When I stumbled upon research about the effects of the economic crisis on well-being, I was primed to be curious because I had just read Louisa Jewell’s critique of Bright-Sided and the numerous comments it inspired (29 at the last count).
One of the key findings from Positive Psychology studies is the so-called adaptation effect, which basically means that you get used to both increased prosperity and increased adversity and return to your natural levels of happiness. If you’ve ever had a promotion at work, you’ll no doubt know that the novelty wears off all too soon.
The research aims of Professor Carol Graham, Soumya Chattopadhyay, and Mario Picon (all from the University of Maryland) were to better understand the effects of the US economic crisis on well-being and to determine if individuals adapt both to the bad news of the crisis and then to the good news of potential recovery.
The economic data used in the study came from a variety of sources including the Bureau of Labor Statistics, the Survey of US Consumer Sentiment by the University of Michigan, and the Dow Jones Industrial Average and NASDAQ.
The researchers also created a news time line of 42 economically important events (both positive and negative) such as the SEC ban on short-selling, Wells Fargo’s record Q1 profits and GM’s bankruptcy.
As well as demographic, geographic and socio-economic data, well-being data was taken from the Gallup Daily Poll on well-being from January 01 2008 to June 30 2009, using the following questions:
- Your rating of your life on an 11-point scale from the worst possible life to the best
- Your satisfaction with your standard of living
- Whether you feel that your standard of living is getting better or worse
- Economic conditions in the country today
- Whether you feel that economic conditions are getting better or worse
Of course, the Gallup Daily Poll is a collation of cross-section surveys, in other words it covers a different representative set of people each day, rather than following the same people over time.
Basic Correlates of Happiness
In terms of how particular traits and behaviors affected overall well-being during the crisis, the findings were consistent with other studies, for example:
- There is a U-shaped relationship between happiness and age, the low point being around 47.
- Married people are happier than unmarried people.
- People with higher incomes are happier than those on lower incomes.
- They also found that those who live in counties dominated by Republican voters are happier than those living in counties dominated by Democrats.
Looking across time during the crisis, happiness levels decreased markedly at the start of the crisis, reaching their lowest levels early in 2009, and then following an equally marked upward trend after April 2009. During the downward trend, happiness levels lag the stock market spikes, which makes intuitive sense. But the most striking result is that happiness levels lead the stock market on the upward trend. What’s more, by July 2009 happiness levels were above those at the start of the crisis, even though the Dow Jones was only just starting to recover, having hit rock bottom.
The Influence of the Media on our Happiness
Of course, within the overall happiness trends, there are daily movements linked to the 42 economically important events mentioned above. It’s interesting that the events don’t necessarily influence happiness in the way we might expect. Even events which might be expected to have a positive effect on well-being, such as Obama’s inauguration and Tim Geithner’s financial stability plan, had a negative correlation during a downward trend. But once the happiness trend turned the corner, public reactions remained positive, even to negative events such as GM’s bankruptcy.Do some people adapt better than others?
Carol Graham and her team were also interested in whether some people weather the storm better than others so they split the sample in various ways: age groups; those who had friends/ those who did not; those who had religious faith/ those who did not; Democrats/ Republicans; income groups. Some of the many findings are presented below:
- Age: the oldest group (55 up) reacted least to negative events and responded much more to positive ones. The youngest group (19-35) was the least reactive to all events, barely responding to positive events at all. The middle aged had the strongest and most consistent reactions to both negative and positive events.
- Religion: nonreligious people were more reactive to negative events than religious people. Both groups reacted about the same way to positive events.
- Friendship: those with friends and relatives they could rely on were more affected by events, whilst those who said they didn’t have friends reacted much later to the crisis and then to fewer events.
- Income: those people with income above the mean seemed to react more quickly and more strongly to the onset of the crisis. Those with incomes below the mean barely reacted at all to early events.
- Political affiliation: this study found that income is more important to the reported happiness of Republicans than Democrats, yet they were also slightly less likely to be worried about finances than those in Democrat-dominated counties. It’s not surprising that the two groups responded differently to the same event e.g. the Democrats had a strong negative reaction to the bank bailout plan in February 2009 while the Republicans had no significant response, and the Democrats reacted positively to the signs of recovery well before the Republicans did.
- Health: health trends changed during the crisis, for example the number of people with high blood pressure and high cholesterol increased and did not decrease when happiness levels improved. Interestingly, depression and obesity followed a different pattern – both remained fairly flat. Reported incidences of depression increased slightly at the lowest point in the happiness curve and then when back to average levels. Mean BMI (Body Mass Index) actually fell slightly.
The researchers suggest that it is uncertainty itself which is bad for well-being rather than negative events per se, because individuals seem better at adapting to unpleasant certainty than they are at dealing with uncertainty. In other words, better the devil you know. Once the Dow Jones reached rock bottom we knew where we stood, even if we didn’t like it.
And even when happiness levels started improving, people remained pessimistic in their assessments of their own standard of living and the country’s economic situation, which could be explained in terms of downward adaptation. People adjust to lower standards of living and assess them as such, even while their happiness levels seem to adapt and recover.
Graham, C, Chattopadhyay, S. & Picon, M. (2010). Adapting to adversity: happiness and the 2009 economic crisis in the United States.. Social Research, 77(2), 715-748.
Graham, C. (2010). Happiness Measures as a Guide to Development Policy? Promise and Potential Pitfalls. Paper prepared for the Bank-Fund ABCDE Conference Panel on Measuring Welfare (GDP)/Happiness, Stockholm, Sweden, June 2010
Graham, Carol, Soumya Chattopadhyay, and Mario Picon (2010). The Easterlin paradox re-visited: Why both sides of the debate may be correct. In Ed Diener, John Helliwell, & Daniel Kahneman, eds., International Differences in Well-Being (Positive Psychology). Oxford: Oxford University Press.
Professor Carol Graham from her website at the University of Maryland
Dow Jones Sinks by Scorpions and Centaurs:
Half Empty Half Full by the|G|™
Upside-down rainbow smile by harold.lloyd: