David M. Cutler

English

Research Papers in Economics

This PDF is a selection from a published volume from the National Bureau of Economic Research
Volume Title: Measuring the Subjective Well-Being of Nations: National Accounts of Time Use
and Well-Being
Volume Author/Editor: Alan B. Krueger, editor
Volume Publisher: University of Chicago Press
Volume ISBN: 0-226-45456-8
Volume URL: http://www.nber.org/books/krue08-1
Conference Date: December 7-8, 2007
Publication Date: October 2009
Title: Measuring National Well-Being
Author: David M. Cutler
URL: http://www.nber.org/chapters/c5055107
3
Measuring National Well-  Being
David M. Cutler
The chapter by Alan Krueger and colleagues (chapter 1, this volume) is an 
ambitious attempt to measure the well- being of the population. The chapter 
is nominally about how we spend our time, but it is really about how we live 
our lives. Are we better oﬀ than we used to be? That is the ultimate motiva-
tion for a set of time accounts.
There is much to discuss in the well-  being chapter. I focus my comments 
on three areas.
The distinction between time accounting and well-  being accounting
What is missing conceptually in the U-  index
Possible answers to the puzzle of the United States and the French
3.1      Time Accounts and Well-  Being Accounts
Krueger and colleagues place their analysis in the history of time account-
ing. But much of the genesis of their work is in the measurement of well-
  being. We care about what we do, after all, because we want to know what 
we get for our eﬀorts. Market activity is only one measure of well-  being; 
time allocation promises to open a window on the remainder.
I assume for my comments that our ultimate goal is to measure national 
well-  being. I ask how well the U-  index does in that regard.
A historical development shows some of the limitations. While Krue-
ger and colleagues give many antecedents to their work, they miss one of 
the most important ones: Jeremy Bentham in the 1840s. Bentham is best 
known as the founder of utilitarian analysis. He also tried to quantify how 
David M. Cutler is the Otto Eckstein Professor of Applied Economics at Harvard University 
and a research associate of the National Bureau of Economic Research.108    David  M.  Cutler
happy people were. Bentham laid out his felicity calculus in An Introduc-
tion to the Principles of Morals and Legislation, published in 1823. In that 
work, Bentham delineated fourteen simple pleasures and twelve simple pains 
(complex pleasures and pains involved combinations of the simple pleasures 
and pains). The list of pleasures and pains is detailed in table 3.1.
There is clearly some overlap between Bentham’s pleasures and pains and 
those in Krueger et al. Pleasures of the sense are (somewhat) captured in the 
Krueger et al. analysis. Pleasures of expectation, relief, and those dependent 
on association are also captured to some extent. But many of the pleas-
ures and pains are missing. Pleasures of wealth, skill, amity, a good name, 
piety, and benevolence are generally missing, for example.
A bit of inspection suggests the diﬀerence. The U-  index proposed by 
Krueger and colleagues is about the process of consuming goods, not about 
the enjoyment of the actual consumption. Thus, time spent preparing a meal 
counts as valuable or not, but the quality of the meal is not valued. Similarly, 
work is counted as a disamenity, but the goods that the work buys are not 
included on the good side of the ledger.
This distinction between process measures and existential measures is 
key to resolving one of the major puzzles highlighted by the Krueger et al. 
work: why do Americans spend so much of their time—nearly 20 percent—
engaged in activities that they do not ﬁ  nd pleasurable? Clearly, they do that 
so that they can aﬀord other pleasures: better food and clothes, more gad-
gets, and so on. But those other pleasures are not counted as improving 
welfare. Thus, we appear more miserable than we are.
Existential happiness is not just about material goods consumption. Con-
sider the example of a smoker who gives up smoking so that he can live a 
Table 3.1  Jeremy Bentham’s simple pleasures and pains
Simple pleasures   Simple pains
1.  The pleasures of sense. 1.  The pains of privation.
2.  The pleasures of wealth. 2.  The pains of the senses.
3.  The pleasures of skill. 3.  The pains of awkwardness.
4.  The pleasures of amity. 4.  The pains of enmity.
5.  The pleasures of a good name. 5.  The pains of an ill name.
6.  The pleasures of power. 6.  The pains of piety.
7.  The pleasures of piety. 7.  The pains of benevolence.
8.  The pleasures of benevolence. 8.  The pains of malevolence.
9.  The pleasures of malevolence. 9.  The pains of the memory.
10.  The pleasures of memory. 10.  The pains of the imagination.
11.  The pleasures of imagination. 11.  The pains of expectation.
12.  The pleasures of expectation. 12.  The pains dependent on association.
13.  The pleasures dependent on association.
14.  The pleasures of relief.    
Source: Bentham (1823).Measuring National Well-Being    1 0 9
longer, healthier life. The loss of pleasure from the foregone cigarettes will 
show up in lower happiness for some period of time. But the psychic enjoy-
ment that comes with knowing that one has done the right thing will not.
Krueger and colleagues limit their analysis to time allocation, because 
they want to avoid these existential valuations. But that strikes me as too 
limiting. The major problem that needs to be addressed is how to measure 
the well-  being of the population. Time allocation is most useful if it can 
contribute to that analysis.
3.2      The Formation of the U-  Index
Let me leave aside the conceptual issues about well-  being and turn to 
the formation of the U-  index. How shall we measure the amount of time 
a person spends doing unpleasant activities? The index that Krueger and 
colleagues propose is generally reasonable, but I have a few amendments 
to oﬀer.
One issue is the treatment of the family. Krueger and colleagues consider 
the unit to be the individual. But the family might be more appropriate. 
Consider the example of a wife who goes to work so that her husband does 
not have to work as much. The disamenity of working will be noted on the 
wife’s account. The husband will have fewer hours of unhappiness, but still 
some. It may be that reported unhappiness is the same (equal hours increase 
for her as a reduction for him). Or perhaps more hours are worked in total 
(if the wage of the wife is not high), leading to an increase in U. But because 
the family made the decision to maximize joint welfare, the family is hap-
pier overall.
A second major conceptual issue on which I would like to see more work 
is the separability of the utility function. Krueger and colleagues note that 
their index only makes sense if utility is independent across activities. If util-
ity is interdependent, the authors cannot analyze each activity separately. At 
some ultimate level, separability cannot be true. Consider health. At very 
low levels of health—for example, death or near death—there is no utility 
from any other activity. Thus, utility cannot be independent. A less extreme 
case might be work. If people do not work and thus have extremely low 
income, the unpleasantness associated with most any activity will be high. 
What is pleasurable about leisure if one has no money at all?
One way that Krueger and colleagues might examine this is by relating 
overall satisfaction to happiness in diﬀerent domains, and interactions of 
domain- speciﬁ  c happiness. If the interactions are signiﬁ  cantly related to 
overall health, that would suggest possible nonlinearities to examine.
I do not have the Krueger et al. data to do this, but I do have some in-
formation that can be brought to bear on this. Danny Blanchﬂ  ower kindly 
made available to me data from the General Social Survey (GSS) from 1972 
through 2006. In many years, the GSS asked people an overall level of hap-110    David  M.  Cutler
piness (not too happy, pretty happy, and very happy), and questions about 
their satisfaction with diﬀerent aspects of their life: family, friends, health, 
job, and ﬁ  nancial. Satisfaction is coded on a 1 to 7 basis: none; a little; some; 
a fair amount; quite a bit; a great deal; and a very great deal. I sample adults 
in all years who are asked overall happiness and the ﬁ  ve domains of satisfac-
tion. The sample is 19,029 people.
The ﬁ  rst column of table 3.2 relates overall happiness to satisfaction in 
each of the ﬁ  ve domains. Because happiness is an ordered variable with three 
responses, I use an ordered probit regression. To control for time trends, 
I also include year dummy variables (not reported). Satisfaction in each 
domain of life is associated with greater happiness. The largest coeﬃcient 
is for ﬁ  nancial satisfaction; job and family satisfaction are next, and health 
and friend satisfaction are least important.
The second column of the table includes those ﬁ  ve satisfaction variables 
and two-  way interactions between each of them—ten in total. While the 
standard errors on each interaction are large, the -  squared test rejects the 
null hypothesis that the interaction coeﬃcients are all insigniﬁ  cant. Most 
of the interaction terms are positive; being more satisﬁ  ed in one domain 
increases the impact of satisfaction in other domains on overall well- being. 
To the extent there is a hierarchy, satisfaction with family and friends is most 
basic. People who are not satisﬁ  ed with family and friends ﬁ  nd that satisfac-
tion in other areas of life translates little into overall happiness.
There are clearly signiﬁ  cant issues associated with the interpretation of 
happiness measures, which I do not discuss. Rather, I want to use take from 
these results that happiness in diﬀerent domains is unlikely to be indepen-
dent, and thus that unhappiness with time allocation is unlikely to be inde-
pendent of what else a person is doing. Using the rich data in the surveys 
that Krueger and all collect, they could do a detailed analysis of how overall 
time allocation aﬀects well-  being.
3.3    Cross-  Country  Comparisons
I address the third part of my comments to the most interesting substan-
tive ﬁ  nding in the Krueger et al. work—the fact that the French are so 
much happier than Americans. The reason for this is not hard to divine: the 
French work less than Americans. But why do Americans work so much? 
American workers are just as productive as French workers; thus, we could 
be as happy as the French are, by working less and enjoying leisure more. 
Why do we not do this?
One possibility is that Krueger et al. are wrong—we are not less happy 
than the French. It is true that the French spend less time at work, but our 
additional income buys us more material goods: bigger houses, more food, 
ﬂ  at screen TVs, and the like. Since consumption values are not well captured 
by the index, it appears we are less happy, when in fact we are not.Measuring National Well-Being    1 1 1
There is no perfect way to test this. One type of test is to see whether 
revealed preference is at all useful in predicting what people do. The most 
basic test of revealed preference is that people who like work less should 
work fewer hours. If this is true, it suggests that people are optimizing, and 
perhaps there is some truth in this explanation. If people who dislike work 
more work the same or additional hours, it suggest that people are in a 
suboptimal time allocation.
Table 3.2  Explaining overall happiness
      (1)   (2)  
Satisfaction with
 Family .201 .124
(.007) (.073)
 Friends .105 –.084
(.008) (.079)
 Health .125 .016
(.007) (.067)
 Job .264 .064
(.011) (.099)
 Financial .337 .059
(.012) (.109)
Interactions between satisfaction
  Family and friends — .008
(.005)
  Family and health — .008
(.005)
  Family and job — .002
(.009)
  Family and ﬁ  nancial — –.004
(.010)
  Friends and health — .008
(.005)
  Friends and job — .002
(.009)
  Friends and ﬁ  nancial — .015
(.011)
  Health and job — –.001
(.008)
  Health and ﬁ  nancial — .004
(.009)
  Job and ﬁ  nancial — .031
(.015)
N 19,029 19,029
  ln(Likelihood)   –15,396.929  –15,381.947 
Notes: Ordered probit model for “not too happy,” “pretty happy,” “happy.” All regressions 
contain year dummy variables. Dashes indicate that the variable was not included in the re-
gression model.112    David  M.  Cutler
One possible reason for this is my second theory about the continental 
diﬀerences in happiness: we think we know what will make us happy, but 
we are continually wrong. In this theory, Americans are led to believe that 
working long and hard is good, because it allows us money to live in the sub-
urbs and raise our families. What we forget to take into account, though, is 
that living in the suburbs involves long commutes, and working more means 
more interaction with the boss. Something else is needed to close this theory; 
we do learn, after all, that work is stressful and commutes are unpleasant. 
But one could imagine a situation where people are deluded for a period of 
time, and thus we are less happy than people in other countries.
A ﬁ  nal theory is that leisure is complementary across people, and thus 
that no single American could be happy if they chose the French lifestyle. 
Vacation might be more fun because everyone is on vacation; when others 
are at work, relaxation may be diﬃcult.
The types of regressions I suggested previously might be used to test this. 
In particular, it suggests that work might be more satisfying when one has 
many close friends who work, or when friends and family work many hours. 
Krueger or others might test this.
3.4    Conclusion
Alan Krueger and colleagues have written a chapter designed to provoke. 
It certainly does that. I hope they will continue on the path, to pull together 
the well-  being of the U.S. population. To do that, however, the analysis 
will need to expand beyond what we do and get into the issue of how well 
we like the results. The data and conceptual needs involved could be quite 
substantial.
References
Bentham, J. 1823. An introduction to the principles of morals and legislation. London: 
W. Pickering.
National Opinion Research Center (NORC). 1972–  2006. General social survey. The 
University of Chicago. Available at: http:/  /  www.norc.org/  GSSWebsite/ .

Measuring the Subjective Well-Being of Nations: National Accounts of Time Use and Well-Being

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