PhD Presentation: The Model

This was a presentation I gave recently to my PhD cohort, rehashing some things I have posted here previously. 

Let’s just start with the model. It looks like the following:

UTILITYi = log(WELLBEINGi) + HAPPINESSti + MEANINGi

The notation is a little dodgy here because I don't have the tools in blogger to put in proper time scripts and the like, so I haven't modelled the auto-regressive components properly. It's no biggie though I don't think.

The dependent variable is utility, measured cardinally rather than on a 1-10 scale as is more common. As discussed last session, this avoids essentially imposing a mean-reversion structure onto utility. It leaves open the possibility that happiness follows trends, drifts or has structural breaks.

The independent variables are all words that have been used in the literature to mean utility. This is fitting, because precisely what I am trying to do is integrate these different aspects or sources of utility.

Each of the independent variables refers to a cluster of variables—this is a multi-level model in that sense. For example, wellbeing includes things like income and companionship while meaning includes things like church attendance and career advancement. However, I am principally interested in modelling happiness at this level and not at sub-levels.

Each of the three clusters corresponds very roughly to one of the three literature groups: wellbeing to development economics, happiness to psychology and meaning to philosophy.

When psychologists talk about wellbeing they are generally referring to a lack of negative affect, which in Layman’s terms basically means no bad mood or unpleasant emotion. Other times wellbeing refers to stability of affect.

If I may take some license for a moment, this basically means that we have wellbeing when we are at our set-point of mood, which tends to come around 7/10 on a 1-10 scale.

Curiously, in the development economics literature, this 7/10 tends to coincide with middle income status. This is because at lower levels of income an enormous amount of energy in the human system is given over to survival. While survival is not guaranteed we do not have wellbeing.

These two streams of theory fit together quite nicely and lead us to a definition of wellbeing as the absence of negative drags on utility. This would include biological pressures on survival as well as diseases of the mind and body. It takes in Maslow’s hierarchy of needs—food, shelter, reproduction—and economic development.

It allows encompasses Amartya Sen’s definition of development as agency. A high score on wellbeing means that you have all the pre-requisites for a happy life: including capability and opportunities.

However, it does not mean that you act on those pre-requisites. You have the means to live a good life but not necessarily the skill. This is a very simple summary of one theory as to why we see huge diminishing returns to income for happiness.

These diminishing returns are the so-called Easterlin Paradox: until middle income status, income growth has huge positive benefits to happiness, but once we have sufficient wealth to survive without too much exertion more income doesn’t have much of an effect.

This is why wellbeing is in log form – to capture the diminishing returns.  

The happiness variable draws heavily on studies in psychology concerning adaptation, homeostasis and set point theory.

The crux of this research is that, arguably, human neurochemistry is homeostatic, which means that we have a natural base line happiness of say, 7/10 on a 1-10 scale. While we may experience divergences from this set-point owing to events like orgasm or severe survival stress, over time we always converge back to the set-point.

To capture these effects happiness is modelled as an exogenous shock variable that takes an auto-regressive form. It is not modelled explicitly using sub-variables because the potential sources of these shocks are too broad and vary widely depending on what time scale you are using. For example, at the hourly time scale things like missing the bus or finding a dollar matter, while at the annual time scale we are more interested in things like divorce and promotions.

The final cluster is meaning. This is the part that we don’t see much in the existing literature. Yet In the religious and philosophical literature we see a strong emphasis on the idea that meaning is critical for sustained happiness, which is part of why I am concerned with it: meaning might be a channel for overcoming homeostasis or permanently elevating the set-point beyond 7/10.

This is the idea I was alluding to earlier when I talked about having agency and acting on agency.

For this part of the model I am going to be drawing on some nascent psychology and a lot of early 20th century philosophy, mostly from Kierkegaard, Nietzsche and De Beauvoir.

To summarise this theory very briefly, In order to be robustly and sustainably happy at a high level, the individual needs to answer three questions: who am I, what should I do and what is right? These are the questions of identity, motivation and ethics.

Once the individual has come up with authentic answers, which means that they are their own answers rather than answers received from society, peers or religion, the individual then needs to go out and affirm those authentic values. In so doing, they will reveal to themselves, in and through their actions, to be the person they believe themselves to be and that they want to be.

This is known as the coincidence of being, and is regarded in this philosophy as the end goal of the human condition and the means of its transcendence.