Responding to Climate Change

As of March 2019, 195 UN members have signed the Paris Agreement. The long-term goal of this agreement is to keep the increase in global average temperatures to well below 2 degrees Celsius above pre-industrial levels, and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius. 

This paper shows that if we continue with our current policies we can expect temperatures will rise to between 3.1-3.7 degrees Celsius by the year 2100. And even if we put in place all of the national pledges that countries have committed to recently, temperatures are expected to increase to between 2.6-3.2 degrees Celsius - far above the “well below 2 degrees Celsius” target.

There are now currently ongoing discussions between policymakers as to what is the most effective way in which policies should be designed to achieve the goals set out in the Paris Agreement. The two main policies being discussed is a carbon tax or a range of targeted infrastructure government spending projects combined with regulation, such as the ‘Green New Deal’ that is being proposed by Democrats in the US. 

The carbon tax is an efficient way to create a reduction in pollution and force firms and individuals to develop more environmentally friendly alternatives to carbon. It’s not only this; it’s very difficult to foresee what could be the full economic benefits of the tax due to the billions of knock-on effects it will have across the economic system. For example, it may encourage people to use greener modes transport such as cycling or walking which will lead to health benefits that go beyond the reduction in pollution. 

The main criticism of this policy is that firms’ production may simply shift to countries that don’t have carbon taxes. Therefore, until all of the countries in the world adopt the tax, it’s not likely to work. In addition, the cost of adopting such a tax has the potential be quite expensive (depending on how it is designed), reducing its efficiency. Related to this, there are lots of questions surrounding the optimal design for this tax, how do you determine the correct tax rate? Do you tax every carbon emitter in the country or only the largest producers of carbon? How do you prevent tax evasion from carbon production in an efficient way? 

Then for the alternative policy: from an ideological perspective, this policy is based around large government injections into the economy in order to structurally shift towards a green and renewable based economic system. The benefits are clear from developing a policy framework under this goal; the criticism is that current plans in this area have been vague and its highly likely to be a large political challenge to gain widespread support for this due to the lack fo tangible benefits today from implementing these policies.

Before we offer our view in this debate, we’d like to briefly just explain why as an organisation that focuses on happiness economics research we are discussing this topic in the first place. From a happiness economics perspective there is no greater pressing issue than climate change at the moment. Improvements in quality of life, development and wellbeing all fall second in line to risks faced by not acting now to protect the future of the planet.  This is not an overdramatic or pessimistic statement; it’s a realistic one based on the facts – the diagram in Figure 1 in the article below shows this quite clearly.

In terms of a policy response our view is that both a carbon tax and a targeted infrastructure plan should be put in place, in as many countries as is feasible. The carbon tax should be a starting point and should be implemented swiftly – the optimal design of this policy could be debated for decades, it will never be perfect, but its implementation will represent a large step in the right direction. Then in terms of the infrastructure spending plans, this should be done by taking the revenues from the carbon tax (and additional government spending, where possible) to change the structure of high-carbon producing economies to become green and renewable based.

Our view is that the best way that this can be implemented is through a top-down approach with government co-ordination with industries to find intelligent solutions for facilitating these structural changes. For example, governments should put in place overarching targets (similar to the ones in the Paris Agreement) and then show how they plan to reach these targets through sub-targets for reductions in greenhouse gas emissions across a range of important industries in that country. This needs to be a well-defined co-ordinated plan that is publicly accountable, such that should participants fail to meet their targets they will be publicly named and there should be financial disincentives should participants fail to meet targets several times. 

Neuroscience and Wellbeing

Despite there being strong evidence that subjective wellbeing measures produce statistically significant and often highly informative results, due to their subjective nature there will always be some scepticism surrounding them. In order to help prove the doubters wrong, and to understand wellbeing better, neuroscientists and psychologists have started to investigate the relationship between our functional neuroanatomy and our sense of wellbeing.  

In this article we aim to give an up to date view of our current understanding on this topic. We start by mapping out the key sections of the brain, then discuss some key concepts and finally we finish off outlining some of the most interesting findings in the literature. To put into perspective how cool the brain is – it’s a bundle of cells, like all the other organs in the body, but it’s a bundle of cells that has sent man to the moon, performed awake operations on other brains, re-engineered genes and created Jay-Z’s Black Album (Elliot’s favourite). Let’s go on a tour of these cells. Although there are well accepted areas of the brain that control certain things, it is important to note that these are not hard and fast. . Each brain is unique, like our hands and faces, meaning that our mappings of abilities within and on the surface of the brain are not identical to one another.

The brain is made of two hemispheres, the left and the right. Generally speaking, the left cerebral hemisphere controls the right of the body and the right controls the left. We split these two hemispheres into four ‘lobes’ according to their unique functions: frontal, temporal, parietal and occipital. The frontal is sometimes referred as the ‘human’ part of the brain, as it helps us to read emotions, solve problems, plan, memorise, make judgements, inhibit sexual behaviours and order our language. The temporal lobe is one of Jess’s favourites. Here we process sounds, which are turned into electrical signals, read by the brain through the cochlear.

The parietal lobe holds the ‘sensory strip’, neighbouring the motor strip but instead giving the brain feedback about sensation. It also processes and conceptualises visual information, language and importantly mathematics. Finally, the occipital lobe. Here visual information is processed and understood correctly. Damage here may cause people to neglect half of their vision, such as reading one half of a word, or not knowing where a sentence finishes on a page.

There are also a few parts of the brain that we are most interested in for happiness research. Firstly, the connection between the Amygdala and the medial prefrontal cortex (MPFC), which is the brain circuit that is relevant for emotion regulation. Raw emotions are triggered from the Amygdala and are often done so sub-consciously. Our conscious experience is more linked to our frontal lobes than the deeper parts of our brains. Typical neuroscience studies involve putting electrodes all over the scalp and reading the electrical activity. These measurements are then related to the feelings people report. Positive emotions lead to more activity in the left front side of the brain and negative emotions lead to more activity in the right front side of the brain.

Before we move onto the literature, here are a couple of key concepts that come up a lot in these papers. The first is ‘neuroplasticity’, also known as brain plasticity and it is defined as the ability of the brain to form and reorganize synaptic connections, especially in response to learning or following injury. The second is “epigenetics” – the literal meaning for this is ‘above genetics’ – as it does not refer to a change in a person’s DNA but rather how much or whether some genes are expressed in different cells in your body. Over the course of a person’s life recent research has shown that epigenetics change based on a person’s experiences or life choices, for example by eating a bad diet or choosing to smoke. These concepts are important for wellbeing research because they show that through our own actions we can produce objective results on our mind and body.

We have split the research findings into four topic areas below:

1. Resilience: by resilience we mean the ability to improve mood and emotion regulation. A paper by Kral et al (2018) found that the more experience an individual has in meditating, the stronger was the connection between the Amygdala and the MPFC. As such, the reactions from these individuals to extreme positive and negative stimuli were much smaller than the control group, who had little or no meditating experience. 

2. Attentiveness: An interesting paper was written in 2010, titled “A wandering mind is an unhappy mind”. They developed an app to create an extremely large database of real-time reports of thoughts, feelings and actions of a broad range of people as they went about their daily lives. There were three main findings. First, people’s minds wander frequently, regardless of what they are doing. Mind wandering occurred in 46.9% of the samples and in at least 30% of the time during every activity except making love (individuals had 22 activities to choose from on the app). Second, people are less happy when their minds are wandering than when they are not. And third, what people were thinking about was a better predictor of their happiness than what they were actually doing at the time. This evidence is supported by neuroscience research, for example, Lutz et al (2009) shows that mental training can significantly affect attention and brain control.

3. Connection: the ability to understand emotional experiences of others, empathy, is an important skill for effective social interactions and helps to develop deeper personal relationships. An extremely interesting and unique study was completed last year to test how training empathy in adolescents impacts their brain circuits. The authors of the paper created their own video game (not joking), called Crystals of Kaydor and investigated whether playing the game increased empathic accuracy and related brain activation in adolescents. The authors found that connectivity in empathy-related brain circuits was stronger after gameplay and that the training produced behaviourally-relevant, functional neural changes in the brain. 

4. Purpose: Boyle et al. (2009) used data for 1238 older persons and found that a greater purpose in life is associated with a reduced risk of mortality, holding all else constant. They used life evaluation surveys over a 5-year period and controlled for a large number of variables that will have also impacted the result. Shaefer et al. (2013), found that purpose in life can predict a better recovery from negative stimuli. Greater purpose, assessed over two years prior, predicted better recovery from negative stimuli indexed by a smaller eyeblink after negative pictures offset.

For more detail on neuroscience and wellbeing, please click on the link below or check out the video above.

Mental Health and the UK Economy

In this article we attempt to convince you that mental health creates a big enough problem that economic policies need to be designed to address the issue, and that doing so, would benefit the UK economy. Mental health sits at the centre of what happiness economics is trying to achieve. Our view is that there are two ways that policymakers should look to influence the happiness distribution in a country: by either shifting the bottom end upwards or by shifting the whole distribution upwards. The former aims to make the most miserable in society happier and the latter aims to improve happiness for all in society. 

Mental health affects a lot of people in the UK – 17.6% of the UK population have been diagnosed with either a mental health or substance use disorder. And there are many more people that go undiagnosed. In addition, according to a recent poll completed by YouGov for the Prince’s Trust, the number of young people in the UK who say they do not believe that life is worth living has doubled in the last decade. In 2009, 9% of 16-25 year-olds disagreed with the statement that “life is really worth living”, but that has now risen to 18%. Moreover, 27% of young people do not feel that their life has a sense of purpose – which is one of the most important ingredients of a happy life.

The main way that mental health impacts the economy is through the labour market. By the labour market, we refer to those who are in work (employees), those who are looking for work (unemployed people) and those who offer work (employers). Employment is central to many people’s live and identities. The probability of developing a mental health illness increases the longer an individual is unemployed. This can develop into a vicious cycle, which we have named the unemployment trap. It’s similar to a poverty trap theory, often used for developing economies. Essentially, the idea is that the longer an individual is unemployed, the more likely they are to develop a mental health illness, they then begin to lose motivation and confidence, which reduces the probability of finding a new job further as time passes. Policies aimed developing short term employment contracts to break this cycle could have large benefits to the UK economy, as well as lead to more efficient use of government resource.

On the employment side, the onus is on the employer to make the right decisions, leading to benefits for their firm and the wider economy. The current view is that the best approach is a flexible one from the employer. Different employees require a different response as mental health illnesses and people are not the same. Through firm-wide destigmatisation and taking a flexible approach employee loyalty will increase in the firm, leading to longer tenures and therefore an increased likelihood that employees will become experts in their role.

In order to create conditions within society to generate the greatest possible happiness and the least possible misery across the population, policymakers need to know the causes of happiness and misery. Therefore, we have chosen to study the correlates of life satisfaction and mental health, comparing across two methods of doing so, using within-country and cross-country data. The results showed that within country data performs better than cross country data. Although the results using cross country data did improve when we reduced the sample to a subset of countries that are more comparable to each other. The correlates using within country data were calculated by the UN as part of their World Happiness Report. The correlates using cross-country data were calculated by us and we have linked the data we used and results tables here. There is plenty more detail on this section of the paper in the full article available below, where we explain how to interpret the correlations. We also explain some of the interesting trends we have already been able to pick up regarding what makes a happy life.

Policies aimed at providing solutions to the challenges posed by mental health will have economic benefits that go beyond the labour market. In economics, we call these second order effects, since the majority of the first order effects come through the labour market. There are many second order effects and these will be explored further in a future article focused on policy design.

For more detail on mental health and the UK economy, please click on the link below or check out the video above.

How do you measure happiness and wellbeing?

Measurements of happiness and wellbeing allow policymakers to track progress over time. Bhutan was the first country to do so periodically, creating a Gross National Happiness Index in the 1970’s, as a measure of progress to replace GDP. We chose this to be the topic of our second research article because it is the area that happiness economics tends to get the most cynicism. Many cynics argue that measures of happiness are too weak to be used in statistical analyses, due to the lack of reliability in the subjective nature of the responses.

Our research shows that whilst happiness and wellbeing measures aren’t perfect, they do produce statistically significant and highly informative results. Importantly, due to the data being noisy, the accuracy of the results improve, as the sample size of participants surveyed increases.   

There are a range of different happiness and wellbeing measures available, some are more useful in particular settings than others, depending on the policy purpose they are being used for. No one measure is superior all the time. We summarise these below:

• UN Happiness Indicator: as part of the ‘World Happiness Report’, the UN produces a global distribution of happiness bringing together subjective wellbeing measures (SWB) and economic and development indicators into one overall measure. We have our reservations regarding the question used for the SWB measure (known as the Cantril Ladder), however the overall index produces results that are informative and intuitive at a macro level.

• Happy Planet Index: this was developed by the New Economics Foundation and it is a measure of sustainable wellbeing. Given the goal, at Exploring Happiness, when developing research is: “increasing happiness and wellbeing in society in a sustainable way” , it is highly relevant for our work. Essentially, the aim is to estimate how efficiently residents of different countries are using natural resources to live long ands happy lives.

• ONS Wellbeing Measures: these measure were developed in 2012 and we think the simplicity of questions asked will create more consistent results than other measures. In the UK, they ask participants in their quarterly ONS surveys four questions that relate to four different areas of wellbeing: life satisfaction, life worth, happiness and anxiety. The data only currently covers 6 years, so as the time series extends it will become more and more useful for policy analysis.

• Cross-country surveys: the European Commission has been asking countries within the EU a life satisfaction question since 1973. The length of the data is great, unfortunately, the available answers to the question are limited, which doesn’t allow for much differentiation across participants. The World Values Survey is an extensive survey across 100 societies, which asks several wellbeing related questions in many different ways, which allows researchers to test consistency in responses. The Pew Global Attitudes Survey has collected 38,000 responses from 44 different countries to the same Cantril Ladder question as used by the UN.

• Other Measurement Studies and Indexes:  The OECD Better Life Index doesn’t actually rank countries, it allows the user to do it themselves. They identified 11 topics that they felt contributed towards wellbeing but leave the weighting (from 1-5) on each topic up to you. They also release results of how people within each country choose to weight the different topics, which offer an interesting insight into what people think matters most around the world. The Human Development Report is useful for research focused on quality of life and development. They have expanded on the human development index to also focus on poverty, gender development and inequality. The International Organisation of Migration produces reports that study wellbeing and development of migrants. Their migration data portal covers a highly diverse range of variables which are relevant for wellbeing policy analysis.

Our research has provided us with a great level of comfort in relation to the reliability of happiness and wellbeing measures from a range of different perspectives:

• Hard evidence from Neuroscience: Experimental psychologists and neuroscientists have shown that happiness measures correlate with activities in the parts of the brain associated with pleasure and satisfaction. A recent study scanned 51 individual’s brains using MRI, before answering a series of questions about their happiness and satisfaction with life. They focused on the precuneus, a part of the brain related to consciousness, our sense of self, and as a consequence, happiness. And, fascinatingly, those who scored highly on the happiness survey exhibited significantly more grey matter in that part of the brain than those who scored low.

• Linguistic differences are small: A frequent criticism of cross-country happiness measures is that linguistic differences across countries mean that responses are not likely to be consistent. Studies have shown that whilst a persons culture (e.g. collectivist or individualist) can significantly impact their happiness, this is consistent across individuals and cultures, and comparing for language effects has a negligible impact on the final results.

• Personality traits matter less at a national level: Research focused on different types of measures of happiness, found that personality traits accounted for a significant portion of the variability in an individual’s self-reported happiness score. Further research is necessary to fully understand what are the personality traits that lead to differences in an individual’s happiness, but for policy analysis at the population level, these differences matter much less due to the approach of taking averages. Essentially, the policymaker is mostly concerned with the distribution of happiness within a country, while accepting that individuals characteristics mean they have a greater capacity for satisfaction than others.

  For more detail on happiness and wellbeing measures and greater depth on their reliability, please click on the link below or check out the video above.

What is Happiness Economics?

Happiness Economics is becoming more and more popular. It touches on so many different topics and the findings from the research really make you stop and think. At Exploring Happiness we define Happiness Economics in the following way: “increasing the happiness and wellbeing in society in a sustainable way”. This is the unique core objective that we think should be used to design economic and social policies.

For us, traditional economics has got it wrong. We are told that if the economy is growing and people are getting richer, then we are making good progress. Happiness Economics has put all of this into question. In the western world, over the last 50 years we have become much richer but we haven’t become any happier. We now know that beyond a certain point, greater amounts of income do not equate to greater levels of happiness. And this is why we have created this new goal to target happiness and wellbeing in society in a sustainable way.

A key element to achieving this goal is discovering what makes people happy. This is part of what Happiness Economics is working towards by combining findings from fields such as Psychology, Sociology and Neuroscience, as well as many different fields of economics - for example health, labour, development and environmental, to mention just a few. This is necessary in order to understand what really makes people tick. 

Much like with traditional economics, Happiness Economics can be split into micro and macro areas of research. On the micro level the focus is on individual happiness, where mindfulness, positive psychology and behavioural economics can play an important role. On the macro level the focus is on collective happiness where typically the goal is to measure how key economic variables such as unemployment or income affect happiness.

You may have noticed that the way we define Happiness Economics refers to achieving increases in happiness in a sustainable way. The point here is that any increase in happiness that significantly damages the environment cannot be sustainable or benefit society in the longer term. Our aim is to design killer policies, that make people feel great without damaging Mother Nature - simple!

To offer a high level insight into some of the findings in the field of Happiness Economics we have summarised six different areas of research that have produced interesting results:

1. Income: wealthier countries do tend to be happier than poorer countries. However, above a certain threshold in western societies, people don’t tend to become happier as their income increases over time. They care more about how their income compares against a group of people they feel they are similar to than their actual income. 

2. Inflation: high inflation tends to decrease peoples happiness. It is often linked to political and social unrest and can contribute towards fears of a lower standard of living. 

3. Employment: job satisfaction is what matters most for those with jobs. For those without jobs, the decrease in happiness is not only caused by the decrease in income. A persons mental health is more likely to deteriorate when unemployed, due to the fact that work gives people a place in society and offers important social benefits.

4. Fiscal Policy: increases in unemployment benefits tend to increase happiness in society (perhaps unsurprisingly). There is currently a lack of consistent evidence to show that fluctuations in government spending have a material impact on people’s overall happiness. This is an area of happiness research that we are interested exploring further. 

5. Politics, Democracy & Governance: greater political participation rights increase people’s happiness. In democracies, governments have an incentive to pursue the wishes of the public. The amount that they can and want to do so indirectly reflects people’s perceptions of the governments performance.

6. Inequality: increases in inequality lead to decreases in happiness in society on average. There are interesting behavioural aspects to this, a recent study showed that people that have a preference towards working hard, dislike inequality less than people who care less about hard work. The intuition here is that these people feel as though inequality is less of an injustice and more as a result of the difference in people’s attitudes to work. 

For more information on Happiness Economics and how it all works, including more detail of our favourite findings from Happiness Economics research, please click on the link below.