About the Portfolio: Predictors of Well-Being in High Income, Industrialized Countries and Their Related Effects

To kick off the blog, I plan on starting by explaining my portfolio of project experience.  The first item in this portfolio, chronologically at least, is my senior thesis from Purdue.  This thesis, titled “Predictors of Well-Being in High Income, Industrialized Countries and Their Related Effects,” earned me the Alan Hess Award as one of the top two graduating seniors in Purdue’s economics program. I won’t go into too much detail about the motivation behind the thesis, but I will just say that I have long felt that GDP is not such an adequate measure of the health of a country as it’s often made out to be, and this thesis was a response to the search for alternative measures of progress.

Thankfully, there is a growing movement to promote alternatives to GDP (Such as: the Genuine Progress Indicator, the Human Development Index, the Ecological Footprint, The Happy Planet Index, and Gross National Happiness), and many before me have given this movement ammunition by studying well-being at both personal and national levels.  A good synopsis of the breadth of research on this topic can be found in Alois Stutzer and Bruno S. Frey’s report here. It has been pretty widely established by now that the relationship between per capita GDP and a country’s well-being (as measured by subjective surveys) is logarithmic, that is, countries see dramatic increases in well-being as GDP initially rises, but each further increase in GDP brings about progressively smaller increases in well-being.  This makes sense; a five dollar bill is worth less to a millionaire than a beggar. The following chart from Ronald Inglehart (simplistically) further illustrates this transition: that after basic needs are met through economic growth, individuals do not see as much gain in well-being from improvements in income and “Non-economic aspects of life become increasingly important influences on how long, and how well, people live.” Lifestyle vs SurvivalAs a resident of a world where very few people have to worry about where their next meal is coming from, this economic-to-lifestyle transition feels very real to me.  Inglehart’s hypothesis seems true to my own life experiences, but I didn’t just want trust his word.   For my senior economics thesis, I decided to build upon this hypothesis and the research reviewed above, seeing what the data had to say to either confirm or deny what was instinctively true to me. Continue reading