the authors derived that well-being cannot be captured solely by GDP. Well-being is multidimensional

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encompassing all aspects of human life. They used two approaches: objective measures and subjective measures. Objective indicators are used to complement, supplement or replace GDP. Subjective measures are implemented by asking people to report on their happiness and life satisfaction. The paper presents the main findings from the literature on the economic and non-economic determinants of happiness. The paper also shows that happiness indicators possess some limitations as measures of well-being. Understanding of well-being continued over decades and the concept evolved with time. The study conducted by Diener E., Suh E. M., Lucas R. E. and Smith H. L. (1999) on “Subjective WellBeing: Three Decades of Progress” tries to understand the causal pathways leading to happiness, understand the processes underlying adaptation to events, and develop theories that explain why certain variables differentially influence the different components of subjective well-being (life satisfaction, pleasant affect, and unpleasant affect). The methods used by the author are causal modeling, longitudinal studies, global self-report measures, global life satisfaction, impression management: comparing inperson interviews to anonymous questionnaire, experience sampling method, scoring qualitative descriptions of people's lives, measuring reactions to emotionally ambiguous stimuli, recording people's memories for good and bad events, physiological measures such as salivary cortisol levels. General satisfaction is „satisfaction with life as a whole‟ and domain satisfactions can be health satisfaction, financial satisfaction, job satisfaction, housing satisfaction, leisure satisfaction and environment satisfaction. General satisfaction with life is explained by domain satisfactions. In the domain satisfactions, financial satisfaction and housing satisfaction complements the economic development or vice-versa. Financial satisfaction and housing satisfaction depend upon one variable, the income growth. (Van Praag B.M.S., Frijters P., Ferrer-i-Carbonell A., 2001) The best available summary indicator of human well-being is how long and happily a person lives. Improving the human well-being of the poor is best served by equipping these same people to be agents of their own development. This involves increasing the effectiveness of social structures, which will require addressing inequality across an array of dimensions. Four qualities of life: a) Life-ability of the environment b) Life-ability of the individual c) External utility of life and d) inner appreciation of life. Conceptualization of human well-being is very rich, its empirical operationalization is still lagging behind. It is better to distinguish four distinct life qualities rather than quality of life. (McGillivray M. and Clarke M., 2006) The self stands at the junction of subjective well-being and culture. Culture provides form and shape to the self, which in turn influences how individuals feel and think about various aspects of their lives, which is the central research issue of subjective wellbeing. Given its overlapping intersections with both culture and subjective experience, the self holds a key in unraveling the complex relation between culture and subjective well-being. Western theories of psychological well-being are firmly established on a highly individuated self concept; individuals are

believed to be metaphysically discrete and separate from others just as their physical bodies are. (Suh E. M., 2000) In this regard various theories are formed. The five basic approaches towards theories of well-being are: Hedonistic theories, Desire theories, Authentic Happiness theories, Welfare Eudaimonism (or “self-fulfillment”) theories, List theories. Hedonism identifies well-being with pleasure. Well-being consists in a subject‟s balance of pleasant over unpleasant experience. The desire theory of well-being, also called the desire or preference satisfaction or fulfillment account identifies well-being with the (actual) satisfaction of the individual‟s desires. Authentic happiness is a view where one‟s happiness is both informed about the conditions of one‟s life and autonomous, meaning that it reflects values that are truly one‟s own and not the result of manipulation or oppressive social conditioning. Welfare eudaimonism is an approach to wellbeing where we start with a conception of human nature or the self, and take well-being to consist in the fulfillment of that nature. Aristotelian views form the best-known variety of eudaimonism. List theories of well-being identify well-being with some brute list of goods, such as knowledge, friendship, accomplishment, pleasure, etc. (Haybron D. M., 2009) Previous researchers have generally assumed that variables as domain satisfactions, social support, life events, and levels of expectation and aspiration are causes of subjective well-being. Critics have pointed out that they could just as well be consequences. In some contexts this has been referred to as the top-down versus bottom-up controversy. The main purpose is to propose a general statistical model which holds promise of resolving this controversy. The model can be used when three or more waves of panel data are available. The study conducted by Heady B., Veenhoven R. and Wearing A., (1991) on “Top-Down versus Bottom-Up theories of Subjective Well-Being” assesses causal direction between six domain satisfactions (marriage, work, leisure, standard of living, friendship and health) and subjective well-being. Most researchers have held a bottom-up view of links between domain satisfactions and life satisfaction. Even those who have recognised the possibility of top-down causation have tended to pose the issue in either-or terms; either all relationships must be top-down or all bottom-up. The results found in this research complicated the picture. The marriage domain is characterized by two-way causation. The work, leisure and standard of living domains show top-down causation, and the observed correlations between life satisfactions and both friendship and health satisfaction appear to be spurious. Psychologists gave a more mind and soul related answer towards understanding subjective well-being. But for validating their answers a scale was needed that would measure the life events. The study made by Diener E, Emmons R. A., Larsem J R, and Griffin S., (1985) on “The Satisfaction with Life Scales” reports the development and validation of a scale to measure global life satisfaction, the Satisfaction with Life Scale (SWLS). Among the various components of subjective well-being, the SWLS is narrowly focused to assess global life satisfaction and does not tap related constructs such as positive affect or loneliness. The SWLS is shown to have favorable psychometric properties, including high internal consistency and high temporal reliability. Scores on the SWLS correlate moderately too highly with other measures of

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subjective well-being, and correlate predictably with specific personality characteristics. It is noted that the SWLSs suited for use with different age groups, and other potential uses of the scale are discussed. The study made by Samman E. (2007) on “Psychological and Subjective Well–Being: A Proposal for Internationally Comparable Indicators” sets out a proposal to measure psychological and subjective states of wellbeing in individual and household surveys. In particular, it proposes a shortlist of seven indicators, and a module containing the relevant questions needed to construct them. The indicators address both eudaimonic and hedonic criteria, and cover four aspects of well-being: (1) meaning in life; (2) relatedness, following self-determination theory; the three “basic psychological needs” of autonomy, competence and relatedness; (3) domain-specific and overall life satisfaction; and (4) happiness. The article recommends that further research explore the connections between these indicators, as well as their relationship with objective measures of disadvantage. While reaffirming those perceptual states should not be treated as aims of government policy, it is argued that they may provide a richer understanding of people‟s values and behavior. This paper has proposed collecting data to derive seven indicators of psychological wellbeing namely, the presence of meaning, and relatedness, autonomy and competence, life satisfaction (global and domain-specific) and happiness. They have argued that exploring the relationship between these indicators, and also with the “objective” criteria typically available in national surveys and their evolution over time, could significantly complement the content and process of anti-poverty policy-making. They do not propose these indicators because they believe policy should be designed around them. At the same time, they feel strongly that these indicators capture something important about why people feel and act as they do, and that better elucidating the extent to which people perceive their well-being positively, and how these perceptions change between countries, over time, and in relation to objective measures would fill an important gap in our understanding of capability poverty. Individual‟s responses to subjective well-being questions vary with their present circumstances and other factors. The U-index, a misery index of sorts, which measures the proportion of time that people spend in an unpleasant state, and has the virtue of not requiring a cardinal conception of individual‟s feelings. Experienced utility is the way people feel about experiences in real-time and remembered utility is the way they remember their experiences after they are over. Important brain functions evidence that activity in the left prefrontal cortex of the brain is associated with the processing of approach and pleasure, whereas the corresponding area in the right hemisphere is active in the processing of avoidance and aversive stimuli. Some visible signs of cheerfulness, such as smiling, are positively associated with self-reported happiness. Recent positive changes in circumstances, as well as demographic variables including education and income, are also positively correlated with happiness or satisfaction. Variables that are associated with low life satisfaction and happiness include: recent negative changes of circumstances; chronic pain; and unemployment, especially if only the individual was laid off. Gender is uncorrelated with life satisfaction and happiness. The lowest life satisfaction is apparently experienced by those who have teenagers at home a cross-section of people, income has a modest correlation with life satisfaction, several

studies have found that rank in the income distribution or in one‟s peer group is more important than the level of income. (Kahneman D. and Krueger B. A., 2006) A question arises that is there any monetary measurement of calculating the affect of life events on happiness. The solution to this was given by the study of Clark A. E. and Oswald A. J. (2002) on “A Simple Statistical Method for Measuring How Life Events Affect Happiness.” tries to measure the different sizes of events like illness, marriage, or unemployment upon human happiness and psychological health. They used the method of measuring life events. The findings of the author were „health is hugely important to happiness‟ and „getting married is calculated to bring each year the same amount of happiness as having an extra 70,000 pounds of income per annum.‟ They discussed that unemployment has a strong and well-defined negative impact on well-being. An employed man in a household, where all other adults work is estimated to have the same level of well-being, and as a jobless man in a household where all others are unemployed. Health also matters in subjective well-being levels of a person and vice-versa. Good health is positively related with subjective wellbeing. The study conducted by Diener E. and Chan M. Y. (2011) entitled “Happy People Live Longer: Subjective Well-Being Contributes to Health and Longevity” reviews seven types of evidence that indicate that high subjective well-being (such as life satisfaction, absence of negative emotions, optimism, and positive emotions) causes better health and longevity. For example, prospective longitudinal studies of normal populations provide evidence that various types of subjective well-being such as positive affect predict health and longevity, controlling for health and socioeconomic status at baseline. Combined with experimental human and animal research, as well as naturalistic studies of changes of subjective well-being and physiological processes over time, the case that subjective well-being influences health and longevity in healthy populations is compelling. However, the claim that subjective well-being lengthens the lives of those with certain diseases such as cancer remains controversial. Positive feelings predict longevity and health beyond negative feelings. However, intensely aroused or manic positive affect may be detrimental to health. Issues such as causality, effect size, types of subjective well-being, and statistical controls are discussed. There is increasing interest in the “economics of happiness”, reflected by the number of articles that are appearing in mainstream economics journals that consider subjective well-being and its determinants. The study conducted by Dolan P., Peasgood T. and White M. (2007) on “Do we really know what makes us happy? A review of the economic literature on the factors associated with subjective well-being.” provides a detailed review of this literature. It focuses on papers that have been published in economics journals since 1990, as well as some key reviews in psychology and important unpublished working papers. The evidence suggests that poor health, separation, unemployment and lack of social contact are all strongly negatively associated with subjective well-being. However, the review highlights a range of problems in drawing firm conclusions about the causes of subjective well-being; these include some contradictory evidence, concerns over the impact on the findings of potentially unobserved variables and the lack of certainty on the direction of causality.

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Economic development is a term which quite obviously is capable of a variety of meanings. In regard to economic systems it might mean increase in the absolute size of capital or annual production regardless of the size of the population, the sense in which it was commonly used before the rise of classical economics and in which it is sometimes used in popular discussion today. It might mean increase in complexity, in the articulation of various different functions. It might mean progress towards some ethically defined goal. But the sense in which it is used nowadays is theory of production, which means it is used in relation to movements in real income per head. Real income is conceived as a stream of availability of goods and services as distinct from the experiences or satisfactions. (Robbins L., 1968) The study conducted by Sacks D. W., Stevenson B. and Wolfers J. (2010) on “Subjective well-being, income, economic development and growth” explores the relationships between subjective wellbeing and income, as seen across individuals within a given country, between countries in a given year, and as a country grows through time. They show that richer individuals in a given country are more satisfied with their lives than are poorer individuals, and establish that this relationship is similar in most countries around the world. Turning to the relationship between countries, they show that average life satisfaction is higher in countries with greater GDP per capita. The magnitude of the satisfaction-income gradient is roughly the same whether we compare individuals or countries, suggesting that absolute income plays an important role in influencing well-being. Finally, studying changes in satisfaction over time, they find that as countries experience economic growth, their citizens‟ life satisfaction typically grows, and that those countries experiencing more rapid economic growth also tend to experience more rapid growth in life satisfaction. These results together suggest that measured subjective well-being grows hand in hand with material. (Sacks D. W., Stevenson B. and Wolfers J., 2010) Researchers were interested in finding a relation between income raise and overall happiness. They were confused that whether a raise in income of everyone will make everyone happy or not. The study conducted by Easterlin A. R. (1994) on “Will raising the incomes of all increase the happiness of all?” provides evidence that income growth in a society does not increase happiness which comes from time series studies of the United States, nine European countries, and Japan. There is also evidence relating to norms that supports the notion that higher incomes do not lead to greater happiness because material aspirations increase with a society‟s income. The author derives that within a country at a given time those with higher incomes are, on average, happier. However, raising the incomes of all does not increase the happiness of all. This is because the material norms on which judgments of wellbeing are based increase in the same proportion as the actual income of the society. These conclusions are suggested by data on reported happiness, material norms, and income collected in surveys in a number of countries over the past half century. Further study made by Diener E. and Oishi S. (2000) on “Money and Happiness: Income and subjective well-being across nations” describes the empirical evidence on the relation of income and subjective well-being. They review the existing evidence on money and happiness across cultures. For liberals, there is the finding that poor people are less happy on average. For

conservatives, there is the finding that wealthy nations are happier, and that the degree of inequality in nations does not seem to adversely affect subjective well-being. For those who believe that materialism is not the road to happiness, there is the finding that wealthy societies have not grown in subjective well-being as they achieved even higher levels of wealth, and also the finding that believing money is very important is related to less life satisfaction. For the psychologist there is the finding that global feelings of well-being influence financial satisfaction in a topdown fashion beyond the bottom-up influence of objective income. And for the cross-cultural scientist there is the finding that culture and expectation seem to play a large role in people‟s subjective well-being. First, income within nations correlated with subjective well-being, and this trend was true even for comparison between the wealthiest income categories. Further they found a large correlation between the wealth of nations and the level of subjective well-being reported in them. Despite these positive findings, they also found that the average industrialized nation has not experienced large increases in subjective well-being over the years since World War II, even as wealth has increased dramatically. However, there was suggestive evidence that subjective well-being in poorer nations has increased as their economics have prospered. Increased wealth can help reduce infant mortality, foster scientific pursuits, allow spending on parks and public facilities, and create more leisure time. Some researchers argued that it is not income which is making more impact on subjective well-being, but consumption. This misconception was soon proved wrong by the study of Ahuvia A. C. (2001) on “Individualism/Collectivism and Cultures of Happiness: A Theoretical Conjecture on The Relationship between Consumption, Culture and Subjective Well-Being at the National Level” seeks to explain an empirical puzzle presented by past research on the relationship between consumption and subjective well-being. Research has shown that people in rich countries are, on average, significantly higher in subjective well-being than people in poor countries, which is consistent with a strong link between one‟s overall level of consumption and one‟s subjective well-being. However, when individuals within the same country are compared, income has little relationship to subjective wellbeing above the level at which basic needs can be met, suggesting that higher levels of consumption may not be linked to higher levels of subjective well-being. This link between consumption and subjective well-being when nations are compared to each other, but not when individuals within a given nation are compared to each other, presents a puzzle. Thus, economic development leads to higher levels of national average subjective well-being not by increasing consumption, but by creating more individualistic cultures which encourage their members to pursue personal happiness over honor and meeting social obligations. Whether or not this is seen as a socially positive development depends in a circular fashion on the cultural values of the person making the judgment. The study conducted by Graham C. and Pettinato S. (2001) on “Frustrated Achievers – Winners, Losers, and Subjective Well Being in New Market Economies” provides empirical evidence from two emerging market countries, Peru and Russia. Their results from the assessments of the respondents with the greatest income support the importance of relative rather than absolute income differences. Among other factors, they attribute their

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results to shifts in reference norms and to macroeconomic volatility. Relative differences seem to matter more for those in the middle of the distribution than for the very wealthy or the very poor. Their respondents were more critical in assessing their progress vis-à-vis others in their country versus those in their community. The large and consistent gap they find between objective income trends and the subjective assessments of the upwardly mobile may have implications for the future economic and political behavior of a group that is critical to the sustainability of market policies. Their results from the assessments of the most upwardly mobile respondents clearly reflect the importance of relative income differences. Upwardly mobile individuals are most likely look beyond their original cohort for reference groups. Income mobility also had effects on “happiness”, with greater objective gains often associated with increased frustration rather than increased subjective well-being. There are several plausible additional explanations for the frustrations of our “achievers”. These include recall problems in assessing past earnings, particularly for non-salaried workers, and differences among rural and urban respondents, with the latter much more willing to make extreme statements. The study made by Diener E. and Diener B. R. (2001) on “Will Money Increase Subjective Well-Being?” reveals that there are large correlations between the wealth of nations and the mean reports of subjective well-being in them; mostly small correlations between income and subjective well-being within nations, although these correlations appear to be larger in poor nations, and the risk of unhappiness is much higher for poor people; economic growth in the last decades in most economically developed societies has been accompanied by little rise in subjective well-being, and increases in individual income lead to variable outcomes, and people who prize material goals more than other values tend to be substantially less happy, unless they are rich. Not only might the correlation between income and subjective well-being indicate the influence of money on happiness, but as the discussion above indicates, the causal arrow could point in the other direction: happy people might on average earn more income. Thus, more money may enhance subjective well-being when it means avoiding poverty and living in a developed nation, but income appears to increase subjective well-being little over the long-term when more of it is gained by well-off individuals whose material desires rise with their incomes. Some researchers went on to question past researches and reassess the previous theories. The study conducted by Stevenson B. and Wolfers J. (2008) on “Economic Growth and subjective well-being – Reassessing the Easterlin Paradox” refers the Easterlin paradox which suggests that there is no link between a society‟s economic development and its average level of happiness. In this work the authors re-assess this paradox analyzing multiple rich datasets spanning many decades. Using recent data on a broader array of countries, they establish a clear positive link between average levels of subjective well-being and GDP per capita across countries, and find no evidence of a satiation point beyond which wealthier countries have no further increases in subjective wellbeing. They show that the estimated relationship is consistent across many datasets and is similar to the relationship between subject well-being and income observed within countries. Finally, examining the relationship between changes in subjective wellbeing and income over time within countries they find economic

growth associated with rising happiness. Together these findings indicate a clear role for absolute income and a more limited role for relative income comparisons in determining happiness. The quest for happiness also witnessed the urge of researchers in formulating functions to define happiness. The study made by DiTella R., MacCulloch R. and Oswald A. J. (1999) on “The Macroeconomics of Happiness.” gives a vast literature in macroeconomics which assumes a social objective function, W(, U), where inflation, , and unemployment, U, are bad. This paper provides some of the first formal evidence for such an approach. It uses data on the reported well-being levels of approximately one quarter of a million randomly sampled Europeans and Americans from the 1970's to the 1990's. After controlling for personal characteristics, year dummies and country fixed effects, they find that the data trace out a W(, U) function. It is approximately a linearly additive "misery index". The paper calculates the implied dollar value of a low inflation rate. It also examines the structure of happiness equations across countries and time. There is evidence to support the macroeconomics literature's assumption that social well-being is a decreasing function of inflation and unemployment. The data are reasonably well-approximated by a simple linear misery function. Their estimates cover two decades, and control for personal characteristics, year dummies, and country fixedeffects. There is a common structure of well-being across countries. The same personal characteristics can be expected to appear significant in a well-being regression, regardless of the country where it is estimated. Furthermore, the coefficients can be expected to be quite similar across nations. They find evidence that being unemployed is associated with lower well-being, that persons in higher income quartiles are happier, and that well-being is U-shaped in age. In general, males, widows, separated individual, those divorced, those not married, those with children, and those with little education, have lower levels of well-being. Well-being regressions provide an estimate, for each year and country, of the level of well-being that is not associated with personal characteristics. A plot of these happiness and life satisfaction residuals over time is indicative of the presence of happiness cycles. They find these cycles are determined in part by macroeconomic forces. In a panel that controls for year and country fixed-effects, higher levels of income per capita are found to be associated with increased life satisfaction. The coefficient, however, is small. Higher unemployment benefits also increase life satisfaction. The regression results indicate that people find inflation costly and are willing to undergo a recession to get rid of price increases. The well-being of Britain and USA was tracked over time in the study conducted by Blanchflower D. G. and Oswald A. J. (2002) on “Well-Being over Time in Britain and USA”. In this paper the author studies happiness in the United States and Great Britain. Reported levels of wellbeing have declined over the last quarter of a century in the US; life satisfaction has run approximately flat through time in Britain. The happiness of American blacks, however, has risen. White women in the US have been the biggest losers since the 1970s. Well-being equations have a stable structure. Money buys happiness. People care also about relative income. Wellbeing is U-shaped in age. The paper estimates the dollar values of events like unemployment and divorce. They are large. A lasting marriage (compared to widow-hood as a „natural‟ experiment), for example, is estimated to be worth $100,000 a

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year. This paper explores the economics of happiness. It estimates micro-econometric wellbeing equations. Reported levels of happiness have been dropping through time in the United States. Life satisfaction has run approximately flat in Great Britain. Measuring well-being is a complex task since it varies across many variables. The study conducted by Helliwell J. F. (2002) entitled “How‟s Life? Combining Individual and National Variables to Explain Subjective Well-Being.” attempts to explain international and inter-personal differences in subjective well-being. The empirical work makes use of data from three waves of the World Values Survey3 covering about fifty different countries. The analysis proceeds in stages. First there is a brief review of some reasons for giving a key role to subjective measures of well-being. This is followed by a survey of earlier empirical studies, a description of the main variables used, a report of results and tests, and discussion of the links among social capital, education, income and well-being. The main innovation of the paper, relative to earlier studies of subjective well-being, lies in its use of large international samples of data combining individual and societal level variables, thus permitting the simultaneous identification of individual-level and societal-level determinants of well-being. This is particularly useful in identifying the direct and indirect linkages between social capital and well-being. The author includes both individual-level and societal variables as determinants of wellbeing so as to be able to estimate their separate influences on wellbeing. International well-being data permit the combined use of individual and societal variables. This in turn makes it possible to identify the consequences of societal or ecological variables, whether they are the consequences of history, government policy, or community choices. The well-being data themselves have fairly good claims as measures of individual welfare. The well-being in developing economies was totally different from the developed economies. The study made by Camfield L. (2006) on “The Why and How of Understanding Subjective Well-Being: Exploratory work by the WeD group on four developing countries” reviews participatory studies carried out in developing countries during the past decade and contrasts their findings with qualitative data from the initial phase of the Wellbeing in Developing Countries ESRC4 Research Group‟s exploration of quality of life. This used primarily qualitative methods to establish the categories and components of subjective quality of life or wellbeing in four developing countries: Bangladesh, Ethiopia, Peru and Thailand. The comparison supports the proposition that a more open-ended approach provides insight into how people understand, pursue, and preserve their wellbeing. It is a dynamic and holistic concept that incorporates the material, relational, and cognitive/affective dimensions of people‟s lives. This includes the creation of meaning and forming of standards, which are not individual processes. The

3

World Values Survey (WVS) is a global research project that explores people‟s values and beliefs, how they change over time and what social and political impact they have. It is carried out by a worldwide network of social scientists who, since 1981, have conducted representative national surveys in almost 100 countries 4 Economic and Social Research Council (ESRC) is one of the seven research councils in the United Kingdom. It receives most of its funding from the Department for Business, Innovation and Skills, and provides funding and support for research and training work in social and economic issues, such as postgraduate degrees.

openness of the concept enables the understanding of people‟s lives in their own terms. Researchers have established many measures for subjective wellbeing, but are these measures reliable. The study conducted by Krueger B. A. and Schkade A. D. (2007) on “The Reliability of Subjective Well-Being Measures” analyzed the persistence of various subjective well-being questions over a two-week period. They found that both overall life satisfaction measures and affective experience measures derived from the DRM exhibited test-retest correlations in the range of .50-.70. While these figures are lower than the reliability ratios typically found for education, income and many other common micro economic variables, they are probably sufficiently high to support much of the research that is currently being undertaken on subjective well-being, particularly in cases where group means are being compared (e.g. rich vs poor, employed vs unemployed) and the benefits of statistical aggregation apply. Examples from China used to determine subjective well-being in the study conducted by Knight J., Song L. and Gunatilaka R. (2007) on “Subjective Well-Being and its Determinants in Rural China” uses a national household survey for the year 2002, containing a specially designed module on subjective well-being, to estimate pioneering happiness functions in rural China. The variables predicted by economic theory to be important for happiness are relatively unimportant. Rural China is not a hotbed of dissatisfaction with life, possibly because most people are found to confine their reference groups to the village. Relative income within the village and relative income over time, both in the past and expected in the future, are shown to influence happiness. „Subjective well-being poverty‟ functions are estimated, in which income and various proxies for „capabilities‟ and „functionings‟ appear as arguments. Even amidst the poverty of rural China, social functionings, attitudes and expectations are important to subjective well-being. First, happiness increases with absolute income, ceteris paribus5. Moreover, differences in income explain only a small proportion of the variation in happiness among people. Cross-country studies suggest that the relationship between income and happiness becomes weaker as income per capita rises. This is consistent with the argument that happiness depends in part on the gratification of certain basic biological needs and in part on the gratification of various social needs that are moulded by society. It tests various hypotheses which emerge from that information and from the general literature on subjective wellbeing. Despite the fact that rural-dwellers have relatively low incomes and have been left behind in China‟s economic development, it appears that rural China is not a hotbed of dissatisfaction with life. There are powerful regularities in our happiness functions, and these bear plausible interpretations. The paper adds to the growing evidence that the variables predicted by economic theory to be important for happiness are relatively unimportant. It suggests that we need to draw on psychology and sociology if we are to understand. It takes a tiny step towards achieving the critical mass of evidence which might yet induce the paradigm shift required to make happiness studies part of mainstream economics. 5

Ceteris paribus or caeteris paribus is a Latin phrase meaning "with other things the same" or "all other things being equal or held constant."

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In recent decades economists have turned their attention to data that asks people how happy or satisfied they are with their lives. Much of the early research concluded that the role of income in determining well-being was limited, and that only income relative to others was related to well-being. In the study made by Sacks D. W., Stevenson B. and Wolfers J. (2012) on “The New Stylized Facts about Income and Subjective Well-Being.”, the author reviews the evidence to assess the importance of absolute and relative income in determining well-being. Their research suggests that absolute income plays a major role in determining well-being and that national comparisons offer little evidence to support theories of relative income. They find that well-being rises with income, whether the comparison is within a single country and year, across countries, or at economic growth for a given country. Through these comparisons they show that richer people report higher well-being than poorer people; that people in richer countries, on average, experience greater well-being than people in poorer countries; and that economic growth and growth in wellbeing are clearly related. Moreover, the data show no evidence for a satiation point above which income and well-being are no longer related. Both measures of subjective well-being (life satisfaction and affective experience) display a serial correlation of about 0.60 when assessed two weeks apart, which is lower than the reliability ratios typically found for education, income and many other common micro economic variables. They analyzed the persistence of various subjective well-being questions over a two-week period. They found that both overall life satisfaction measures and affective experience measures derived from the „Day Reconstruction Method‟ exhibited test-retest correlations in the range of .50-.70. While these figures are lower than the reliability ratios typically found for education, income and many other common micro economic variables, they are probably sufficiently high to support much of the research that is currently being undertaken on subjective well-being, particularly in cases where group means are being compared (e.g. rich vs poor, employed vs unemployed) and the benefits of statistical aggregation apply. They found out that richer people report greater well-being than poorer people, richer countries have higher per capita well-being than poorer countries, economic growth over time is related to rising well-being, there is no satiation point beyond which the relationship between income and well-being diminishes and the magnitude of these relationships is approximately equal. Together, these facts suggest an important role for absolute income, since the within country, cross-country, and time series relationships are approximately equally strong. This fact by itself also suggests that relative income is less important, although our results are not precise enough to rule out a meaningful role for relative income in well-being. The study conducted by Wu X. and Li J. (2013) on “Economic Growth, Income Inequality and Subjective Well-Being: Evidence from China” examines the subjective consequence of rising income inequality amidst the rapid economic growth in China. Based on the data from a national representative survey conducted in 2005, they employ multi-level models to show that, while personal income improves life satisfaction, the effect decreases with the level of local economic development; moreover, the rate of local economic growth has a positive effect, but local income inequality has a negative effect, on individuals‟ life satisfaction. Their findings help to clarify the mixed results in previous studies and

point to the importance of both economic and social policies in improving people‟s subjective well-being in China‟s transitional economy. The author specifically examines the subjective consequence of rising income inequality in China amidst the economic boom that has continued for decades. At the individual level, they show that personal income affects life satisfaction in a positive way, namely, individuals with higher income tend to report higher levels of life satisfaction. However, this effect is largely mediated by the process of social comparisons, highlighting the fact that subjective well-being carries a relative component. In other words, it is how one‟s income compares with peers in the immediate social environment instead of absolute income that determines one‟s subjective well-being. Thus they turn their attention to the role of the local socioeconomic context, such as economic development, growth rate, and income inequality, in affecting life satisfaction. At the prefectural level, after controlling for all other factors, they found that GDP per capita has no effect on individuals‟ subjective wellbeing. It appears that, after decades of continuing economic growth, the living standard in China has improved so much so that the “Easterlin Paradox” has inevitably emerged. Further analysis shows that the interaction between personal income and local GDP per capita is significantly negative. In other words, higher personal income matters more in determining one‟s subjective well-being in poorer areas than in

richer ones. This finding provides evidence to support social comparison theory that offers explanation for the “Easterlin Paradox.” Recent research has found that richer countries have higher wellbeing than poorer countries and that the relationship is similar in magnitude to that seen between rich and poor members within countries. However, limited data have constrained previous researcher‟s ability to detect whether economic growth within countries leads to greater well-being. Thus the question of whether raising the income of all will raise the well-being of all remains open. The study made by Sacks W. D., Stevenson B. and Wolfers J. (2013) on “Growth in Income and Subjective Well-Being over Time” combines newer data from many different sources with historical data to study the relationship between well-being and GDP in a panel and time series context. They find strong evidence that well-being and GDP grow together. This finding holds over both the short and long run. Over recent decades the world has gotten happier, and the magnitude of the gains is similar to what would be predicted by the growth in world GDP. Their findings suggest an important role for economic growth in increasing wellbeing, and cast doubt on the Easterlin paradox and theories of adaptation.

Review Matrix Comparison of Aim: S.No 1

Author Diener E, Emmons R. A., Larsem J R, and Griffin S.

Research Topic The Satisfaction with Life Scales (1985)

2

Heady B., Veenhoven R. & Wearing A.

Top-Down versus Bottom-Up theories of Subjective Well-Being (1991)

3

Easterlin A. R.

5

DiTella R., MacCulloch R. and Oswald A. J. Diener E., Suh E. M., Lucas R. E. and Smith H. L.

Will raising the incomes of all increase the happiness of all? (1994) The Macroeconomics of Happiness (1999) Subjective Well-Being: Three Decades of Progress (1999)

6

7

Suh E. M.

Self, the Hyphen between Culture and Subjective Well-Being (2000)

8

Diener E. and Oishi S.

Money and Happiness: Income and Subjective Well-being across Nations (2000)

10

Van Praag B.M.S., Frijters P., Ferrer-i-Carbonell A.

The Anatomy of Subjective WellBeing (2001)

11

Graham C. and Pettinato S.

Frustrated Achievers – Winners, Losers, and Subjective Well Being in New Market Economies (2001)

12

Ahuvia A. C.

Individualism/Collectivism and Cultures of Happiness: A Theoretical Conjecture on The Relationship

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Aim To articulate the development and validation of a scale to measure global life satisfaction, the Satisfaction With Life Scale (SWLS). To propose a statistical model which holds promise of resolving issues of causal direction in research on subjective well-being. To find out whether raising the incomes of all increase the happiness of all. To estimate the effect of inflation rate and unemployment rate on subjective well-being To understand the causal pathways leading to happiness, understand the processes underlying adaptation to events, and develop theories that explain why certain variables differentially influence the different components of subjective well-being (life satisfaction, pleasant affect, and unpleasant affect. To explain the psychological mechanisms involved in the experience and judgment of subjective well-being among different cultural members To review the existing evidence on money and happiness across cultures. To examine several theories about why money relates to happiness. To develop a joint model which gives room for subjective well-being, „satisfaction with life as a whole‟ and domain satisfaction. To bring some empirical evidence from two emerging market economics-Peru and Russia-this deals with income inequality, macroeconomic volatility, and occupational status. To explain the relationship between consumption and subjective well-being

Between Consumption, Culture and Subjective Well-Being at the National Level (2001) Will Money Increase Subjective WellBeing? (2001)

13

Diener E. and Diener B. R.

14

Clark A. E. and Oswald A. J.

15

Blanchflower Oswald A. J.

16

Helliwell J. F.

17

Kahneman D. and Krueger B. A.

18

Camfield L.

19

Dolan P., Peasgood T. and White M.

20

Krueger B. A. and Schkade A. D.

21 22

Knight J., Song Gunatilaka R. Samman E.

23

Stevenson B. and Wolfers J.

24

Conceicao P. and Bandura R.

25

Daniel M. Haybron

26

Sacks D. W., Stevenson B. and Wolfers J.

27

Diener E. and Chan M. Y.

Happy People Live Longer: Subjective Well-Being Contributes to Health and Longevity (2011)

28

Sacks D. W., Stevenson B. and Wolfers J. Wu X. and Li J.

The New Stylized Facts about Income and Subjective Well-Being (2012) Economic Growth, Income Inequality and Subjective Well-Being: Evidence from China (2013) Growth in Income and Subjective Well-Being Over Time (2013)

29

30

D.

G.

L.

and

and

Sacks W. D., Stevenson B. and Wolfers J.

A Simple Statistical Method for Measuring How Life Events Affect Happiness (2002) Well-Being Over Time in Britain and USA (2002) How‟s Life? Combining Individual and National Variables to Explain Subjective Well-Being (2002) Developments in the Measurement of Subjective Well-Being (2006) The Why and How of Understanding Subjective Well-Being: Exploratory work by the WeD group on four developing countries (2006) Do we really know what makes us happy? A review of the economic literature on the factors associated with subjective well-being (2007) The Reliability of Subjective WellBeing Measures (2007) Subjective Well-Being and its Determinants in Rural China (2007) Psychological and Subjective Well – Being: A Proposal for Internationally Comparable Indicators (2007) Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox (2008) Measuring Subjective Wellbeing: A Summary Review of the Literature (2008) Philosophy and the Science of Subjective Well-Being (2009) Subjective well-being, income, economic development and growth (2010)

To provide improved data that will better illuminate the psychological processes relating money to subjective wellbeing. To measure the different sizes of events like illness, marriage, or unemployment upon human happiness and psychological health. To study the numbers that people report when asked questions about how happy they feel and how satisfied with life. To explain international and inter-personal differences in subjective well-being over the final fifth of the twentieth century. To analyze that individual‟s responses to subjective wellbeing questions vary with their circumstances and other factors. To produce a methodology that creates a space for selfevaluation, where people can tell us what they value, what they have experienced, and how satisfied they are with what they have, and what they can do and be. To find how a range of personal, economic and social factors are associated with SUBJECTIVE WELL-BEING.

To analyze the test-retest reliability of two measures of subjective well-being: a standard life satisfaction question and affective experience measures. To estimate pioneering happiness functions in rural China To derive seven indicators of psychological wellbeing (namely, the presence of meaning, and relatedness, autonomy and competence), life satisfaction (global and domain-specific) and happiness. To sort out the stylized facts about the link between income and well-being. To analyzes the meaning, importance and determinants of subjective well-being. To understand the Prudential Psychology and articulate the theories of happiness. To explore the relationships between subjective well-being and income, as seen across individuals within a given country, between countries in a given year, and as a country grows through time. To establish the fact that high subjective well-being (such as life satisfaction, absence of negative emotions, optimism, and positive emotions) causes better health and longevity. To assess the importance of absolute and relative income in determining well-being. To examine the level of life satisfaction among individuals and its relationship with income inequality and other macro-socioeconomic factors in China. To examine the relationship between growth in subjective well-being and income over time.

Comparison of Methods: S.No. 1


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Methods a) 48 self-report items b)

Study I: 176 undergraduates at the University of Illinois

c)

Study II: Two different samples of undergraduates

served as subjects. Sample 1 consisted of the 176 students used in Study 1. Sample 2 consisted of a different group of 163 undergraduates enrolled in introductory psychology classes. d) 2



3

Easterlin A. R.

4

DiTella R., MacCulloch R. and Oswald A. J.

Will raising the incomes of all increase the happiness of all? (1994) The Macroeconomics of Happiness (1999)

5

Diener E., Suh E. M., Lucas R. E. and Smith H. L.

Subjective Well-Being: Decades of Progress (1999)

6

Suh E. M.


7


Money and Happiness: Income and Subjective Well-being across Nations(2000)

8 9

Van Praag B.M.S., Frijters P., Ferrer-i-Carbonell A. Graham C. and Pettinato S.

10

Ahuvia A. C.

11


The Anatomy of Subjective WellBeing (2001) Frustrated Achievers – Winners, Losers, and Subjective Well Being in New Market Economies (2001) Individualism/Collectivism and Cultures of Happiness: A Theoretical Conjecture on The Relationship Between Consumption, Culture and Subjective Well-Being at the National Level (2001) Will Money Increase Subjective WellBeing? (2001)

12


13 14

Blanchflower D. G. and Oswald A. J. Helliwell J. F.

15

Kahneman D. and Krueger

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Three

A Simple Statistical Method for Measuring How Life Events Affect Happiness (2002) Well-Being Over Time in Britain and USA (2002) How‟s Life? Combining Individual and National Variables to Explain Subjective Well-Being (2002) Developments in the Measurement of

Study III: Fifty-three elderly persons living in the Urbana-Champaign area volunteered for the project. a) Australian Quality of Life Panel Study b) Stratified probability sample of 942 persons drawn in 1981 c) Measures involved: i. Life Satisfaction ii. Domain Satisfaction iii. Personality iv. Socio-economic status a) Previous Evidence b) Time Series Comparison a) Self-reported measures of well-being b) Two large survey programs: i. The U.S. General Social Survey (GSS) (1972-1990): 30,000 persons in US. ii. The Euro-Barometer Survey Series (1975present): 300,000 people in twelve European countries. a) Causal modeling b) Longitudinal studies c) Global self-report measures d) Global Life Satisfaction e) Impression management: comparing in-person interviews to anonymous questionnaire f) Experience sampling method g) Scoring qualitative descriptions of people's lives h) Measuring reactions to emotionally ambiguous stimuli i) Recording people's memories for good and bad events j) Physiological measures such as salivary cortisol levels a) Self-enhancement b) Self-Consistency a) Cross-sectional within-nation data b) Comparing the lowest and highest income groups c) Comparing the top income groups d) Differences between income effects across nations e) Causal Direction a) Self-reported measures of well-being b) German Socio-Economic Panel (GSOEP) a) Income Mobility b) Panel Data c) Perceived Past Mobility Reliable self report measures have been developed for the three primary components of subjective well-being: the presence and frequency of positive emotions, the absence of negative emotions, and cognitive beliefs about one‟s overall level of life satisfaction (for review, see Ahuvia and Freedman, 1998). a) Cross-Sectional Correlations for Individuals b) Changes in Individual Income, and the Causal Order of Variables c) Analysis at the National Level Experience Sampling Method for measuring life events.

Document the existence of discrimination This paper analyzes measures of subjective well-being drawn from three successive waves of the World Values Survey (WVS, Inglehart et al 2000). a) For each feeling the average variance of ratings within

B. A.

Subjective Well-Being (2006)

a subject‟s day was calculated. Experience Sampling Method on Dialysis Patients. U-Index: The proportion of time an individual spends in an unpleasant state. d) Day Reconstruction Method Sample of 909 working women from Texas. Experienced wellbeing or Subjective quality of life (QoL), Exploratory Research. Semi-structured interviews, focus group discussions, and administration of the GPGI in Ethiopia, Thailand, and urban Bangladesh (Camfield & Ruta, 2007), the Satisfaction with Life Scale (SWLS) in Ethiopia (Diener et al, 1985), and a Global Happiness Question (GHQ) in Bangladesh. a) Grey literature from economists working on subjective well-being: 153 papers b) 19 major national and cross-national data sets. c) British Household Panel Survey d) Positive and Negative Affective Scale (PANAS) e) Satisfaction with Life Scale (SWLS) f) General Health Questionnaire (GHQ) a) Day Reconstruction Method (DRM) b) Experience Sampling Method (ESM)(also called Ecological Momentary Assessment (EMA)) c) Sample of 229 women who each filled out a DRM questionnaire for two Wednesdays, two weeks apart in 2005. a) Extensive rural household questionnaire b) Sample covers 22 provinces: 1 province - 5.5 counties, 1 county - 7.9 villages, 1 village - 10 observation households. 9,200 households responded to the subjective wellbeing questions Psychological and subjective well-being focus on eudaimonic, hedonic and mental health measures, respectively. a) Their analysis of the relationship between happiness and income involves an assessment of correlations rather than an attempt to establish tight causal links. b) c)

16

Camfield L.

The Why and How of Understanding Subjective Well-Being: Exploratory work by the WeD group on four developing countries (2006)

17


Do we really know what makes us happy? A review of the economic literature on the factors associated with subjective well-being (2007)

18


The Reliability of Subjective WellBeing Measures (2007)

19

Knight J., Song L. and Gunatilaka R.

Subjective Well-Being and its Determinants in Rural China (2007)

20

Samman E.

21


Psychological and Subjective Well– Being: A Proposal for Internationally Comparable Indicators (2007) Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox (2008)

b) 22


Measuring Subjective Wellbeing: A Summary Review of the Literature (2008)

23

Daniel M. Haybron

24


25


Philosophy and the Science of Subjective Well-Being (2009) Subjective well-being, income, economic development and growth (2010) Happy People Live Longer: Subjective Well-Being Contributes to Health and Longevity (2011)

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Running an ordered probit of well-being on country × wave fixed effects. a) Objective Measures: to complement, supplement or replace GDP. b) Subjective Measures: asking people to report on their happiness and life satisfaction. Person‟s propensity for experiencing various moods, which can vary over time. a) Gallup World Poll b) Within-country relationship between income and life satisfaction a) Long-term prospective studies in which participants are followed over time. b) Studies in which natural levels of subjective wellbeing are related to specific physiological processes that can affect health and longevity. c) Studies in which moods and emotions are experimentally manipulated, and effects on physiological variables that could affect health are assessed. d) Animal studies in which there is experimental control over the environment of the animals. e) Quasi-experimental studies in natural settings, in which natural events can be examined for their effects on health outcomes. f) Experimental intervention studies in which treatments are administered that can influence people‟s long-term subjective well-being.

g) 26


The New Stylized Facts about Income and Subjective Well-Being (2012)

a)

b) 27

28

Wu X. and Li J.


Studies on how quality of life factors such as pain and mobility are related to subjective well-being. Institute for the Study of Labor (IZA) engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. This IZA Discussion Paper represents preliminary work and is circulated to encourage discussion. Multi-stage stratified random sampling method.

Economic Growth, Income Inequality and Subjective Well-Being: Evidence from China (2013)

a)

Growth in Income and Subjective Well-Being Over Time (2013)

a) b) c) d) e) f)

Findings a) Study I: The mean score on the SWLS was 23.5, with a standard deviation of 6.43. b) Study II: Scores on the SWLS correlated .02 with the Marlowe-Crowne measure. c) Study III: The mean SWLS score for the sample was 25.8. a) Reciprocal causation b) Top-down causation c) Spuriousness Material norms and income increase, not only in the same direction, but at the same rate. A number of personal characteristics seem to be associated in a similar way with happiness, regardless of the country involved. a) According to bottom-up approach, fulfillment of needs makes a person happy. b) Personality consists of: i. Temperamental Predisposition for subjective wellbeing: Some people have a genetic predisposition to be happy or unhappy, which is presumably caused by inborn individual differences in the nervous system. ii. They proposed a dynamic equilibrium theory in which personality determines baseline levels of emotional responses. iii. Traits and cognitive dispositions are associated with subjective well-being. iv. Extraversion influences positive affect and Neuroticism influences negative affect. a) East Asian cultural members constantly tone down their individuality by avoiding overly self-promoting and self assertive, self-presentations. b) Motive of self -enhancement as well as the motive of self consistency are weaker in East Asian than in Western cultures. c) Both self-esteem and level of identity consistency are less powerful predictors of subjective well-being in collectivist than in individualist cultures. a) For liberals, there is the finding that poor people are less happy on average. b) For conservatives, there is the finding that wealthy nations are happier, and that the degree of inequality in nations does not seem to adversely affect subjective well-being. a) Individuals are able to recognize and predict the satisfaction level of others. b) There is a common human „language‟ of satisfaction and that

b)

First, 125 principal sampling units are selected from 2,798 county or county-level districts, stratified by region, rural and urban populations, and education level. Then, four second-level sampling units in each selected principal unit, two third-level sampling units in each selected second-level unit, and ten households in each selected third-level unit are chosen. One eligible person aged 18 or above is randomly selected from each sampled household to serve as the survey respondent. World Values Survey Eurobarometer International Social Survey Program Gallup World Poll Pew Global Attitudes Survey Latinbarometro

Comparison of Findings: S.No. 1



2



3

Easterlin A. R.

4

DiTella R., MacCulloch R. and Oswald A. J. Diener E., Suh E. M., Lucas R. E. and Smith H. L.

Will raising the incomes of all increase the happiness of all? (1994) The Macroeconomics of Happiness (1999)

5

Subjective Well-Being: Three Decades of Progress (1999)

6

Suh E. M.


7



8

Van Praag B.M.S., Frijters P., Ferrer-i-Carbonell A.

The Anatomy of Subjective Well-Being (2001)

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satisfaction is roughly observable. Individuals in a language community have a common understanding of how to translate internal feelings into a number scale. a) Mobile individuals are most likely look beyond their original cohort for reference groups. b) Recall problems in assessing past earnings, particularly for non-salaried workers, and differences among rural and urban respondents, with the latter much more willing to make extreme statements. a) Increasing national wealth and the rise of individualism are so closely intertwined in a syndrome of modernization that it is difficult to separate their influences (Bulmahn, 2000). b) Collectivism is a social mechanism for organizing and enforcing group cooperation. Collectivism is associated with poor countries because it is a cultural survival mechanism born of the necessity for group solidarity. Indeed collectivism is a survival mechanism that is positively correlated with well-being if one looks only at a sub-sample of poor countries (Veenhoven, 1999). a) There are large correlations between the wealth of nations and the mean reports of subjective well-being in them. b) There are mostly small correlations between income and subjective well-being within nations. c) Economic growth in the last decades in most economically developed societies has been accompanied by little rise in subjective well-being. a) Health is hugely important to happiness. b) Getting married is calculated to bring each year the same amount of happiness as having an extra 70,000 pounds of income per annum. a) Anti female-discrimination policy was unsuccessful in either country in creating a feeling of rising well-being among women. b) Black people in the US appear to be much less happy, ceteris paribus, than whites. a) Individuals whose personalities are inherently more optimistic are more likely to give positive assessments of their health status and their subjective well-being. b) The fact that being separated is worse than being divorced may reflect habituation and recovery effects that presumably have had more time to work for those who are currently divorced than for those who are separated. c) Those who have stayed in full-time education until a later age are not systematically more satisfied with their lives, once account has been taken of the higher incomes, wider participation and better health that might have been facilitated by their education. d) The base group comprises those aged 18-24. Those in the next three age groups are significantly less happy than those aged 18-24, providing some partial support for the earlier view that life is happier for the young. However after reaching a low point among the 35-44 year-old group, subjective well-being there after rises systematically and significantly, with those 55 to 64 as happy as those aged 18 to 24, and those aged 65 and up much happier still. a) The average woman spent about 17.7 percent of her time in an unpleasant state. b) The U-index falls slightly with household income (18.9 percent for incomes less than $35,000 and 16.6 percent for incomes of $55,000 and higher) and is unrelated to marital status. c) The index falls with age: those age 18–24 spent 22 percent of their time in an unpleasant state, compared with 19 percent for those age 25–44 and 15 percent for those age 45–64. d) Those who report less satisfaction with their lives as a whole also spend a greater fraction of their time in an unpleasant state. Overall, the top 10 percent of people account for 38 percent of all the time spent in an unpleasant state. A qualitative analysis of the data suggests that having good family relationships, being economically secure, being educated or knowledgeable, and being respected or worthy of respect are universally important. The potential influences on well-being are categorized as: a) Income b) Personal characteristics c) Socially developed characteristics d) How we spend our time e) Attitudes and beliefs towards self/others/life c)

9



10

Ahuvia A. C.

Individualism/Collectivism and Cultures of Happiness: A Theoretical Conjecture on The Relationship Between Consumption, Culture and Subjective Well-Being at the National Level (2001)

11


Will Money Increase Subjective WellBeing? (2001)

12


A Simple Statistical Method for Measuring How Life Events Affect Happiness (2002)

13

Blanchflower D. G. and Oswald A. J.

Well-Being Over Time in Britain and USA (2002)

14

Helliwell J. F.

How‟s Life? Combining Individual and National Variables to Explain Subjective Well-Being (2002)

15

Kahneman D. and Krueger B. A.

Developments in the Measurement of Subjective Well-Being (2006)

16

Camfield L.

17


The Why and How of Understanding Subjective Well-Being: Exploratory work by the WeD group on four developing countries (2006) Do we really know what makes us happy? A review of the economic literature on the factors associated with subjective wellbeing (2007)

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18


The Reliability of Subjective Well-Being Measures (2007)

19 20

Knight J., Song Gunatilaka R. Samman E.

Subjective Well-Being and its Determinants in Rural China (2007) Psychological and Subjective Well –Being: A Proposal for Internationally Comparable Indicators (2007)

21


22


23

Daniel M. Haybron

24


Subjective well-being, income, economic development and growth (2010)

25



26

Sacks D. W., Stevenson B. and Wolfers J. Wu X. and Li J.

The New Stylized Facts about Income and Subjective Well-Being (2012) Economic Growth, Income Inequality and Subjective Well-Being: Evidence from China (2013)


Growth in Income and Subjective WellBeing Over Time (2013)

27

28

L.

and

Economic Growth and Subjective WellBeing: Reassessing the Easterlin Paradox (2008) Measuring Subjective Wellbeing: A Summary Review of the Literature (2008) Philosophy and the Science of Subjective Well-Being (2009)

f) g) a)

Relationships The wider economic, social and political environment. Satisfaction with domains of life (work and home) are both more reliable than satisfaction with life overall. b) The corresponding home and work mood measures are also more reliable than life satisfaction. c) Positive affect appears to be somewhat more reliable than negative affect. Happiness increases with absolute income, ceteris paribus (Frey and Stutzer, 2002). A global measure, such as life satisfaction, has the strong advantage that it “covers all relevant resources, and not just the few that are easily measurable and deemed relevant” (Veerhoven, 2007, p. 219). However, in our view, this strength is offset by a clear weakness. Asked in isolation from domain-specific satisfaction, global questions fail to provide information regarding the components of subjective well-being. The relationship between subjective well-being and income within countries is similar to that seen between countries, which in turn are similar to the time-series relationship. Economic and non-economic determinants of happiness Life satisfaction is holistic, ranging over the whole of one‟s life or the totality of one‟s life over a certain period of time. It reflects not just the aggregate of moments in one‟s life, but also the global quality of one‟s life taken as a whole. Findings cast doubt on the Easterlin Paradox and various theories suggesting that there is no long-term relationship between wellbeing and income growth. subjective well-being, especially in the form of positive affect, has been found to be associated with longevity.

Both measures of subjective well-being (life satisfaction and affective experience) display a serial correlation of about 0.60. a) First, men are less happy than women and those who are not currently married are less happy than those who are married. b) Second, a non-linear relationship is found between age and life satisfaction, which shows that happiness drops with age but its effect levels off after individuals reach midlife. c) Third, while those who have attained more years of schooling tend to be happier, the unemployed are the least happy. a) Robust positive relationship between well-being and GDP over time. b) Point estimates of the relationship between well-being and GDP over time are similar to that when comparing countries at a point in time.

Comparison of Discussion: S.No. 1



2



3

Easterlin A. R.

Will raising the incomes of all increase the happiness of all? (1994)

4

DiTella R., MacCulloch R. and Oswald A. J.

The Macroeconomics of Happiness (1999)

5

Diener E., Suh E. M., Lucas R. E. and Smith H. L.

Subjective Well-Being: Three Decades of Progress (1999)

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Discussion Analysis a) Positive affect, Negative affect and Life satisfaction. The results indicated that the scale has favorable psychometric properties. b) A question arises about why the interviewer ratings correlated more highly with the LSI than with the SWLS. The LSI is a broader band instrument that includes affective as well as life satisfaction content. The model embodies numerous non-obvious assumptions, it is important to vary assumptions and check if results are substantially affected. Most researchers have held a bottom-up view of links between domain satisfactions and life satisfaction. a) There is considerable agreement among scholars involved in international comparisons that material aspirations vary positively with the level of economic development. b) It would be of interest to assess the size of the cross-sectional income-happiness relation among countries relative to that found within countries. This undertaking is complicated, however, by the now well established finding that bivariate international comparisons of happiness and income are significantly influenced by cultural factors. A measure of the happiness in a particular year and country that is not explained by the personal characteristics of the respondents might be viewed as the happiness on which government policy is supposed to focus. a) Personality may interact with situations and the environment to influence subjective well-being. b) Happy individual is one who is extraverted, optimistic, and

worry-free. Personality is strongly related with subjective well-being. Genes are partly responsible for these relations. d) Multiple Discrepancy Theory: Individuals compare themselves to multiple standards including other people, past conditions, aspirations and idea levels of satisfaction, and needs or goals. e) Social Comparison: One should be happy if proximate others are worse off and unhappy if proximate others are better off. a) Subjective well-being, as the term indicates, is primarily concerned with the person‟s subjective judgment of his or her well-being. b) The judgment of life satisfaction could be based on different sources of information across cultures. a) Income within nations correlated with subjective well-being, and this trend was true even for comparison between the wealthiest income categories. b) Large correlation between the wealth of nations and the level of subjective well-being reported in them. c) The average industrialized nation has not experienced large increases in subjective well-being over the years since WWII, even as wealth has increased dramatically. a) General satisfaction is a composite of the various domain satisfactions. b) Domain Satisfaction includes: 1. Job Satisfaction 2. Financial Satisfaction 3. Housing Satisfaction 4. Health Satisfaction 5. Leisure Satisfaction 6. Environment Satisfaction Both Peru and Russia have been affected by the broader trends affecting most emerging market economies. Market reforms and globalization have brought economic growth and created new opportunities for many individuals. a) For people living in developed economies, correlations between income and subjective well-being are surprisingly low, generally explaining 2–3% of the variance in subjective well-being between individuals. b) The strong correlation between national wealth and nationally aggregated levels of subjective well-being is well established. Economic development increases subjective well-being by creating a cultural environment where individuals make choices to maximize their happiness rather than meet social obligations. a) The correlation between income and subjective well-being indicate the influence of money on happiness. b) The causal arrow could point in the other direction: happy people might on average earn more income. a) Unemployment has a strong and well-defined negative impact on well-being. b) An employed man in a household where all other adults work is estimated to have the same level of well-being as a jobless man in a household where all others are unemployed. c) Psychological cost of current unemployment is estimated to be zero for man who has been unemployed for 60% of the time over the past three years. This paper‟s analysis is not an attempt to define „utility‟ in a single and exact empirical way. Nevertheless, the philosophy underlying the paper is that subjective well-being data may be useful to economists (just as such statistics have to psychologists). This paper has attempted to illustrate rather than exhaust the possibilities for using international well-being data to measure and explain differences in well-being within and among nations. Two strategies for reducing the amount of time people spend in an unpleasant emotional state. a) The first is to focus on mental health interventions (such as anti-depression drugs or positive psychology) for the small segment of the population that spends a great deal of its time in an unpleasant state. b) The second is to focus on time allocation. For example, interventions that reduce the amount of time spent commuting alone (such as congestion taxes and car pool subsidies) could possibly have a beneficial effect on individuals‟ emotional states. The responses to the question on people living well from the individual WeD countries were initially compared with participatory studies done in similar areas (e.g. Peru and rural Mexico, Bangladesh and India) c)

6

Suh E. M.


7



8

Van Praag B.M.S., Frijters P., Ferrer-iCarbonell A.

The Anatomy of Subjective Well-Being (2001)

9



10

Ahuvia A. C.

Individualism/Collectivism and Cultures of Happiness: A Theoretical Conjecture on The Relationship Between Consumption, Culture and Subjective Well-Being at the National Level (2001)

11


Will Money Increase Subjective WellBeing? (2001)

12


A Simple Statistical Method for Measuring How Life Events Affect Happiness (2002)

13

Blanchflower D. G. and Oswald A. J.

Well-Being Over Time in Britain and USA (2002)

14

Helliwell J. F.

15

Kahneman D. Krueger B. A.

How‟s Life? Combining Individual and National Variables to Explain Subjective Well-Being (2002) Developments in the Measurement of Subjective Well-Being (2006)

16

Camfield L.

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and

The Why and How of Understanding Subjective Well-Being: Exploratory work by the WeD group on four developing countries (2006)

17


18


19

Knight J., Song L. and Gunatilaka R. Samman E.

Subjective Well-Being and its Determinants in Rural China (2007) Psychological and Subjective Well –Being: A Proposal for Internationally Comparable Indicators (2007)

21


Economic Growth and Subjective WellBeing: Reassessing the Easterlin Paradox (2008)

22

Conceicao Bandura R.

Measuring Subjective Wellbeing: A Summary Review of the Literature (2008)

23

Daniel M. Haybron

Philosophy and the Science of Subjective Well-Being (2009)

24


Subjective well-being, income, economic development and growth (2010)

25



26


The New Stylized Facts about Income and Subjective Well-Being (2012)

27

Wu X. and Li J.

Economic Growth, Income Inequality and Subjective Well-Being: Evidence from China (2013)

28


Growth in Income and Subjective WellBeing Over Time (2013)

20

P.

Do we really know what makes us happy? A review of the economic literature on the factors associated with subjective wellbeing (2007) The Reliability of Subjective Well-Being Measures (2007)

and

Concordances 1. The common aim was to determine the relationship between absolute income and subjective well-being. 2. Most of the researches used experience sampling method and day reconstruction method to collect data. 3. Common findings were absolute income is more important than relative income.

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Simple one-item happiness and life satisfaction questions are showing significant differences between those who are employed versus unemployed, single versus living with a partner and so on. They found that both overall life satisfaction measures and affective experience measures derived from the DRM exhibited test-retest correlations in the range of .50-.70 which are lower than the reliability ratios typically found for education, income and many other common micro economic variables, they are probably sufficiently high to support much of the research that is currently being undertaken on subjective well-being. It tests various hypotheses which emerge from that information and from the general literature on subjective well-being. Critiquing Psychological/Subjective Measures as a Policy Goal a) Nature of Happiness b) Conflict with other Values c) Democratic Process d) Adaptive Preferences a) Their analysis encompasses virtually all of the extant data linking happiness or life satisfaction to income. b) Their measurement framework allows us to assess the extent to which these relationships may differ. “Set-point theory” suggests that individuals have a fixed set-point of happiness in their life which is determined by personality and genetics. Life events have an initial impact on people‟s happiness, for example they are happier when they get married or saddened when widowed, but on the lifespan the individual adjusts to these events and returns to his or her given “set-point”. Five basic approaches here: 1. Hedonistic theories 2. Desire theories 3. Authentic happiness theories 4. Eudaimonistic theories 5. List theories This paper focuses explicitly on the magnitude of the subjective well-being income gradient, while also bringing the greatest quantity of data to bear on these questions. a) One complication in interpreting subjective well-being effects is that in research controlling for baseline health the researchers might actually be studying whether subjective well-being has a greater influence in later life than in earlier life. b) However, there are studies in which high subjective wellbeing clearly has been found to have positive effects on those with existing diseases. They found that both overall life satisfaction measures and affective experience measures derived from the DRM exhibited test-retest correlations in the range of .50-.70. a) At the individual level, they show that personal income affects life satisfaction in a positive way, namely, individuals with higher income tend to report higher levels of life satisfaction. b) At the prefectural level, after controlling for all other factors, they found that GDP per capita has no effect on individuals‟ subjective wellbeing. Four main reasons of analyzing the datasets: a) It aids transparency, as changes in well-being are easy to plot against changes in per capita GDP. b) Regressions in first differences remain appropriate even if one is concerned that per capita GDP has a unit root. c) If one is concerned that their panel regressions are dominated by business-cycle movements, then one simple response is to analyze changes over periods long enough that business-cycles account for little of the variation. d) This allows them to assess the sensitivity of our findings to possible adaptation, which would yield much smaller effects in the long-run.

4. 5.

Discussions were made on life satisfaction scales and affective measures. Income growth influences subjective well-being crossperson, cross-country and time series analysis.

Critical Reviews: According to researchers there are two extreme concepts of happiness, subjective and objective happiness. Subjective happiness asks people how happy they feel themselves

to be. Objective happiness is a physiological approach which aims to capture happiness through the measurement of brain waves. Subjective well-being comes from subjective happiness. Subjective well-being is a particularly democratic outcome variable because it allows people to judge their own lives and it is also a data collection method which is termed as “self-reported measures of well-being”.

Well-being rises with income, whether we compare people in a single country and year, whether we look across countries, or whether we look at economic growth for a given country. These results suggest that absolute income plays a major role in determining wellbeing. The importance of relative income cannot be found in national comparisons of subjective well-being. Easterlin argued that the strong relationship between well-being and income within countries reflects the advantages conferred by absolute income or rather, one‟s relative position in society. In the absolute income interpretation, greater income is associated with greater well-being because of the advantages of greater prosperity: higher consumption, more choices, and fewer constraints for survival. An alternative story, though, is that having more money than others within a country matters because we like having more money than other people: we want to have bigger bank accounts, bigger houses, and fancier cars than our peers. If only absolute income matters, then when everyone gets richer, everyone‟s well-being should rise. But if only relative income matters, then when everyone gets richer, no one‟s well-being should rise, since no one gets richer relative to the average. The relationship between well-being and income can be concluded with five stylized facts. First, richer people report greater well-being than poorer people. Second, richer countries have higher per capita well-being than poorer countries. Third, economic growth over time is related to rising well-being. Fourth, there is no satiation point beyond which the relationship between income and well-being diminishes. And fifth, the magnitude of these relationships is approximately equal. Together, these facts suggest an important role for absolute income, since the cross-person, cross-country, and time series relationships are approximately equally strong. This fact by itself also suggests that relative income is less important, although our results are not precise enough to rule out a meaningful role for relative income in well-being. (Sacks D. W., Stevenson B. and Wolfers J., 2012)

While collecting data from people‟s experiences, their evaluations of their own lives should be considered. These evaluations can be categorized as affective and cognitive. As termed in the Life Satisfaction Index6, there are two dimensions of subjective wellbeing: Cognitive Life Satisfaction and Affective Experience. Cognitive life satisfaction can be divided into two broad categories: general satisfaction and domain satisfaction. Affective experience includes positive affect (pleasant state) and negative affect (unpleasant state). Potential influences on well-being that have been identified in the literature. These falls under two broad headings: (1) Income (2) Personality (3) Discrepancy Theory (4) Goals (5) Adaptation and Coping. 1.

Income - The effects of wealth on people‟s happiness within developed economies are less important than those of other factors such as employment, health, marriage, and age. Macroeconomic variables other than income growth, such as inflation, unemployment, and volatility, seem to have strong effects on happiness. Some of the factors that influence individual assessments of well being, such as income inequality, macroeconomic volatility, and occupational status, fluctuate more in the developing countries, and no doubt have implications for the happiness of individuals within those countries. After a certain absolute level of basic income relative income differences matter more than absolute ones. (Graham C. and Pettinato S., 2001) There are strong correlations between income and subjective well-being at the individual level. Economic development increases subjective well-being by creating a cultural environment where individuals make choices to maximize their happiness rather than meet social obligations. This cultural transformation away from obligation and toward the pursuit of happiness is part of a broader transition away from collectivism and toward individualist cultural values and forms of social organization. Collectivism is a social mechanism for organizing and enforcing group cooperation. Over time, often several generations, wealth erodes people‟s dependence on family, neighborhood, and other networks of generalized social reciprocity. It seems then that people in individualistic countries tend, on average, to be happier than people living in collectivist societies. (Ahuvia A. C., 2001)

2.

Personality - Personality is one of the strongest and most consistent predictors of subjective well-being. Because personality is a reliable predictor of subjective well-being, a number of theories have been developed to explain why it is related to subjective well-being. The interaction of personality with life circumstances to influence Subjective well-being is discussed below (Diener E., Suh E. M., Lucas R. E. and Smith H. L., 1999): a)

6

Life Satisfaction Index or Satisfaction with Life Index was created by Adrian G. White, an analytic social psychologist at the University of Leicester, using data from a meta-study. It is an attempt to show life satisfaction in different nations.

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b)

Temperamental predisposition for subjective well-being: Some people have a genetic predisposition to be happy or unhappy, which is presumably caused by inborn individual differences in the nervous system. There is a dynamic equilibrium theory in which personality determines baseline levels of emotional responses. Traits and cognitive dispositions are associated with subjective well-being: The traits that have

c)

d)

3.

received the most theoretical and empirical attention in relation to subjective well-being are extraversion and neuroticism. Extraversion influences positive affect and Neuroticism influences negative affect. Personality and environment interactions: The influences of traits on emotions are probably moderated by the environment in which the individual is immersed. Personality may interact with situations and the environment to influence subjective well-being. Variability: Mean levels of subjective well-being indicate how much subjective well-being a person possesses on average. One can also examine variability in well-being over time by examining the standard deviation of a person‟s subjective well-being or by examining cycles in well-being via spectral analysis. The amount of variability of a person‟s life satisfaction and affect is stable over time and correlates with other personality variables.

Discrepancy Theories – Discrepancy theories depend on the fact that a discrepancy or difference between current condition and previous condition that involves an upward comparison will result in decreased satisfaction, whereas a downward comparison will result in increased satisfaction. a)

b)

Multiple Discrepancy Theory: Individuals compare themselves to multiple standards including other people, past conditions, aspirations and idea levels of satisfaction, and needs or goals. Satisfaction judgments are based on discrepancies between current conditions and these standards. Social Comparison: One should be happy if proximate others are worse off and unhappy if proximate others are better off. Three major processes of Social Comparison: i. Acquiring Social information ii. Thinking about social information iii. Reacting to social comparisons

c)

4.

Modest Aspirations: High aspirations are a major threat to happiness. The general idea is that high aspirations will lead to unhappiness because the person will be discouraged by long gap between where he or she is and where they would like to be. Aspiration level in itself is not a good predictor of subjective well-being.

Goals - Individuals behaviors can be best understood by examining goals: What people are trying to do in life. The types of goals one has, the structure of one‟s goals, the success with which one is able to attain one‟s goals, and the rate of progress toward one‟s goals can all potentially affect one‟s emotions and life satisfaction.

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5.

Adaptation and Coping – The idea of adaptation or habituation to continuing conditions is a central component of modern theories of subjective well-being. Evolution prepared us to make adjustments to external conditions. We adjust at least to some degree, to both good and bad events so that we do not remain in a state of either elation or despair. Our emotion system reacts most strongly to new events and these reactions dampen over time.

Subjective Well-Being Measures: The method of data collection is very important and sensitive since people‟s moods and perception changes every now and then. The various subjective well-being measures are listed below (Krueger B. A. and Schkade A. D., 2007): Experience Sampling Method (ESM): It is also called Ecological Momentary Assessment (EMA). Here participants are prompted at irregular intervals to record their current circumstances and feelings. This method of measuring affect minimizes the role of memory and interpretation, but it is expensive and difficult to implement in large samples. Day Reconstruction Method (DRM): Here participants are required to think about the preceding day, break it up into episodes, and describe each episode by selecting from several menus. The DRM involves memory, but it is designed to increase the accuracy of emotional recall by inducing retrieval of the specifics of successive episodes. A critical advantage of the DRM is that it provides data on time-use which is a valuable source of information in its own right. Further Research Area: A fundamental assumption of standard economic analysis is that people‟s wellbeing increases with consumption of food, clothing, housing, entertainment, and many other goods and services. But GDP is the sum of consumption and investment. If large increases in GDP take the form of growth in investment rather than consumption, then GDP itself does not necessarily mean improved wellbeing. Wellbeing is difficult to define but it is even harder to measure. In general, wellbeing measures can be classified into two broad categories: objective and subjective measures. The first category measures wellbeing through certain observable facts such as economic, social and environmental statistics. People‟s wellbeing is assessed indirectly using cardinal measures. On the other hand, subjective measures of wellbeing capture people‟s feelings or real experience in a direct way, assessing wellbeing through ordinal measures. One concern with wealth is that its pursuit might be frustrating and endless because feeling satisfied with one‟s may be a zero-sum game between the members of a society. In other words, feeling that one‟s income is adequate may depend on being in the upper distribution of income, leaving some segments of society to always feel dissatisfied, no matter how wealthy they are in absolute terms. On the other hand, it might be that material prosperity will help people meet a number of their inherent needs and therefore will produce heightened well-being. In light of the huge importance now placed on material prosperity, and on the economic development occurring throughout much of the world, we need to

inquire as to whether increasing income will produce high levels of subjective well-being (Diener E. and Oishi S., 2000). We find that absolute income is more important in determining the subjective well-being. But the relative income influence on subjective well-being cannot be ignored. Relative income interpret that we compare our economic status with our peers. So, further research is needed to measure the level of importance that relative income has in determining subjective well-being. Happiness does sometimes rise or fall over time, and these movements deserve study. There is also need for more empirical work on how material norms change with the level of economic development, and the mechanisms shaping such norms. Finally, there is a need to develop international cross-sections of the happiness-income relationship that are free of cultural biases. It thus appears that some reorientation is needed in material goals, from acquiring money to enjoying the process of work and contributing to society. Conclusion Today, as in the past, within a country at a given time those with higher incomes are, on average, happier. However, raising the incomes of all does not increase the happiness of all. This is because the material norms on which judgments of well-being are based increase in the same proportion as the actual income of the Reference: Robbins L. (1968) “The Theory of Economic Development in the History of Economic Thought”, (Available online at URL https://mises.org/books/economic_development_robbins.pdf; assessed on 7th April) Diener E, Emmons R. A., Larsem J R, and Griffin S. (1985) “The Satisfaction with Life Scales”, (Available online at URL http://h24-files.s3.amazonaws.com/80877/189347-0xYUS.pdf; assessed on 25th March) Heady B., Veenhoven R. & Wearing A. (1991) “Top-Down versus Bottom-Up theories of Subjective Well-Being”, (Available online at URL; assessed on 25th March) Easterlin A. R. (1994) “Will raising the incomes of all increase the happiness of all?”, (Available online at URL http://repub.eur.nl/pub/22191/91b-full.pdf; assessed on 25th March) DiTella R., MacCulloch R. and Oswald A. J. (1999) “The Macroeconomics of Happiness”, (Available online at URL http://www.econstor.eu/bitstream/10419/39619/1/269376186.pdf; assessed on 25th March) Diener E., Suh E. M., Lucas R. E. and Smith H. L. (1999) “Subjective Well-Being: Three Decades of Progress”, (Available online at URL http://stat.psych.uiuc.edu/~ediener/Documents/Diener-Suh-LucasSmith_1999.pdf; assessed on 26th March) Suh E. M. (2000) “Self, the Hyphen between Culture and Subjective Well-Being”, (Available online at URL http://citeseerx.ist.psu.edu/viewdoc/download?rep=rep1&type=pdf th &doi=10.1.1.208.1738; assessed on 26 March) Diener E. and Oishi S. (2000) “Money and Happiness: Income and Subjective Well-being across Nations”, (Available online at URL http://citeseerx.ist.psu.edu/viewdoc/download?rep=rep1&type=pdf &doi=10.1.1.208.4409; assessed on 27th March)

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society. Although the evidence in support of these conclusions continues to grow, there is need for more work. Despite the fact that time series studies are crucial to the question of how subjective well-being and economic development are related, surprisingly little analysis of this type has been done, especially in poorer countries. It appears that a higher income might help if we are very poor. Living in a wealthy society appears to be beneficial. On the other hand, strongly desiring large amounts of money appears likely to hinder our chances for high subjective well-being. Gaining more income if we are middle-class or upper-class and are living in a wealthy nation is unlikely to substantially affect our subjective well-being on a long-term basis. A fundamental finding of the present review is that for middle and upper-income people in economically developed nations, acquiring more income is not likely to strongly enhance subjective well-being. People should understand that placing great emphasis on the acquisition of wealth can be counterproductive to happiness, and that gaining increased income has dangers as well as pleasures. As the world enters a new era of material abundance, a new paradigm is needed in which greater emphasis is placed on fulfilling vocations that benefit society, and on preventing the involuntary poverty that is associated with a higher risk of unhappiness. Van Praag B.M.S., Frijters P., Ferrer-i-Carbonell A. (2001) “The Anatomy of Subjective Well-Being”, (Available online at URL http://www.econstor.eu/bitstream/10419/18249/1/dp265.pdf; assessed on 27th March) Graham C. and Pettinato S. (2001) “Frustrated Achievers – Winners, Losers, and Subjective Well Being in New Market Economies”, (Available online at URL http://www.brookings.org/es/dynamics/papers/frustrated/frustrated. pdf; assessed on 27th March) Ahuvia A. C. (2001) “Individualism/Collectivism and Cultures of Happiness: A Theoretical Conjecture on The Relationship between Consumption, Culture and Subjective Well-Being at the National Level”, (Available online at URL http://deepblue.lib.umich.edu/bitstream/handle/2027.42/43060/?se quence=1; assessed on 28th March) Diener E. and Diener B. R. (2001) “Will Money Increase Subjective Well-Being?”, (Available online at URL http://www.langleygroup.com.au/images/Money-Happiness2002.pdf; assessed on 28th March) Clark A. E. and Oswald A. J. (2002) “A Simple Statistical Method for Measuring How Life Events Affect Happiness”, (Available online at URL http://ije.oxfordjournals.org/content/31/6/1139.full.pdf; assessed on 30th March) Blanchflower D. G. and Oswald A. J. (2002) “Well-Being over Time in Britain and USA”, (Available online at URL http://wrap.warwick.ac.uk/315/; assessed on 29th March) Helliwell J. F. (2002) “How’s Life? Combining Individual and National Variables to Explain Subjective Well-Being”, (Available online at URL http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.66.1193 &rep=rep1&type=pdf; assessed on 30th March) Kahneman D. and Krueger B. A. (2006) “Developments in the Measurement of Subjective Well-Being”, (Available online at URL http://www.uvm.edu/~pdodds/teaching/courses/2009-08UVM-

300/docs/others/everything/kahneman2006b.pdf; assessed on 28th March) Camfield L. (2006) “The Why and How of Understanding Subjective Well-Being: Exploratory work by the WeD group on four developing countries”, (Available online at URL http://www.welldev.org.uk/research/workingpaperpdf/wed26.pdf; assessed on 30th March) McGillivray M. and Clarke M. (2006) “Understanding Human Well-Being”, (Available online at URL http://archive.unu.edu/unupress/sample-chapters/1130UnderstandingHumanWell-Being.pdf; assessed on 7th April) Dolan P., Peasgood T. and White M. (2007) “Do we really know what makes us happy? A review of the economic literature on the factors associated with subjective well-being”, (Available online at URL http://www.iei.liu.se/program/shk/internationalisering-isamhallsvetenskaperna-91-105-hp/filarkiv-internat-isamhallsvet/2011/artiklarnek/1.247436/happinesswhatmakesus.pdf; assessed on 30th March) Krueger B. A. and Schkade A. D. (2007) “The Reliability of Subjective Well-Being Measures”, (Available online at URL http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2597879/; assessed on 28th March) Knight J., Song L. and Gunatilaka R. (2007) “Subjective WellBeing and its Determinants in Rural China”, (Available online at URL http://www.economics.ox.ac.uk/Research/wp/pdf/paper334.pdf; assessed on 28th March) Samman E. (2007) “Psychological and Subjective Well–Being: A Proposal for Internationally Comparable Indicators”, (Available online at URL http://ejournal.narotama.ac.id/files/Psychological%20and%20Subj ective%20Well-being.pdf; assessed on 27th March) Stevenson B. and Wolfers J. (2008) “Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox”, (Available online at URL http://www.econstor.eu/bitstream/10419/26439/1/577841831.PDF; th assessed on 30 March) Conceicao P. and Bandura R. (2008) “Measuring Subjective Wellbeing: A Summary Review of the Literature”, (Available online at URL http://web.undp.org/developmentstudies/docs/subjective_wellbeing _conceicao_bandura.pdf; assessed on 27th March) Haybron D. M. (2009) “Philosophy and the Science of Subjective Well-Being”, (Available online at URL http://philpapers.org/rec/HAYPAT-3; assessed on 27th March) Sacks D. W., Stevenson B. and Wolfers J. (2010) “Subjective wellbeing, income, economic development and growth”, (Available online at URL http://www.econstor.eu/bitstream/10419/46339/1/639467660.pdf; assessed on 29th March) Diener E. and Chan M. Y. (2011) “Happy People Live Longer: Subjective Well-Being Contributes to Health and Longevity”, (Available online at URL http://internal.psychology.illinois.edu/~ediener/Documents/DienerChan_2011.pdf; assessed on 29th March) Sacks D. W., Stevenson B. and Wolfers J. (2012) “The New Stylized Facts about Income and Subjective Well-Being”,

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(Available online at https://cama.crawford.anu.edu.au/pdf/workingpapers/2013/032013.pdf; assessed on 30th March)

URL

Wu X. and Li J. (2013) “Economic Growth, Income Inequality and Subjective Well-Being: Evidence from China”, (Available online at URL http://www.psc.isr.umich.edu/pubs/pdf/rr13-796.pdf; assessed on 30th March) Sacks W. D., Stevenson B. and Wolfers J. (2013) “Growth in Income and Subjective Well-Being over Time”, (Available online at URL http://www.hks.harvard.edu/inequality/Seminar/Papers/Stevenson1 th 3-1.pdf; assessed on 30 March)