German Happiness = (α1 log yit+1 + α0 log yit…

Via Kevin Drum, I learn that a recent study of Germans conducted jointly by scholars at the Harvard Business School, DIW Berlin, and Imperial College, London, says this is how you achieve happiness:

Happiness[it] = ( α1 log yit+1 + α0 log yit + α-1 log yit-1 + α-2 log yit-2 + α-3 log yit-3 + .. α-T log yit-T) + ( β1 log Sit+1 + β0 log Sit + β-1 log Sit-1 + β-2 log Sit-2 + β-3 log Sit-3 + .. β-T log Sit-T) + δ Xit + fi + ηt + eit

Those Anglo-Saxons think everything can be reduced to a number, some German readers are now chuckling.

OK, enough snark. I am not one to pooh-pooh happiness research. I’ve read a few of the better books on the subject and come away impressed. Yes, you can measure happiness pretty reliably, and you can identify factors which are strongly associated with it (a good social network, being married, having some sort of religious belief, and feeling and expressing thankfulness). 

Money and status are somewhat associated with happiness, but not as strongly as most people think.  More money can create a "hedonic treadmill effect," in which rising levels of income ratchet up your desire for yet more comsumer goods, and your frustration at not being able to afford the next-most expensive high-definition television (U.S.) or next-most-prestigious contemporary sculpture (Germany). And what about status? Here is the basic conclusion of the study’s authors:

In this paper, we … estimat[e] a happiness equation with a distributed lag structure for income and status on individual panel data on 7,812 people living in Germany between 1984 and 2000.  We find strong adaptation to changes in income but not to changes in status. The adaptation effects to income are large in size. Once the long-run effects are estimated (by summing up the current and lagged income coefficients) we cannot reject the null hypothesis that people adapt totally to income within four years. By comparison, significant effects of status are found to remain after this time.

In this context, adaptation means "it wears off."  That is, 10% raise increases your level of contentment for a short time, but then you revert to being as happy as your were before the raise.  A raise in status, however, seems to permanently increase your level of contentment.  Most interesting of all is the results along political lines.  The authors designated sub-groups of people who had distinct left-wing and right-wing views and found: "that those on the right (left) of the political spectrum adapt to status (income) but not to income (status)." In other words, right-wing Germans tend to be made lastingly happier by increases in their income (but not by status increases), while left-wing Germans tend to be made lastingly happier by increases in their status, but not by income increases.

I find this fact fascinating. It also helps explain something I’ve always found a bit amusing: German professors with known left-wing views who still insist on being referred to by all of their titles: "Prof. Dr. Dr. hc.," etc. I would be willing to bet there’s a strong cultural factor at work here; i.e. that you would get somewhat different results in other countries.   Deriving satisfaction from being rich is still a little declasse in Germany, where you encounter traces of something like the English disdain for "trade money." You also find very evident traces of admiration for those who act from "noble" or non-monetary motivations. Here, for example, Reinhard Mohr argues (G) that condemnation of the "Black Bloc" rioters in the German press during the G8 summit was muted because of the German cultural trait of forgiving those who operate from "pure" motivations. There might be something "wrong" with having money, from this perspective, but there’s nothing wrong with having status (degrees, awards, impressive job titles etc.). Especially if you got those status designations for doing something unselfish, such as writing or heading up an NGO.

Anyone agree/disagree?

3 thoughts on “German Happiness = (α1 log yit+1 + α0 log yit…

  1. To be honest, I find striving for happiness through income (the right) much more pitiful than through status (the left). With income, there is always the connotation of greed and satisfying it. Status is about reputation and recognition of your actions within a social group. No wonder the U.S. are leaning to the right. 😉

  2. i think you’re all sickos. people looking for money or status are BOTH creepy and quite frankly _weak_ because they would rather lick someone else’s boots or the boots of an entire group or society in order to validate their pathetic existence instead of validating their OWN existence by living their own lives in independence of the judgements of stupid people around them. so in other words, both left-wing and right-wing people are extremists and twats. intelligent people seek moderation in all things.

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