The Coin of Your Life (and the “U-Index”)

Posted in Issues

There’s a vogue among economists for happiness research – subjective well-being, in econospeak.  Among the leaders in the field are Bruno Frey, of the University of Zurich, and Richard Layard, of the London School of Economics.  French president Nicholas Sarkozy in January asked Nobel laureates Amartya Sen and Joseph Stigliz to chair a panel of experts charged with developing an index of the quality of life.

With a view to getting a grip on the question in the U.S., Alan Krueger and Daniel Kahneman, of Princeton University; David Schkade, of the University of California at San Diego; Norbert Schwartz, of the University of Michigan; and Arthur Stone, of Stony Brook University (as the State University of New York at Stony Brook is now called), convened a two-day meeting at the National Bureau of Economic Research last December to envisage a new project on national time accounting. Krueger is an economist; the others are psychologists (though Kahneman won a Nobel Prize in economics for his work).

They, too, began by quoting a politician, Robert Kennedy’s famous “On Gross National Product” speech in March 1968:

Too much and for too long we have surrendered personal excellence and community values in the mere accumulation of material things.  Our Gross National Product, now, is over $800 billion a year….[but it]  counts air pollution and cigarette advertising… special locks for our doors and jails for the people who break them. Yet the GNP does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials….

The researchers went on to propose “an alternative way of measuring society’s well-being,” based on citizens’ evaluation of their emotional experiences during their daily activities – an index of mood. After discussing conceptual problems and various survey methods, they described what they called the Princeton Affect and Time Survey, or PATS, designed to produce a “U-index” to measure the proportion of time individuals spend in an “unpleasant” or “undesirable” or “unhappy” state, which they tried out with a telephone survey of 4,000 persons. You can read about this in their paper on the conference website.


National time accounting is a dandy idea. Without it, we couldn’t begin to measure the time we spend commuting, which surely is today’s most serious problem with the misallocation of time. The Bureau of Labor Statistics already collects data through its American Time Use Survey, or ATUS. (George W. Bush’s 2008 budget proposes to eliminate the time survey. Bad idea!)


It is true, too, that a good deal of the debate over taxes of the past thirty years has had to do with the “work-leisure tradeoff.”  Happiness researchers sometimes argue that a little-noted advantage of progressive taxation is that it may correct for an innate cognitive bias that leads people to work longer and harder for money than is good for them (or to be drawn into competitive rat-races).  This is not an unreasonable argument, despite the difficulty of distinguishing it from mere paternalism.


I’m not very hopeful about the empirical happiness business, though, for all the excitement among economists about what they can learn from neurological activity and blood chemistry. The last word that day on the approach from behavioral economics and psychology seems to me to have belonged to William Nordhaus.

Constructing an index of aggregate pain or pleasure is similar to creating an index of the aggregate blueness of the Atlantic Ocean.  I do not doubt that in some ideal world we can make measurements of the spatially averaged wavelength of the light coming off the Atlantic Ocean.  Moreover, I do not doubt that we can in principle measure the physiological responses to particular wavelengths of light in different people.  Moreover we might even correlate these physiological responses with how people describe their experience, whether the ocean is “blue” or “deep blue” or “a beautiful blue.”  But it would make no sense to construct a national index of the “Blueness of the Atlantic Ocean” that involved adding up how individuals on a particular day report the experience of looking at the Atlantic Ocean.  Nor would it make sense to have an index of “Blueness” that would go up and down from day to day, depending on the weather, the seasons, and people’s moods.  Neither blue oceans nor blue moods constitute a meaningful index because they are not based on measurable variables. 

But I do admire a paper like that of Krueger, Kahneman et al., which begins with a motto like this one from Carl Sandburg. 

Time is the coin of your life. It is the only coin you have, and only you can determine how it will be spent.  Be careful lest you let other people spend it for you.

EP seconds the motion. Have a good week!




I was mistaken last week when I described N. Gregory Mankiw’s introductory text as having entered the market a dozen years ago with disproportionate sales in junior colleges. Whatever the figures then, only 20 percent of the sales of the fourth edition of Mankiw’s book are at two-year schools.

The book’s discussion of the distinction between “public” and “private” goods is confused, however, especially with respect to lighthouses – nonrival, historically difficult-to-exclude goods that have long been a problem for economists. The phrase “intellectual property”  appears nowhere in the book (apparently), and certainly not where it belongs, in the discussion of the partial excludability of nonrival goods.

At stake is students’ understanding of the deeper, more important analytic distinction between “atoms” and “bits,” or “things” and “ideas” – between goods that are “used up” in consumption (such as apples and electricity) and goods that are not (such as blueprints, medicines, computer software, entertainment goods, streetlight illumination, national defense and, also, lighthouse bearings).