My colleague Paul Frijters presented the annual Fred Gruen lecture last night. I never knew Fred Gruen, but he was a powerhouse in the ANU’s research school, and is one of those who firmly believed that economics should always strive to be relevant to the policy debate. (For more about his career, click here).
Paul Frijters is a superb colleague to have – a researcher who has a view on every aspect of economics, always gives fast feedback on a paper, attends every seminar, and knocks on all our doors to take us all off to lunch each day. Paul spoke on happiness research and the Easterlin paradox (the contention that above a certain threshold, more GDP doesn’t make us happier). It’s a sexy topic, and the venue was packed. I enjoyed chatting afterwards with Fred’s sons, David and Nicholas (of Troppo fame).
However, my reading of the literature is that Paul is wrong. Rafael Di Tella and Robert MacCulloch have two recent papers showing that rising GDP boosts happiness for rich countries. So Paul and I have a bet going. When the 2005 World Values Survey reports its results for individuals’ life satisfaction, we’ll take the country averages for every country surveyed in the previous wave (1995-2000), whose GDP per capita exceeds US$15,000. My contention is that we’ll still see a rise in average happiness. Paul’s contention is that there will be no significant difference between the two surveys (he also wins if 2005 is lower than 1995-2000).* We should know the answer sometime late next year.
Update: Nicholas Gruen has written a Wikipedia entry on Fred Gruen.
* Formally, where LS is the mean life satisfaction score for country j in year t, we’ll run the regression:
LSjt = (Country indicator)j + B(Year)t + ejt
(using data from countries in the Integrated 1995-2000 wave, and the 2005 wave of the WVS, and excluding nations whose GDP per capita is below US$15,000)
Andrew wins if B>0 at the 10% level of significance. Paul wins otherwise.