Arnold Kling  

Surveys Vs. Revealed Preference, III

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I take a skeptical view of surveys in this essay.


From the standpoint of revealed preference, the [survey evidence] that income over $20,000 does not raise happiness simply falls apart. Observing the fact that even people with very high incomes choose to work, an economist would infer that for most people the point at which income brings sharply diminishing returns to happiness must be much higher than $20,000. If $20,000 were the point of diminishing returns, then people who earn more than that would reduce their work effort and consume more leisure.

For Discussion. Some people choose to retire early at relatively low levels of wealth, while others continue to work at high levels of wealth (think of Warren Buffett). How can this be explained?


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COMMENTS (8 to date)
David Thomson writes:

“Some people choose to retire early at relatively low levels of wealth, while others continue to work at high levels of wealth (think of Warren Buffett). How can this be explained? “

Is Arnold Kling retired? My guess is that some observers might conclude that this is the case. Yet, Mr. Kling is extremely active and contributing greatly to society. I know of very few educated individuals who truly retire and forevermore watch Roy Rodgers reruns and become proficient in shuffleboard. Thus, retirement is often a relative term. Warren Buffet has his own way of keeping busy while others devote their time and efforts in other ways.

Many, however, feel uneasy to talk about the lower educated blue collars who labored on a production line throughout their adult years. These folks rarely know what to do with themselves after retirement. A number of these individuals die from boredom soon after receiving their last paycheck. Human beings are neither existentially or psychologically able to endure lives of everyday indolence and unrelenting pleasure seeking.

JT writes:

I have these comments:

1) Imprecise/loaded term at the center of the observation: What does "happiness" mean? Ask twenty different people, and you will get twenty different answers.

2) What does an "average" number represent?: In answer to your Warren Buffett question, it means that the concept of happiness and how much a given person enjoys their work is highly idiosyncratic. The statement about happiness staying level at an income over $20k, no matter what its other problems, in fact represents an average and is suspect on that ground alone.

3) Expectations and the Present: Much of our feeling of happiness consists of whether we believe we are making progress towards a happy future. Even if we are relatively poor, if we feel things are getting better, it will have a pronounced influence on our outlook.

Brian writes:

Since money and happiness are not interchangeable (example: love, especially that of a particular person, cannot be bought) conventional economics will be imprecise in explaining behaviour if conventional economists assume people try to maximize lifetime spending.

I am of course assuming that people are motivated to maximize happiness which I think is not controversial at all.

Scott writes:

My graduate advisor liked to say that he “retired” into teaching at 30. Although he’s over 65 and quite wealthy, he loves teaching so much that he will continue to do it until the state forces him to quit. So, for the purposes of this discussion, is he retired or is he working?

Jim Glass writes:

"Human beings are neither existentially or psychologically able to endure lives of everyday indolence and unrelenting pleasure seeking."

I sure would like the opportunity to test this assertion, and "money can't buy happiness too" -- they seem consistent, I volutneer to do a twofer.

There are too damn many untested assumptions like these in the social sciences.

FreeBoot writes:

Mr Thomson asserts that "Human beings are neither existentially or psychologically able to endure lives of everyday indolence and unrelenting pleasure seeking."

In the interests of science, I would like to introduce Mr T. to my ex-wife.

David thomson writes:

"There are too damn many untested assumptions like these in the social sciences."

Oh darn it, I’ve apparently upset Jim Glass, someone I normally agree with on most issues.
Economics is a Liberal Arts philosophical science. It is not a hard science! I concede that my contention is difficult to prove in a test tube. Inevitably, any study of human beings deals with aspects that are intrinsically nebulous.

David thomson writes:

"There are too damn many untested assumptions like these in the social sciences."

Oh darn it, I’ve apparently upset Jim Glass, someone I normally agree with on most issues.
Economics is a Liberal Arts philosophical science. It is not a hard science! I concede that my contention is difficult to prove in a test tube. Inevitably, any study of human beings deals with aspects that are intrinsically nebulous.

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