Institute of Economics
Labor and Personnel Economics
Seminar: Market, States, and Civil Society
Research Paper
Happiness and Economic Development
"Those who say that money can't buy happiness don't know where to shop."
Anon
Author
Abdul Maruf Yawari
CONTENTS
1. INTRODUCTION ............................................................................................................................... 3
1. THEORETICAL FRAME ............................................................................................................... 4
2. DATA AND MEASUREMENT ............................................................................................................. 6
3. CRITICAL ANALYSIS OF THE AUTHORS‟ MAIN FINDINGS ............................................... 8
4. CONCLUSION ................................................................................................................................... 9
5. REFERENCE: ................................................................................................................................... 11
1. INTRODUCTION
The question what makes people happy, make Psychologists, economists, biologists,
sociologists and political scientists to investigate and conduct the years of research.
Traditionally, psychology studies human behavior and they look to anxiety and human
depression. On the other hand economists look to other variable such monetary saturation
factors and non-monetary saturation factors such as democracy, religiosity, and national pride
and so on. These are different variables of subjective well-being (SWB).
This paper is written based on the Ronald Inglehart, Roberto Foa, Christopher Peterson, and
Christian Welzel(2008) argue about (development, Freedom, and Freedom Rising Happiness)
and (Agency, Values, and Well-Being: A Human Development Model) written by Christian
Welzel and Ronal Inglehart(2010). In this research paper we argue that the feeling of agency
are linked to human well-being through a sequence of adaptive mechanisms that promote
human development, once existential condition becomes permissive. That in turn leads people
to changes their strategies in order to maximize happiness and that changes in value priorities
are an inherent part of this process.
SWB as dependent variable could be a function of various and many independent
variables. Among these different variables, we are highly keen to look at economic
development variable as determinant in the evolutionary sequence of adaptive links
explaining social change at the first part of the paper. This is very important because through
the process of evolutionary sequence of adaptive links of social change, human adaptive
linkage follow vicious and a virtuous pathway, distinguishing them by how inhibitive or
favorable they are, lead us to the second discussion; which is vicious pathway and is labeled
as “human stagnation path” and the virtuous one is labeled “human development path”. They
are mirrors image of each other. It‟s really important since in the human development model
economic development as independent variable play an important role. Since economically
advanced society offer individual manifold opportunities to thrive, to take advantage of these
opportunities people adopt argentic orientations and emancipates them from group authority.
Emancipative values in turn inspire and legitimize promotion of strategies. This will in turn
nurture the virtues of democracy. Moreover Inglehart (1990) found that not just economic
development is strongly related to happiness, but also democracy. Which we are in turn argue
and criticize these findings in the light of empirical evidences from World Value Survey(WS)
and World Happiness Report and that will lead to the last discussion of this paper.
1. THEORETICAL FRAME
The happiness of nations was investigated with data form the VS and European
Values Study, which have been conducted out in five set time from 1981 to 2007, scoring
almost 90% of the world‟s population. In the all widely used indicators of SWB; happiness
and overall life satisfaction, administered in the same format in equivalent translations in
every wave (Inglehart & Welzel, 2005).
Economic development increases people‟s sense of existential security, leading them to shift
their emphasis from survival values toward self-expression values and free choices, which is
direct way to maximize happiness and life satisfaction. They underlying theme of this shift in
life strategies is to deemphasize external authority and maximize individual autonomy (Ibid:
266). The operation procedure spelled out in the human development model proposed by
Welzel, Inglehart, and klingenmann(2000). This process is well-known as mechanisms of an
Evolutionary Model of Sequence of Adapting (Welzel et al. 2003). Fig. 1 shows an
evolutionary sequence of cultural change, involving four adaptive links. First there is an
environment-utility link through which given existential condition pave the way for the
availability of opportunities to thrive. Existential condition could be social, economic or
cultural conditions as illustrated below:
Environmental utility link value strategy link value-strategy link strategy- wellbeing
Fig.1 An evolutionary sequence of adaptive links explaining social changes.
This model shows that economic variable could maximize free choices through adapting
sequence mechanisms of evolutionary approach. The belief that one has free choice and
control over one‟s life is closely linked with happiness (Inglehart and welzel 2005; Jonson
and Kreuger, 2006)
As Welzel and Inglehart(2010) describe Environmental utility link which people prioritize
the opportunities with greatest utility link:
Existential conditions
define the availability
of opportunities
People tend to value
what is most helpful to
make use of given
opportunities
Prioritized value inspire
corresponding
maximization of
strategies
When successful,
maximization strategies
yield some degree of
satisfaction
The environment-utility link is followed by a utility-value link: people prioritize the
opportunities with the greatest utility in their society, so taking these opportunities becomes a
widely supported value. In an agrarian society, for example, land property is valued. And
when a society lacks an efficient pension system so that having many children provides an
important opportunity to subsist in old age, fertility tends to be highly valued. (Welzel and
Inglehart, 2010: page)
In many societies, people value free choices as much as they value economic security (Welzel
and Inglehart, 2005; Sen, 2001) and the freedom increase with rising of economic security.
This societal-level shift is also proceeding in individual-level values change. Under condition of
scarcity, people focus on survival needs, they give top priority to economic and physical security.
Economic development increase the sense of people security, leading them to shift their strategies
based on new dimension of needs and opportunities, this will in turn lead them to shift their emphasis
from survival values toward self expression values and free choice, which nurture life satisfaction
maximization. Since 1981, these shifts in individual-level values have contributed to societal changes
that are conducive to human happiness.).
Cross-sectional data from the 1990 values Surveys suggested that economic development is conducive
to rising level of SWB; this interpretation is proposed by Inglehart(1997) and Hagerty and
Veenhoven(2003). Since 1989, dozens of countries have become democratic, and all high income and
middle income countries become very supportive of egalitarian value such gender equality and more
tolerant of out-group. (inglehart et al 2008)
Table 1 shows the concept of emancipative self expression values. When societies become wealthier,
people become more tolerant of gender equality and social diversity and upgrade the self expression
values. People living in more tolerant societies tend to be happier, regardless of their beliefs. Moreover
people supportive of egalitarian orientation as illustrated in the model 1 of table 1. It indicates that .72
self expressions (emancipative values) explain by egalitarian position. Model 2 of Table 1 shows that
.75 self expression dependent variable (DV) explain by independent variable (IV) liberty. That means
there is strong correlation between liberty values and self expression. Thus, it indicates the positive
and moderate correlation between self expressions IV and autonomy DV.
Table 1 the concept of emancipative self expression values
Welzel, Inglehart (2005) and Andrew and Oswald (2012) argue that economic performance plays
important role in SWB and it yield high level of happiness:
The relevance of economic performance is that it may be a means to an end.
That end is not the consumption of beef burgers, nor the accumulation of television
sets, nor the vanquishing of some high level of interest rates, but rather the enrichment
of mankind's feeling of well-being. Economic things matter only in so far as they make
people happier. (Welzel& Inglehart, 2005; Andrew& Oswald 2012: pp)
Therefore Inglehart(1990) found that happiness is strongly related to democracy(Welzel & Inglehart
2008) Since high level of SWB are conducive to democracy and democracy provides a wider range of
opportunities which is conducive to SWB (Welzel & Inglehart 2005). The capabilities to take
opportunities are necessary in order to thrive. It‟s one of the elements of maximizing agent‟s strategy.
That play important role in order to adapt to new environment. That directly yields high level of
satisfaction for agent (Welzel & Inglehart 2010)
2. DATA AND MEASUREMENT
The data on feeling of Agency and life satisfaction is provided by the European and World
Values Surveys (henceforth: Values Surveys-VS). Sampling between of 1,000 to 3,000
respondent per country is more than 90 societies on all continents, representing more than
90% of the world population from 1995-2005 (Welzel& Inglehart, 2010). To measure the
endurance of democracy, Gerrings democracy stock and polity IV were used. To measure
how advanced cognitive mobilization, knowledge index (KI) is used. The variable cover three
knowledge economic pillars: education, innovation and information technology. The date on
self expression has been taken from the World Value Service the scale range between 0
denote to expressive position and 1 to most expressive position ( Ibid:51)
To measure subjective monetary saturation we use question „„How satisfied are you with the
financial situation of your household‟‟?
Economic growth is measured as the annual growth rate of gross domestic product (GDP) per capita.
By far the most comprehensive cross section study is conducted by Angus Deaton (2008) who
analyzes the 2006 Gallup World Poll data for 123 countries. The interference suggested the explicitly
in Deaton‟s boldface title: “Each Doubling of GDP is associated with a constant increase in life
satisfaction.”
The rate of growth is calculated as the percentage change in GDP per capita. Indeed, based on
quantitative research of happiness on log GDP, Deaton finds that the difference in life satisfaction
associated with a doubling of GDP in cross sectional data is, if there is gap between richer and poorer
counties (Easterlin, 2013: 4).
Inglehart (1997) hypothesized that economic development brings a societal-level shift from
maximizing economics growth to maximizing SWB:
The transition from a society of scarcity to a society of security brings a dramatic
increase in subjective well-being. But we find a threshold at which economic growth no longer
seems to increase subjective well-being significantly. This may be linked with the fact that at
this level, starvation is no longer a real concern for most people. Survival begins to be taken
for granted. Significant numbers of Post materialists begin to emerge and for them, further
economic gains no longer produce an increase in subjective wellbeing. From a rational
actor’s perspective, one would expect economic development to eventually bring a shift in
survival strategies. At low levels of economic development, even modest economic gains bring
a high return in terms of caloric intake, clothing, shelter, medical care and ultimately, in life
expectancy itself. For individuals to give top priority to maximizing economic gains, and for a
society to give top priority to economic growth, is a highly effective survival strategy. But once
a society has reached a certain threshold of development . . . one reaches a point at which
further economic growth brings only minimal gains in both life expectancy and in subjective
wellbeing as illustrated in figure 2. There is still a good deal of cross-national variation, but
from this point on non-economic aspects of life become increasingly important influences on
how long, and how well, people live. Beyond this point, a rational strategy would be to place
increasing emphasis on quality of life concerns, rather than to continue the inflexible pursuit
of economic growth as if it were a
good in itself. (Inglehart, 1997, pp.
64–65).
Figure2 illustrates that happiness move in
particular set points and defines the dimension
marginal utility return.
Psychologists, economists, biologists, sociologists, and political scientists have long
investigated human happiness, and one claim found widespread acceptance until recently:
Happiness remains constant. Research implies that neither rising prosperity nor severe
misfortune permanently affect happiness. After a period of adjustment, individuals return to
their baseline levels of well-being, leaving humanity on a „„hedonic treadmill‟‟ One widely
accepted view is that happiness fluctuates around a fixed set points (Inglehart & Welzel,
2008).
3. CRITICAL ANALYSIS OF THE AUTHORS’ MAIN FINDINGS
As describe above, Inglehart & Wezel( 2010) argue that “economic development
increases people‟s sense of existential security, leading them to shift their emphasis from
survival values toward self-expression values and free choices, which are direct way to
maximize happiness and life satisfaction”. Moreover Inglehart (1990) found that happiness is
strongly related to democracy, since it provides opportunities, which is conducive to SWB.
On the other hand, according to the world map of happiness from World Value Survey Map
(2009), Saudi Arabia has monarchy states, however the people are very happy, although the
political system is non-democratic. It seems it‟s falsifies what Inglehart (1990) argue that
happiness is strongly link to democracy.
Richard Easterlin (1974) is one of the economists who study statistics over time on the
reported level of happiness. His data came from the United States. Easterlin's (1974) paper's
main objectives were, to suggest that individual happiness appears to be the same across poor
countries and rich countries; moreover he argues that economic growth does not raise
wellbeing. Easterlin(1974) suggested that we should think of people as getting utility from a
comparison of themselves with others close to them: happiness is relative. His paper
concludes: ¼in the one time series studied, that for the United States since 1946, higher
income was not systematically accompanied by greater happiness' (p.118) in social
comparison theory (Easterlin, 1974,) happiness stays the same in the face of rising income
because of a shift in reference. If happiness is shaped by one‟s relative position in a society,
then even if a nation‟s overall economy grows, only those with above-average gains will
experience rising happiness, and these increases will be offset by decreases among those with
below-average gains (Inglehart, et al. 2008).
Bhutan, a country with a very low GDP per capita, but ranked among the happiest nations in the
world, then started efforts to put happiness on the global agenda. In Bhutan instead of GDP (Gross
Domestic Product) index, GNH (Gross National Happiness) index is used in order to measure the level
of happiness (Ryback, 2012). It explains the origins of the concept of GNH, its grounding in
Bhutanese culture and history, and describes how the concept is being operationalized in the
form of the GNH Index in some novel and innovative ways. Any discussion of GNH in
Bhutan must begin from the understanding that it is distinct from the western literature on
“happiness” in two ways. First it is multidimensional – not focused only on subjective well-
being to exclude other dimensions – and second, it internalizes other-regarding motivations.
While multidimensional measures of the quality of life and well-being are increasingly
discussed, Bhutan is innovative in constructing a multidimensional measure, which is itself
relevant for policy and is also directly associated with a linked set of policy and program
screening tools. (eds Helliwell, Layard, 2012)
Last summer, the UN General Assembly unanimously adopted the resolution “Happiness:
towards a holistic approach to development”, recognizing the pursuit of happiness as a
universal aspiration embodying the spirit of the Millennium Development Goals. (Ryback,
2012)
The GNH Index provides an overview of performances across nine domains of GNH
(psychological wellbeing, time use, community vitality, cultural diversity, ecological
resilience, living standard, health, education, good governance) ( eds Helliwell, Layard, 2012)
4. CONCLUSION
There are clearly a number of issues remaining to be resolved in this area. But a reasonable
interim conclusion is as follows:
1. In a typical country, economic growth improves happiness, it seems economic growth
improves happiness in countries that they have weak economic situations, other things equal.
Although economic growth is not the only factor to effect happiness, but its yield more
happiness than any other factors such as communion effect and non-monetary saturation other
variable remain equal. Besides economic development provides opportunities through an
environment-utility link since it premise the existential condition, which given existential
condition paves the way for the availability of opportunities to thrive. That in turn contributes
to the promotion of strategy agentic life that yields high level satisfaction as we in
evolutionary sequence of human development linkage. We also observed a typical country such as
Bhutan, the GDP played not very important role, instead psychological wellbeing, time use,
community vitality, cultural diversity, ecological resilience, living standard, health, education
played rather strong role. It seems other factor none other than economic development factor
forms happiness index. It concluded that happiness as dependent variables (DV) could be the
function of multi level module independent variable (IV). They all correlate positively but in
some IV plays stronger role than other IV. To explain in plain words, the strength of
correlation R value indicates how much DV explain by IV.
5. REFERENCE:
Easterlin, R. 1974, „Does economic growth improve the human lot. Some empirical evidence.
In Nations and Households in Economic Growth, New York and London: Academic Press.
Inglehart, R. 1997. Modernization and post modernization: Cultural, economic and political
change in 43 societies, Princeton University Press. Princeton.
Inglehart, R., & Klingemann, H.D. 2000. Genes, culture, democracy and happiness. In E.
Diener & E. Suh (Eds.), Subjective well-being across cultures (pp. 165–183). Cambridge,
MA: MIT Press.
Inglehart, R., & Welzel, C. 2005. Modernization, cultural change and democracy: The human
development sequence. New York: Cambridge University Press.
Inglehart, R., Foa, R., Peterson, C., & Welzel, C 2008. Development, freedom, and rising
happiness. Perspectives on Psychological Science 3, 264-285. [International]
Easterlin, R. 2013, „happiness and economic growth: the evidence,‟ working paper 7187,
available from< http://ftp.iza.org/dp7187>.[ 6 July 2013]
Helliwell, J., Layard., R., Sachs., & Jeffrey (eds.) 2012 World happiness report. The Earth
Institute, New York.
Oswald, A.J. (1997), „happiness and economic performance,‟ The Economic Journal, vol.107,
PP. 1815–1831.
Timothy, WR 2012, „The U.N. happiness project‟, The New York Times, 28 March. Available
from<http://www.nytimes.com>.[6 July 2013]
Welzel, C., & Inglehart, R 2010. Agency, values, and well-being: a human development
model. Social Indicators Research 97, 43-63. [International]
Welzel, C., Inglehart, R., & Klingemann, H. D. (2003). The theory of human development: A
cross-cultural analysis. European Journal of Political Research, vol. 42, pp. 341–379.
World Value Servey 2009, Map of Happiness. Available from :< http://www.jdsurvey.net>.[7 July 2013].
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