The Source of Satisfication

One delusional deceit of sloppy sociology remains the inference of broad conclusions resting on the flimsiest of proof. Typically, the sought after conclusion is already accepted axiomatically and evidence is culled, trimmed, and pruned until it is fashioned to support the conclusion. Perhaps it is in this vein that we indulge the self-serving assertion that Americans are happier and more satisfied than our European friends and that happiness is a consequence of how we have organized our respective economies.

When asked by the Harris Polling Corporation, 58% of Americans claim that they are very satisfied with their lives. This compares with 31% of Europeans who are similarly pleased with their lives. However, Europe is even more diverse than the United States and results vary tremendously between countries. Nearly two-thirds, 64%, of Danes are very satisfied with their lives, whereas only 3% of the Portuguese make the same claim.

Now there are many non-economic cultural factors, which may affect happiness. The quality of family life or the role of religion and spirituality will certainly influence happiness. Nonetheless, we can search economic factors for clues to happiness. While economic well-being may not be sufficient for happiness, economic stress will certainly make life more difficult. If happiness is linked to the choices we make in our lives, then an increase in the scope of choices possible by more economic resources should be reflected in happiness statistics.

Americans and European have differing economic philosophies. Americans enjoy a less regulated and less taxed economy. The consequences are high levels of growth, employment, and inequality. Europeans enjoy a narrower income distribution, but many European economies suffer from high unemployment rates and low growth. Which approach is more correlated with happiness? Which is more important to happiness income, employment or income equality?

Using data from 16 European countries and the United States, we correlated income, unemployment, and income equality with happiness. We used per capita Price Purchasing Parity (PPP), a measure of how much people can buy in their local economies, as a proxy for income. Unemployment is measured by the traditional unemployment rate. Inequality is measured by the Gini index, where the value100 corresponds to perfect income inequality where one individual receives all the income of a society. The value 0 corresponds to perfect income equality, where everyone has an equal income.

As expected, the higher per capita purchasing power, the lower the unemployment rate, and the greater the economic equality, the more satisfied people claim to be. PPP, unemployment rate, and the Gini index are not sufficient to explain, by themselves, personal satisfaction, but some patterns emerge. The square of the correlation coefficient measures the fraction of the country-by-country variation in self-professed satisfaction that is linearly related to PPP, unemployment, and income equally. The data, such as they are, reveal that 34% of the variations in happiness can be accounted for by per capita purchasing power, 19% by employment, and less that 1% by inequality. It would seem then that personal satisfaction is related to how much we have to spend, whether we have the dignity of a job and very little on how much more our neighbors might earn.

Too much should not be made of the rather cavalierly gathered statistics presented above. However, it is part of the American intuition that we are better served by a robust, less encumbered economy and this seems to be born out. Americans seem to be less upset that there are rich people around; perhaps because they aspire to be rich themselves one day.

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