Friday, September 18, 2015

Happiness Index

                                         Comments due by Sept. 25, 2015
We will start soon a detailed discussion of what is GDP, what are its components and how is it calculated. We will also point out to the fact that the GDP was not meant to be a measure of welfare as some insist on doing. Efforts to develop a Happiness Index as a measure of "subjective wellbeing" is something that you must become familiar with. I hope that some might even decide to write your research paper on this topic or something closely related to it.
Calls from UK Prime Minister David Cameron, the United Nations’ World Happiness Report, the OECD’s Better Life Index, along with psychologists and economists, all reflect on the need to develop a better understanding of subjective wellbeing (‘happiness’). Though many contemporary economies have tracked crime, education and economic production for the best part of a century, subjective wellbeing only began to become a staple of world economic indicators in the 1970s.
Unlike national income accounting, which initiated the collection of GDP in the 1930s, subjective wellbeing is a rather young indicator. Though there have been successful projects to roll back GDP (e.g. Bolt and van Zanden 2014, Broadberry 2015), attempts to construct historical series for wellbeing have been notably lacking. Without such a series, we are left wondering how wellbeing responds to key historical events, such as expansionary monetary policies, education and longevity.
But if constructing historical series for wellbeing makes sense, how can we extend existing measures when direct survey evidence was only initiated in the 1970s? The key insight in our new research paper (Hills et al. 2015) is that language conveys sentiment, and that the growing availability of digitised text provides unprecedented resources to construct a quantitative history of wellbeing based on historical language use.
In particular, the foundation of our work involves combining multiple large collections of texts of natural language going back two centuries with state-of-the-art methods for deriving public mood (i.e. sentiment) from language. The recent digitisation of books, newspapers and other sources of natural language – such as the Google Books Ngram database – represent historically unprecedented amounts of data (‘big data’) on what people thought and wrote over the past few centuries (see Michel 2011). These databases have already proved fruitful in detecting large-scale changes in language, which in turn correlate with social and demographic change, for instance in Hills and Adelman (2015).
These data offer the capacity to infer public mood using sentiment analysisDeriving sentiment from large collections of written text represents a growing scientific endeavour. Examples include recovering large-scale opinions about political candidates, predicting stock market trends, understanding diurnal and seasonal mood variation, detecting the social spread of collective emotions, and understanding the impact of events with the potential for large-scale social impact such as celebrity deaths, earthquakes and economic bailouts (e.g. Pang and Lee 2008). Applying the same methods to historical text we can begin to produce more quantitative accounts of national happiness.
In the approach we take, sentiment measures are based on valence norms for thousands of words. These already exist in the literature and are collected from a large group of individuals who are asked to rate a list of words on how those words make them feel (e.g. Gilbert 2007). In the present case, valence norms based on the affective norms for English words have already been collected for five languages: English, French, Spanish, Italian, and German.
We applied these norms to the Google Books corpus for each of these languages, allowing us to derive a new index for subjective wellbeing going back to 1776, which we tentatively call the HPS index. An initial comparison with subjective wellbeing collected with survey data is shown in Figure 1. The data reflect the residuals after controlling for country fixed effects and clearly show a strong and significant correlation with our measure based on historical language.
Figure 1. Comparison between survey measures of life satisfaction and residuals (after controlling for country fixed effects) for our measure based on sentiment from historical text.
Note: The grey area represents the 95% confidence interval.
Rolling the text-derived measures of subjective wellbeing back to 1776 reveals a quantitative picture of how public sentiment has changed across the six countries we considered: France, Germany, Italy, Spain, the UK and the US. Though we make clear in our research that we need to exercise caution when examining very long-run trends (as language itself has evolved so much), it is nonetheless clear in Figure 2 that short-term events, such as the exuberance of the 1920s, the Depression era, and World Wars I and II show clear and distinguishable influences on subjective wellbeing.
Figure 2. The average valences over the period 1776-2000.
Note: For all countries the vertical red lines correspond to 1789 (the year of the French Revolution), World War I (1915-18) and World War II (1938-45). In the five European countries, a line is draw for 1848 (the year of the revolutions). In the US, the vertical lines represent: the Civil War (1861-65), the Wall Street Crash (1929), the end of Korean War (1953) and the fall of Saigon (1975); in the UK, the Napoleonic Wars (1803-15). In Spain, the starting of Civil War (1936); in France, the Napoleonic Wars (1803-15), the end of the Franco-Prussian War (1870); for Germany, the vertical lines represent the Napoleonic Wars (1803-15), the Franco-Prussian War and unification (1870), Hitler's ascendency to power (1934), the reunification (1990); for Italy, the unification (1861-70).

Why is a quantitative history of wellbeing important?

The fledgling state of wellbeing data has limited our collective ability to understand how wellbeing responds to different historical events. This has in turn limited the use of wellbeing in public policy, health initiatives and financial decision-making. In practice, if subjective wellbeing is to become a key factor in guiding our collective behaviour, then we need accounts of wellbeing on a par with those of GDP.
Using wellbeing as a measure to guide behaviour, however, takes more than the desire to simply improve wellbeing. As noted by Gilbert (2007), people have problems understanding so-called ‘affective forecasting’ – the ability to understand how one will feel in the future – and with this also comes a limited capacity to understand how prior events and decisions influenced our past happiness.
To overcome this, especially at the government level, we must develop our capacity to predict how wellbeing responds to both deliberate and unexpected events. Better predicting economic fortunes was the motivation of the national income accounting, which later became GDP, following the Depression in the 1930s. Of course, now numerous decisions are based on GDP, despite a near global acceptance that, in the words of John F Kennedy, “it measures everything in short, except that which makes life worthwhile” (Presidential Library and Museum, North Dakota).
Thus, as with GDP, governments and other agencies recognise the importance of this additional ‘emotional accounting’ and, by all accounts, they want to understand how better to use it to improve future wellbeing. But to do that we need historical informed accounts of what this means, and our index represents a first attempt.(Vox, Sept 17, 2015)


Anonymous said...

The article starts off with talking about the happiness index, then leads into talks of the GDP, not in just one or two places, but in many places around the world. My question is: should the GDP really be factored into the happiness index? If one wants to see how a country's GDP affects its citizens, then yes, but otherwise, I see no actual point in factoring it in. Many people may not have the right education to truly understand the GDP, that and the media and opinions of others, could sway a person's opinion, therefore it would be best to either educate citizens before factoring the GDP in, or just leave that area out entirely.

-E. Piper Phillips

Heather Kiczek said...

The article first discusses how the happiness index is a staple of the measurements that the GDP of the economy is measured. Using these measures the GDP measures that the happiness and well-being standpoint of many countries are directly correlated to times such as World War I and The Great Depression. According to the article, "If subjective wellbeing is to become a key factor in guiding our collective behaviour, then we need accounts of wellbeing on a par with those of GDP. Using wellbeing as a measure to guide behaviour, however, takes more than the desire to simply improve wellbeing." One can imply from this that it is extremely difficult to predict the general well-being of a person from an economic standpoint. With that being said, long-term GDP measurements are virtually useless, for there is no real accurate information that can be obtained. I do think that other people need to have a better understanding of the GDP and its effects before they are measured so until that is done, the well-being measurement is almost pointless.

Anonymous said...

This article discusses two of the many factors of an economy, GDP and the happiness index. to say that one is based on the other is not fully accurate. Within this article there can be an assumption that GDP has a direct correlation with the happiness index but evidently it is not accurate enough especially within the long-term GDP. Playing a role of the GDP is to me irrelevant when you are talking about the economy Happiness index. Misconceptions are made due to lack of knowledge of the GDP which ends up a misuse of factoring in the GDP with the happiness index. Personally i think that if it is not factored in the appropriate way than there should be no factoring the GDP in at all.

-Nikolas Fountis

Marvin jean-baptiste said...

This article shows that GDP and also happiness index are great factors of econonmy. both of them feed off each other. Usually when the GDP is high the happiness index is also high. To have better well being we must develop our capacity to predict how wellbeing responds to both deliberate and unexpected events according to the article. Also according to the article Better predicting economic fortunes was the motivation of the national income. This became GDP. Basically in my oppinion GDP has nothing to do with the economy, and the government needs to educate us as citizens more

-Marvin Jean-Baptiste

Alexandar Dimcevski said...

As the post points out the measurement of people's confidence and outlook about the economic future is a relatively new idea. Personally, I think this approach towards economic prosperity is not viable. This form of measurement varies from different economic places on Earth. Also, outside factors, such as religion and emotion exist in determining happiness for many. These are examples of qualitative data, which can be hard to accurately incorporate into economics, where quantitative data is the norm.

Andresious Cyprianos said...

My personal opinion toward this post and wellbeing in general is that it is extremely difficult to ever come up with happiness index values that can be compared with other countries values due to different historical events. I believe quantitative measures are still the most useful as they can be easily calculated and compared. In cases where you are comparing two different countries GDPs you still have the option of converting on into the others currency. Qualitative data though I feel has different values to every single person.

Anonymous said...

I personally believe that the happiness index and the GDP share something in common because usually when the GDP is high the happiness index is also high and when the GDP is low the happiness index is low. I believe it is important to the economy that the GDP stays at a steady high rate to keep the happiness index high as well.

-Liam Monarchio

David Bavagnoli said...

The well-being of the the nation is important because it will be able to help economists identify how everyone reacts to affairs such as a presidential elections, stock market crashes, or natural disasters. Knowing the GDP can help but when it comes down to it, GDP is just a number and it does't have anything to do with how satisfied consumers really are. I liked what John F. Kennedy said about how GDP only tells us how well the economy is at the time, while the happiness index will tell us if consumers are content, which is essentially the most important thing.

nick lewis said...

GDP measures the amount of economic activity. Economists try to measure happiness on an index that includes the well being of the country is doing. They measure the two to predict how the economy is going to react to changes like the president or a stock market change. They higher the happiness index usually the higher the GDP. A drop in either one will cause the other to react as well. The one thing economists can not predict however, are outside factors to the happiness index or GDP. I think no matter how high or high either one is the GDP can not be high without a high happiness index. We should look to see how the GDP reacts to all inside and outside factors.

-Nicholas Lewis

Anonymous said...

This article states that happiness index and GDP are two main factors in the economy. These two factors can be used to predict how the economy is going to react to things like the stock market, the president, etc. GDP and happiness index are usually directly related in the sense that if GDP is high then happiness index is high, vice versa. I believe that it is important for both the GDP and happiness index to stay high.

-Stefanie Svoboda

Anonymous said...

This article shows that GDP and also happiness index are great factors of economy. When the GDP is high the happiness index is most likely high as well. These two things predict how the economy reacts to certain things. Whenever GDP drops the happiness index drops as well.

- Chelsy Ventura

Anonymous said...

The happiness index and GDP are factors that affect the economy discussed in the article. GDP is measured by the economy's activity, while the happiness index is measured by how the well being of the country is doing. These factors share a common correlation. Usually, when GDP is high, so it the happiness index. When GDP is low, the happiness index is also low. In my opinion, I believe that it is important for the economy, that both the GDP and the happiness index remain high.

-Jane Kasparian

Anthony Zullo said...

The Happiness index is a very hard study to figure out by itself. It is done using language and comparisons between countries that I don't believe should be comparable. Countries are very hard to compare because language is completely different in the terms used and the way of life day in and day out is. If I would verify he happiness index with a correct correlation to anything it would be with the GDP and quantitative measures. When GDP is high and the economy is thriving the happiness index follows with it. The GDP and happiness index connects with the opinions of political candidates because it shows who the people feel will better the economy and government which makes the people happy. The stock market and seasons of the year are other factors because the stock market is a huge representation for how the economy is doing and many businesses are seasonal which rollercoaster as the months move along. I don't believe there is a reliable methodology to predict what will happen in the future using either method talked about in the article. There are too many loopholes and not enough consistency.

Anonymous said...

Personally, I do belive that there could be a correlation between GDP and the happiness of the people in our contry. I think it is true that when GDP goes up people will become happy, but this will only happen when businesses are treating employies well. People can be unhappy when GDP is high if they are not being treated properly at work. This is because of technology; throughout history technology has changed the way people are capable of answering questions on their own. People have always had questions but in today's age we are able to have any question answered on the internet. Therefore, people that are working for less will see much easier that they are simply being taken advantage of. This has also caused greater seperation between political views. Some parties use fear to gain support and those who need the help to gain opportunity get lost in these lies. If GDP always had a correlation to happiness than we would be one of the happiest countries in the world. In reality, we aren't and if that were to change, we must care more about happiness and education rather than just quarterly earnings and money made at the end of the day.

- Matthew Golden

Anonymous said...

The connection between GDP and the happiness of the people of that nation are very closely related. With the GDP up, the people have reasons to invest in other things besides themselves. People always say that money does not buy happiness, but in some situations that is not true. It is hard to be happy with what you are doing if you have to plan out every dollar you send. Yes even wealthy people even need some plan, but they have some wiggle room. Altough this is very true, the income has to be spent right, the in mind the eployies. Whatever benefits them, and makes the prosper, is the best route.

-Alexander Shields

Jeff Towle said...

The GDP allows economist to not only measure the economic activity but the happiness index as well. This will help them to see just how well a country is doing and if they are flourishing or not. These studies will also allow the economist to take precaution for changes that are bound to occur. these changes include stock market crashes or change in the presidential office. the happiness index and the GDP react direct with each other meaning as one goes up the other does as well. Without one the other will fall, so when it comes down to outside factors effecting one of them, it effects the other as well. ultimately I think our country needs to take this relationship between GDP and the happiness index into consideration because our GDP and index don't necessarily correlate.

James McDermott said...

The article shows that the country's GDP follows closely along with the overall wellbeing of the country's population. Research has shown that the wellbeing and happiness of people in the past has had a direct correlation to what was currently happening in the world. For example, previous stock market crashes or times of war has resulted in a decrease in the wellbeing of our country's people. Tracking the population's wellbeing is important because it shows how different times in the world can effect the economy's prosperity and why. If the population's happiness and wellbeing stays high it is more likely to result in positive economic development and activity.

susan aracena said...

Who would have known that the countries GDP and overall happiness would be correlated. (sarcastic voice) Its obvious that if the country is effected by a crash in the stock market then the people living in the country would be "unhappy"; it's effecting them negatively. GDP measures the overall activity of a country and in this article economist are trying to measure how people feel parallel to how well the country is doing. I believe that the GDP and the overall economy is very different. The way a person feels is only a reaction to what effects them such as job creation and inflation.

-susan aracena

Hamed Alharbi said...

I kind of agree with what the article say about how the GDP is closely related to the wellbeing of the population. Like how in the past during the time of wars and how low the happiness index wen and affected the economy, also during the great depression. But I got to say it also depends on the work’s environment, the GDP might be high but also the wellbeing of most the workers can be low cause of a bad work environment.

Anonymous said...

Even though well being can be distinguished in many forms I agree with this article in the fact that throughout the centuries languages have been able to determine th3e sentiment of others. GDP and happiness are closely related as this article states. Even though recording sentiments wasn't a thing till the 1970's the fact that the language that were recorded before show the well being or their sentiments toward wars, depressions and even resections. At the end of the day the well being of any person is how or with what type of environment they are surrounded with and that what GDP should mostly be about.

Manuel Llivisaca

Anonymous said...

This article discusses that there is a correlation the GDP and overall happiness. GDP (Gross Domestic Product) measures the overall activity of a country. Many economists have done multiple studies and tests to observe this correlation. GDP is the measure of the size of the economy. When GDP is high the happiness of people is high, and when the GDP is low the happiness becomes low. However I believe that some of these results are quite inaccurate. I believe that the GDP isn't the factor that should determine the well being of people. The well being of an upper class citizen is going to differ from the well being of a middle class lower class person based on the GDP. Therefore the GDP can't give an exact overall representation of the overall happiness off the economy. However it would be best to keep the GDP quite high in order to keep the happiness index high.
-Surina Sandhu

Anonymous said...

In the article, the happiness index is spoken about and how it is a factor that can be used to influence GDP and the economy. The happiness index is the behavioral patterns of consumers. These factors greatly impact the economy because whether it is an event like a war, a depression, a government program, the consumers will react in some way. This reaction then will have an influence on the GDP whether it be positive or negative. So in order for behavioral patterns to be considered a factor of GDP, there needs to be a standard.
-Nick Arciszewski