January 12, 2014
report by Barrie Webster
Sunday, January 12, brought us Dr. Pascal Courty of the Department of Economics at the University of Victoria. Dr. Pascal Courty was born and brought up in Montpellier in the south of France and educated at the University of Paris (IX, Dauphine). He received his PhD at the University of Chicago. He has held academic appointments at the University of Victoria since 2009, and also at the London Business School and the European University Institute, with visiting professorships at the University of Montpellier, Autonoma de Barcelona, and Stanford University.
Pascal describes his research interests as Information Economics, Contract Theory, Industrial Organization, and Behavioural Economics. In layman’s terms, that means, for instance, that his work relates to the study of how companies such as hotels and airlines set prices to maximize their revenue, and how pop artists set their concert prices. More generally, he studies how individuals and groups choose to use resources. This interest can be described as microeconomics, or the study of business and consumer behaviour. Dr. Courty’s interest in happiness and economics is more recent.
Dr. Courty began by informing us that there were a number of different definitions of happiness, ranging from those of Socrates and Aristotle to Charles Shultz (of Peanuts fame). Further, there were various ways to measure economic activity, the gross national product (GNP) being the most common. Thus, more material goods can be purchased with more money. Or put another way, more money allows more choice, and the degree of consumption, a behavioural index, could be seen as a behaviourist measure of happiness. On the other hand, cognitive happiness can only be measured by subjective means, notably, by surveys, of various sorts, of well-being. Such questions as “How satisfied are you with your life?” or “Did you laugh today?” are used by Gallup to generate ‘ladders of happiness’ on a scale of 1-10 (either immediate or with the perspective of the next five years). World Happiness Reports are thereby published, and in the 2011 and 2012 years, North America and Australia-New Zealand scored 8. Denmark and the rest of Scandinavia scored 9, while African countries typically scored lower than Greece which came in at 7. The results appear to be stable over time, and appear to be associated with social and economic factors, income levels, and crime rates. Other factors were psychological or genetic. But the results may be simplistic.
Another way of determining happiness is to use the “Big 7” factors method of determining happiness: family relationships, situation, work, community and friends, health, personal factors, and personal values. So does higher income correlate with greater happiness?
The results of studies by Easterlin (the Easterlin Paradox – 1974 & 2010) show that there is only a very weak correlation. Further, breaking down the population into ‘poor-to-medium’ ($25K vs. $50K per annum) and ‘high’ ($100K vs. 250K) income earners, we find different results. The former need sufficient resources to live comfortably and the correlation is good; on the other hand, the higher income group showed a flat-to-negative response. Such factors as ‘keeping up with the Joneses’, conspicuous consumption, or positional consumption appeared to be rational individually, but were collectively self-defeating. And in so-called lottery studies in the Netherlands, it was found that relative consumption does not correlate at all well with happiness.
Results of these studies and others based on paired subjects completing tasks and being rewarded for performance or fMRI scans of the brain to measure oxygenation of blood in the reward centres suggest possible strategies to counter the down side of conspicuous consumption. For instance, there is the use of a tax on specific items involved in conspicuous consumption or a tax on positional goods to counter the excessive non-happiness-generating rat-race or status seeking behaviour.
Dr. Courty’s presentation generated animated discussion. If you weren’t there, you missed a good talk.