As often happens on the internet, one thing leads to another. I was catching up with Brad Delong who mentioned that Will Wilkinson had remarked on a new paper by Di Tella, Haisken-De New, and MacCulloch on how people, particularly Germans between 1984 and 2000 reacted to changes in income and status. This being the internet, and the paper being available at the NBER site, I decided to go to the source and see what all the fuss was about. Delong and Wilkinson were quite amused by one apparent result:
"we find that those on the right (left) of the political spectrum adapt to status (income) but not to income (status)"
This I had to see.
The paper is pretty straightforward. There was one big dataset, a study of households in West Germany from 1984 to 2000. There were over 60,000 samples of income, status and happiness involving nearly 8,000 individuals. As they noted in the study, East and West Germany were merged in 1990 which goes to show how hard it can be to do a real controlled study in the social sciences.
So, what was being measured? Income, presumably in the form of money, was measured in Deutschmarks, which is fair enough. Money, as the economists say, is money. Happiness, being completely subjective, is also easy enough to measure. It is hard to argue the matter with someone who convinced that he or she is happy or unhappy.
Status, presents a slightly different problem, since it is subjective, but involves not what one person thinks, but what one person thinks about another. To the authors' credit, they have chosen the Treiman Standard International Occupation Prestige Score. This is one of those unexpected measures, like Scovilles, for the hotness of spicy food, or the Aarn Thompson Motif Index of Folk Literature, for categorizing folk tales.
The scale is international, but what exactly is status? According to the examples in the paper, senior national government officials (George Bush?) are ranked high, at 71, while laborers in mining, construction, manufacturing and transport are ranked a lowly 18, unless you have a leak in your bathroom. In India, status might be one's caste. In England, it might be one's class. There are always subtleties. An English lord might lose status by operating a mine, but not by operating a brewery. A feminist might note that anything done by a woman is generally lower status than the same thing done by a man. Men do art. Women do crafts.
If only for tax collecting purposes, most governments provide guidelines for determining when one's income has increased. To understand this study we have to have some idea of what it meant to have one's status increase in late 20th century West Germany.
For example, consider 1,2,3 Go, a rather charming movie about an American soft drink executive (and his wife and teen-aged daughter) stationed in post-WWII Berlin. One running gag revolved around the German custom of having all inferior employees rise whenever the boss enters the room. As the complications of his daughter's affairs have him running in and out of his office, he is caught desperately pleading with everyone to sit down and not let his daughter's romantic complications interfere with their work. I know that Germany is still a more formal society that the United States, but I imagine that this is not the custom in modern German offices.
So, what did the data show?
First, how did people respond to increases income? According to the paper, there is an initial positive response, with people a fair bit happier when income rises, but this effect is not long lived. The effect generally wears off after four years, and people are left feeling about as happy as they were before the rise. The authors call this effect adaptation. They assume that the happiness increase vanishes because people get used to the increased income or status. That's fair enough, but it ignores other explanations. For example, in engineering at least, few projects last longer than three or four years because of the way that engineering work is structured. That shiny new and wonderful job with a shiny new and wonderful paycheck and all that shiny new and wonderful status becomes less shiny and wonderful as the project winds down. There are similar effects in the legal field, and most likely elsewhere.
So, what about particular subsets of people? What about left and right wingers? What about men and women? What about employees and the self-employed? Well, the data were all there in Table 2 of the paper. I even did a miserable Excel graph of it:
As I said, this is a miserable graph, so start by finding zero on the Y-axis, the vertical one on the left. That's where everyone starts, then they get their income increase and their happiness goes up.
There seem to be three main reactions to a rise in income. The self employed become much happier and they stay happier. Everyone else, except right wingers, get happier, and then the happiness lessens. Right wingers get happier. Then they get a bit less happy, but then, two years after the income increase, they get even happier than they did right after the rise! Are they suckers for delayed gratification? Or, is this bounce an artifact of the data analysis? (The engineer part of me is screaming Fourier transform artifact, but I've learned to ignore it).
Then right wingers get less happy, but in the fourth year they get happier again. (Up and down, up and down, how sine wave, how Fourier. You see this in eigenvectors all the time). If this were an American dataset I'd say that right wing happiness is tied in with the two year election cycle, and income be damned.
The difference between right wingers and left wingers, and between right wingers and everyone else, is quite notable, but so is the difference between men and women. Men getting more money become more happy. Sure, some of the happiness wears off, but most of it stays for at least four years. Women in contrast like having more income, but the happiness is short lived, and if the data are to be believed, they wind up even more miserable than before!
Despite improvements, Germany is a more sexist society than the United States at least with regards to the private sector. If you don't have a wife to lay in the bratwurst and museli during work hours, you might wind up going hungry if you miss the limited Saturday hours. The stores can't stay open late and they are closed on Sunday.
Then there is the difference between the self-employed and employees. Employees are like women. More money helps, but the effect wears off in a year or two and the end result after three or four years is at best a small increase in happiness. The self-employed ratchet up in happiness quickly and they stay happy. I'd guess that we are seeing some sort of status difference right here in the income data.
So, now let's look at my miserable Excel graph of the response to status data:
The self-employed respond most slowly to an increase in status but they respond most dramatically. Moving to a new line of work, or operating at a higher level, has a big impact. It might take two or three years for the change to affect happiness, but this is not surprising. It takes a couple of years for anyone to get established when they start out on their own. It would be interesting to see if the delay in happiness after a change in status is a result of the lag in rising income. I can't think of any reason that most this self-employed happiness vanishes in the fourth year. Maybe the contracts start running out?
Employees also get a happiness kick from a change in status. It takes a year or two to build, and it is no where near the happiness that the self-employed gain, but it is real and persistent. Think of a change in status as starting in a new line of work, in a new company or with a promotion. Interestingly, the change in status has more long term effect on an employee's happiness than a change in income. Maybe there are good jobs and bad jobs, and leaving a bad job for a good job has a bigger effect than staying with a bad job and getting paid more for it.
Both women and men are happier with more status. Women might be slightly happier about a better job than men, but not by any great measure.
Left wingers respond most quickly to status changes and their response continues to rise almost as long as that of the self-employed, though not quite as high. Do people leave the fascist corporate grind and go self-employed even as they leave the Christian Democrats for the Greens? Is the issue of status change more important to left wingers as it revolves around power and economics, both at the heart of politics? Does it have to do with education and the way that higher status is obtained? Left wingers tend to have more faith in education, and more education can lead to higher status jobs.
Once again the right wingers are something else. I mean, who are these guys? They change jobs, change their line of work or get a promotion and it takes them two years to feel better about it. Shouldn't they at least be feeling the money pop in year one? After TWO years, they start feeling happier, then they feel worse, and in the fourth year they are back where they started. Is it about the election cycle? (Something, most likely all the ups and downs, is screaming algorithmic artifact at me, but wild speculation based on uninformed analysis is much more amusing).
You'll notice I don't talk much about adaptation. I presume that "adaptation" is a technical term, and I'd rather talk about what my naive eye can see in the authors' statistical analysis. Clearly people become more happy and then less happy, and some of has to do with income and status.
Even I can see that the difference between left wingers and right wingers is real, but it looks more that right wingers are nutso, or from another planet. You'll notice that every time I talk about the right wingers, the data goes up and down, and something starts screaming Fourier artifact at me. That's probably because I come from another planet, but a different one from all those right wingers.
So, what is the buried lead? Is it that being an employee sucks? Is it that women would rather have higher status than more money? (My guess is that there are more women down towards the low end of the Treiman scale than men). Is it that the self-employed are susceptible to the fourth year blues? Is it that right wingers are nutso, or an artifact of statistical analysis? Is it that the NBER paper has some of the data in Table 2 wrong? (I want my $5 back!) Am I totally misreading things? If someone can set me straight on this, I'd be pleased to have something better than PDF files and miserable Excel charts to work with.
In conclusion, there are definitely profound differences between the political left and the political right, but I'm not sure that the authors have captured in words just how different the numbers imply that they are. All told, "Happiness Adaptation to Income and to Status in an Individual Panel" definitely provided some food for thought.