Economics and Finance Research Professor Dr. Rik Hafer and Assistant Professor Dr. Ari Belasen have recently published an article in the journal Intelligence entitled “Well-being and economic freedom: Evidence from the States.” In their findings, Hafer and Belasen have found an interesting correlation between the well-being of individuals residing in the U.S. and the economic freedom they experience in different states and regions across the nation.
Hafer and Belasen began the research about a year ago when they read about a psychological study that put together what is called the well-being index. The index captured five different factors of well-being: health, income, crime rate, religiosity, and IQ.
Intrigued by this information, Hafer and Belasen wanted to apply it to their field of expertise: economics. In their research, they wanted to take the well-being factors and apply them to state economic factors.
“It’s an interesting measure because we always talk about happiness in economics and utility, benefit, and satisfaction, but being able to measure it is not something that you usually see,” says Belasen.
To measure the well-being of people, Hafer and Belasen developed a state index and a freedom index. The state index sees how well-off people are in each state in accordance to the factors of the well-being index. The freedom index measures people’s economic freedom by state through government regulations, tax policies, and labor policies.
The amount of well-being one person embodies is not an easy measure to study, just as measuring a person’s level of happiness is not easy to study.
“There are two ways of measuring well-being,” Hafer explains. “One is to just go out and ask people, ‘How well-off do you think you are? Are you happier now than you were five years ago?’ There’s been a lot of debate as to whether you’re getting an accurate measure. ”
Hafer says that the second way to measure well-being is how the psychologists who formed the well-being index, which is chiefly by logic. When people were asked if they felt they were better off than they were five years ago, the psychologists examined the results. According to Hafer, the results yielded a “tangible, measurable event [that] occurred in their lives that correlated with their current statement of ‘Things seem to be better off.’”
These measurable results within the context of state economics is where Hafer and Belasen found their research opportunity. They used the data gathered by the psychologists and applied what they knew about state economic conditions. The question they sought to answer through their research was, How does the ranking of well-being compare with the ranking of economic freedom?
Because economic conditions differ in each state, the freedom index for each state had to be examined. Their index factors differed in each state and therefore, people’s well-being factors differed from state to state. Depending on each person’s individual experiences and culture, more government involvement in one’s life could be considered either a positive or a negative force.
Despite differences at each state level, though, Hafer and Belasen’s research found that people reported higher levels of well-being in states where government was less involved in their lives.
“There is a positive relationship between states that record higher levels of well-being and states that have found that their economic freedoms have increased over time,” Belasen says.
Hafer and Belasen found the conclusions of their research very interesting, as they noticed that high levels of well-being in accordance to less governmental involvement were found within regions, not just states. For example, people in the Northeast reported higher levels of well-being with less governmental involvement, whereas people in the Southeast reported lower levels of well-being with higher governmental involvement.
While Hafer and Belasen’s findings are telling of regional beliefs and citizens’ expectations of American economics, the goal of their research is not to say that more economic freedom is better than less economic freedom.
“It’s not to say one is better than the other,” Belasen states. “You can’t make that value judgment, but you have to understand that people in those areas have those feelings because that’s their culture, their regional culture.”
Hafer and Belasen are simply reporting the data that they found in their research and not making any sort of political or social stance with their results. Besides their objectivity as researchers, they, as Belasen stated, realize that people have different values and cultures that shape their beliefs.
“It’s all comparative. There aren’t any absolutes,” Hafer adds. “We’re really looking at relative levels of well-being and relative levels of freedom. We can’t just say, ‘This is the level of well-being everybody should be at. This is the level of freedom everybody should be at.’ We’re just trying to figure out, given the distribution, given the array of states out there, how do they match up?”
Hafer and Belasen, bearing in mind that happiness has no numerical value, measured what states‘ policies were making residents report being at a higher level of well-being than others. They admit that those who completed the psychology research and created the well-being index may not agree that economics has anything to do with well-being.
However, Hafer and Belasen see this research as generating an important question for both scholars and everyday American citizens to ponder: What role should government play in the day to day operations of an economy?
Hafer and Belasen’s research has successfully added one more facet of well-being into the overall picture of how humanity conceives being well-off and seeks out a better life. Considering how economics plays a vital role in our everyday lives, knowing the economic factor of well-being is an important and essential piece to the puzzle.
Filed Under: Economics