# The Evolution of Status and its Implications for Happiness and Well-being

Originally status would have developed from some kind of of stimulus-response setup:

    Beating Competitor
|
V
Higher Status
|
V
(e.g. Food and Partners)
|
V
Higher Survival Rate /
More Progeny etc
|
V
Development of Reward System(s)
for these outcomes (Food etc)
|
|  (short-circuiting
|   as with e.g. sex)
|
V
Development of Reward Systems
for Success in Competition
(Higher Status)


So status now has two components:

1. Increase in status improves access to ‘basic’ goods we derive direct ‘utility’ from (food etc)
2. Increase in status provides direct ‘utility’ independent of any impact upon access ‘basic’ goods.

What about respect? It could be argued that respect is a ‘basic’ good directly equivalent to type (ii) status. However I’m not really convinced of this for two reasons. First, ‘respect’ is fundamentally different from ‘normal’ goods in that one can select what you respect (and whose respect you care about). Second, and more importantly, as just outlined above, the desire for ‘respect’ or ‘status’ seems to me a ‘secondary’ desire, which has come about via a short-circuiting of our basic reward systems for ‘primary/basic’ goods.

Leaving this aside, the crucial point is that type (ii) status results in a pure zero-sum game. Thus, reducing competition for it (perhaps by increasing compassion) might move us to a (more) positive sum situation. Furthermore, the clear distinction between type (i) and type (ii) allow us to separate out ‘competing to survive’ (which might be essential) and ‘competing (just) to win’. This seems an important distinction to make. After all, we can all accept that, in a whole set of situations, successfully competing may be crucial to obtaining the basic resources needed to survive. However as we get wealthier it would seem that this first aspect diminishes in importance and the second (less healthy) aspect of status looms ever larger.

# Workshop on Well-Being II

Following the first workshop a month ago, today I attended the second of a series of “Workshops on Well-being” at the LSE. Below are some (very) impressionistic notes.

## Presentation by Paul Dolan and Robert Metcalfe: Valuing non-market Goods: Preference based and experience based methods

1. How do Value non-market goods?

• Preferences
• revealed (observed market behaviour)
• stated (contingent hypothetical market)
• Experiences: subjective well-being
• Traditionally (implicitly) assume all of these are equivalent
2. urban renewal in swansea (from 2001)

• 2 areas: hafod and landore
• hafod has had renewal (500/950 homes)
• landore (675) has not
• compare the two (omitting those who have not yet had renewal and in-movers)
3. Improvements:

• front boundary walls
• street lighting
• etc
• landore: house cost 95k, income 16k
• hafod
4. Estimate revealed preferences using land-registry data and dummy for renewal.

5. WTP: card they fill in saying what they are willing to pay for various improvements (per month for 3 years).

6. “Thinking about your life and personal circumstances, how satisfied are you with your life as a whole?”

7. 364 out of 1625 (22.4%) response rate (low but representative)

• slightly biased to renewal area
8. Revealed prefs: no effect on prices of renewal (and apparently this had also been found in a much larger

9. WTP: Â£750 over 3 years (Â£250 a year)

10. 6.5% increase in life satisfaction (7.1 to 7.7 on a 10 point scale)

• controlling for marital status, age, gender, income etc
• approx 19k in monetary terms
• but problems of endogeneity of income
• instrument using partner in employment and rented accommodation well-being hit now is Â£6350
• cost of renewal was ~14k
11. 2nd experiment: renewal in Port Talbot but not Neath

• 8k for improvements + Â£250 for home safety per household
• WTP: Â£500 (over 3 years)
• SWB: 12.5k
• but 2.5k for repair and 10k for safety!
• income instrumented by WTP
12. What explains the discrepancy?

• revealed preference may be wrong because of unobserved effects (e.g. improvements in Hafod).
• WTP: evidence that per month/year figures would just go on forever (even though told just for 3 years).
• SWB Income Compensation: might be discounted PV of long-term benefits.
• WTP accumulate over 12-20 years (average time people are in the house) or discounted SWB IC over 25 years results in WTP value = SWB IC value.

# Workshop on Well-Being I

Yesterday I attended the first of a series of “Workshops on Well-being” at the LSE organized by Paul Dolan, Richard Layard and Andrew Oswald. Below can be found some (very) impressionistic notes.

## Talk by Andrew Oswald: Does Higher Job-Status Make a Person Healthier? A Longitudinal Test of the Whitehall Hypothesis

Basic (well-known) facts:

• Strong inverted u-shape in depression/anxiety over life-cycle peaking in mid-40s to mid-50s
• Need to move away from GDP to well-being in the next century
• More collaboration across discipline
• Across countries wealth correlated with happiness
• Within country across time (i.e. repeated cross-sections) no real growth in happiness (though growth in money)
• Now have data for Britain, Belgium and Netherlands and we reject null of no change in GHQ over time (so there is a decline in mental health over time).
• Can repeat across EU countries.

New social welfare functions:

• blood pressure, obesity, height.
• Life Satisfaction (LS) from NCDS: LS=f(high blood pressure, personal controls). high blood pressure enters negative.
• Well-being and height (guided by John Komlos)
• danes and netherlands have been getting taller faster than anyone else (in US it may even be going down recently i.e. since ~1990)
• this is interesting because danes and nthlands are happiest (and US is pretty unhappy)
• height and happiness are correlated in rich EU countries (this still holds with deltas of height and happiness)
• Weight and well-being
• BMI enters negatively in regressions for LS, Happiness, well-being (GHQ)
• Christakis and Fowler The spread of obesity in a large social network over 32 years. NEJM 2007
• Summarizes his paper on BMI with Powdthavee (where relative effects are significant)
• u is concave in relative position then upward spirals, convexity then deviate from herd.
• Relative BMI enters negatively (along with absolute BMI)
• Carol Graham on US and Russians

Status and well-being.

• Look at the ‘Whitehall effect’ using longitudinal data. Contrary to existing cross-sectional results finding a robust effect they do not find such a result. This suggests that cross-section results may be picking up causality the other way and the resulting selection effect (people who are healthier get promoted).
• Redelmeier and Singh, Annals of Internal Medicine (Oscar winners live longer). But lot of issues statistically (not enough controls)
• Rablen and Oswald (2006), look at Nobel prize winners (vs. nominees). Get 1.6 extra years.
• Final aside: did experiment looking at reporting function on height. Found perceived height was linearly related to actual height.

## Discussion

Paul Dolan

• When do we compare?
• Inequalities (higher moments …)
• Mental health and well-being (v. blurred distinction)
• International comparisons (are they useful)
• What measures if we move away from GDP?

Misc

• Range frequency theory
• Parducci etc
• How happy they are with weight
• Actual weight vs. actual weight
• Gilevich study
• won a medal. Silver medallists less happy than bronze medallists.
• Increase in reports of morbidity but less actual illness.

## Own questions

QU: if we’re hoping for a reorientation of public policy in relation to happiness and GDP) one would want to ask why hasn’t there already been a reorientation in relation to other areas (e.g. environment and GDP) — or at least why has it been so slow.

QU: Is relative effects in obesity coming from status stuff or from signalling (i.e. I use other people’s weight to compute what the optimal weight is). Has importance to determining policy impact.

# Workshop on Rationality and Emotions: Notes from Day 2

Herewith are further (partial, impressionistic) notes from the second day of the two-day workshop (programme) on Rationality and Emotions organized by Miriam Teschl at Robinson College here in Cambridge.

### S-Shaped Probability Weighting and Hyperbolic Preference Reversal – An Intimate Relationship by Herbert Walther

Walther has published these results as a 2003 paper in Journal of Economic Behaviour and Organization.

#### Overview

• Empirical regularities:
• hyperbolic discounting
• sign effect: loss discounted less than gains
• preference reversal:
• magnitude effect: preference for losses before gains
• s-shaped prob weighting (Gonzales and Wu 1999, Fehr-Duda, 2006 et al.)
• prob weighting can explain Allais paradox
• How to resolve?
• Ans: EU maximizer considers anticipated emotions reactions to resoluton of uncertainty
• prob weight derived via intertemporal state dependent EU max
• using this can explain most empirical effects

#### Model and Results

Part 1: Generating the S-shape prob distbn

• EU of some binary prospect L(p, w1, w2), w1
• EU of wealth
• EU of elation (if you win)
• EU of disappointment (if you lose)
• last two both fade away over time
• Implied prob q(p) is as follows:
• $$q(p) = p \frac{1 + (1-p)\mu}{1 + (1-p)p(\gamma + \mu)}$$ where
• $$\gamma = \frac{\delta \alpha}{\delta + \theta}$$ where $$\delta$$ is discount rate, $$\alpha$$ is weighting of elation and $$\theta$$ is the exponential rate of elation decay
• $$\mu = \frac{\delta + \beta}{\delta + \rho}$$ where $$\beta$$ is weighting of disappointment and $$\rho$$ is exponential rate of disappointment decay.
• Really recommend looking at Walther’s paper (fig 1) which is on Robinson website
• Generates the S-shaped effect
• furthermore have testable empirical predictions: higher time preference (i.e. more impatient) should be associated with more pronounced S-shape (i.e. more risk-loving). So e.g. people who are gamblers should be saving less.
• Part 2: Empirical regularities

Having generated the S-shaped result Walther goes on to show how this can generate most of the empirical regularities we are interested in.

• Look at some payment/contract whose probability of payment fulfilment is falling over time (this way we get probability in which we need)
• Now have some S-shaped setup and probability that goes into this S-shape is dropping over time (contract is less likely to be fulfilled).
• Hyperbolic discounting: can also now generate hyperbolic discounting within this same framework (other explanations e.g. Souzou 1998, Dasgupta and Maskin (2005) only do it on its own).
• Logic underlying hyperbolicity: at start contract is very likely to be fulfilled so if it does not lots of disappointment — so (exp) discount rate is very high. Over time prob falls and S-shape prob distbn kicks in (so elation outweighing disappointment) and discount rate falls.
• The sign effect: gains discounted more than losses
• Logic: again simple. If loss is very likely little disappointement but a very certain gain has lots of potential for disappointment.
• prediction: again the sign effect is more pronounced for poor than the rich.
• magnitude effect for losses: higher losses have higher impact that lower losses (because straightforward wealth utility becomes more important than disappointment/elation effect).
• preference reversal
• poor will prefer losses before rich subject but gains after rich subject
• preferences are same but marginal utility of wealth is different

#### Summary

• Simple model that is a small extension of basic EU maximization most of the empirical regularities.
• If diminishing marginal utility of wealth poor people will behave ‘less rationally’ than rich people despite having same preferences
• For the future: Why is prob weighting evolutionary sustainable?
• potential answer: in hunter gather society there are externalities in that (large) gains and losses are shared (this would => S-shaped prob distbn).

### “It’s a boy! Behavioural and Neural Evidence on Self Delusion” by Danica Mijovic-Prelec

• Deficits (due to lesion) on right side of brain lead to deficits in left hemisphere
• Furthermore these patients are not aware of the deficit and deny its existence (to the extent of confabulating experiences)
• Sackheim-Gur 1979: self-deception in social psychology
• played people mixture of their own phone and others
• averse to your own voice
• people would not hear their own voice and furthermore physiological measure of stress indicated it went up when ‘not hearing their voice (when it was there) — i.e. when people were self-deceiving
• Sackheim-Gur criteria:
• individual holds 2 contradictory beliefs
• beliefs held simultaneously
• individual is not aware of of holding one of the two beliefs
• nonawareness of this belief is motivated

#### Experiment

• shown korean figures and asked to classify as male/female
• first stage: get figures and must classify (5c for each correct prediction — correct measured against classification by some control group)
• second stage: must also predict gender of next figure (and then classify)
• paid like before for classification but bonus for being in top x% of predictors

#### Results

• Focus on items that were ‘well-classified’ by control
• First classification: 65% accurate
• Anticipation: 50% accurate (as expected since randomized)
• Second classification: <65%
• anticipation effects classification
• stronger for males: anticipated as male results in classification as male 72% (for females like first time round)
• calculate self-delusion index for each subject
• four options for response pattern (starting with female) of form 1st classif, anticipation, 2nd classif:
• FMF: honest
• FMM: self-deluding
• FFM: inconsistent
• FFF: consistent
• need to subtract inconsistency from self-delusion percentage to get ‘true’ self-delusion
• index = % self-delusion / % inconsistency (could use difference)
• fMRI
• expect that self-deluding subjects behave differently from inconsistent (and honest and consistent)
• notably don’t show this activation on consistent trial (when they also confirm their prediction)
• this is what they find (v. significantly)
• in attentional and cog. control regions
• self-deluding and inconsistent is similar
• however big difference in parahippocampal gyrus (associated with memory)
• [rp] question: could some of this come from a priming effect combined with better recall. I anticipate X, which primes me. Then suppose I see the figure and have a vague recall from before. Suppose that people experience different priming effects — then those with a strong priming effect feel conflicted and have more stress (i remember Y sort of but do I really or I just doubtful because of having seen X) which means more fMRI anomalies and and means they are more likely to ‘self-delude’ while those with weak priming simply aren’t sure what they think (not really excited/conflicted) and just go randomly with M/F (so ‘self-delusion’ or ‘inconsistency’ are equally likely).

### Herding and Social Influence in Economic Decision Making by Michelle Baddeley

• Solomon Asch
• Length of line experiments (everyone says line is B when actually A)
• two charts for past prices of a stock
• shown faces along with their associated choice (controlled by experimenter)
• Results:
• strong effect of other decisions on own decision (on average 72% vs. 50% choose the one chosen by herd)
• perhaps not very surprising here given the lack of info about stocks (and their underlying equivalence) — a small piece of information should have a dramatic effect

# Workshop on Rationality and Emotions: Notes from Day 1

Today I attended the first day of a two-day workshop (programme) on Rationality and Emotions organized by Miriam Teschl at Robinson College here at Cambridge. The mix of economics, psychology and neuroscience has so far been fascinating and below I include some general ‘impressionistic’ notes from some of the sessions so far.

### Stress and Euphoria on a Trading Floor by John Coates

#### Overview

• Better title might have been ‘Fear and Greed’.
• Managed a trading desk on Wall Street.
• Are fear and greed exaggerated by a steroid induced shift in risk preferences?
• Cortisol rises in a market crash, raises risk aversion and accentuates crash.
• Little literature on hormones
• one paper on oxycytocin and trust
• Steroids have very widespread effects in body (everything from body shape to cognitive function).
• Cortisol follows adrenalin as a stress response.
• Acute exposure: euphorogenic, increases motivation (+ve basically)
• Chronic exposure: bad. Selective attention to negative precedents (Erikson 2003) etc.
• Decrease risk preferences
• 17 males, 19-38 from City Trading Floor. Healthy and no outside source of stress.
• No overnight positions, no salary, no bonus. Just given capital and trade (each with own deal: basically a percentage or profits)
• Annual P&L range: -10k to +5m
• Experiment was live because you could not replicate high stakes trading in the lab.
• Trading US Bond Futures adn Bund Future, Dax, and Euro/$• German market main component of P+L so that was the focus • Use calendar of econ stat announcements as ‘stress’ events (some traders make almost all their money just when US employment info comes out) • Data: • Sampled 2x a day (11am,, 4pm) to bracket NY 0830 news releases • P+L at 11am and 4pm • Long term P+L • Plus other info #### Results • Massive volatility in cortisol: cortisol should drop by 30% in a normal subjects but in 40% of subjects upwards slopes were increasing by 500% • No relation of cortisol to P+L at all (surprising: but this was not a a very volatile period). • But a strong relation of cortisol and std dev of P+L • Next look at effect of expected volatility (measured by implied volatility measures used to price derivatives) to see whether this affects cortisol release • incredibly good fit (people were excited because volatility means there is money to be made) • Conclusion: only saw acute exposure effects (so mainly excitement) • prolonged exposure could be very different: ‘irrational pessimism’ (but no evidence in this paper) ### The Psychology of Gambling Behaviour by Dr Luke Clark #### Overview • Lots of Gambling and it has been increasing (9.6bn a year) • Structural characteristics lead to overestimation chances of winning • Erroneous verbalizations using ‘think aloud’ (Gaboury and Ladouceur 1988) — up to 80% of their thoughts are irrational (problem gamblers show more) • Gamblers develop ‘illusion of control’ (Langer 1975) • Failure appreciate independence of turns (Wagenaar) • Investigate particular items • Effect of ‘near-misses’: people play more when more near-misses (Kassinove and Scharre 2001 find maximum at 30% of near-misses) • Effect of personal control: • craps: people bet more on their own throw than on others’ throws • roulette: higher bets when palyer versus croupier throws ball • lottery: players demand more to exchange self-selected tickets ($9) than lucky dip tickets (\$2) (Langer 1975)
• Experimental design like a slot/fruit machine (but with participant having chance to select value on left ‘wheel’)
• Thus can investigate both control and near-misses at same time
• Also elicit feeling at particular points of time

#### Results

• Behaviour
• control results in significant increase in ‘happiness with situation’
• happier when they win if ‘in control’
• interaction of control and near-miss: when in control near-miss increases desire to continue (but this is not so when computer ‘in control’)
• Arousal:
• near-miss impact on arousal depends on control (w/o control no response)
• fMRI

#### Summary

• Gambling-related cognitive distortions can be elicited on a laboratory task
• Personal control increased perceived chance of winning and pleasure at winning
• Near-misses are aversive but encourage continued play (*when player ‘in control’)

### Time and Emotions by Stephane Luchini

#### Overview

• People prefer to ‘consume’ something unpleasant before something ‘pleasant’ (if they have a choice)
• seems problematic as with discounting would expect the opposite
• One explanation: people ‘consume’ an event both at the time it happens and before (thus want the good thing second so you ‘anticipate’ it for longer).
• But what about the effect of the anticipated outcome on the subjective experience of time
• Significant amount of evidence that emotions affect time perception
• Emotions are generated by differential/passage between two situations (not time dependent)
• Anticipated duration is function of actual clock time and the basic emotion which depends on difference between current state and future state.

#### Results

• To obtain time reversal (negative time preference) emotions must have strong impact on time discounting
• Only can occur if the the future date is not too remote.