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People Are Happier When Insulated from Market Forces

- July 19, 2010

bq. We examine the role of political factors in affecting quality of life in the context of the American states. In particular, we ask whether the choices made by voters, as manifested by the governments they elect, and the subsequent public policy regimes those governments establish, determine the degree to which individuals find their lives satisfying. We find that the different ideological and partisan orientations of state governments, as well as a state’s pattern of public policies, have strong effects on satisfaction with life, net of economic, social, and cultural factors. The more a state attempts to insulate citizens against market forces, the greater is satisfaction.

That is from a newly published paper by Ángel Álvarez-Díaz, Lucas González and Benjamin Radcliff. They find that Americans report more satisfaction with their lives when they live in states that have (1) more transfer payments from government to citizens, per capita; (2) more regulation of markets; (3) more liberal state governments; and (4) more Democratic state governments. The analysis controls for state population, income, racial diversity, and social capital; it also addresses concerns that “satisfied” states simply pass more liberal policies. The authors do not attempt to determine directly which of the 4 measures of policies and politics is the more important — i.e., by including them in the same model — but the evidence suggests that policies matter more. Finally, there is some evidence that the effects of these policies and political arrangements are somewhat larger for poorer citizens, although these effects are present even among the wealthiest.

The authors are cautious about drawing normative conclusions from their results:

bq. …they do not provide any overall judgment on whether generous welfare policies are good or bad; whether liberal or conservative, Democratic or Republican, governments are superior; or whether, in sum, human life is best served by the state taking an expansive or minimal role in economic management. These questions are inherently both normative and ideological. As such, they do not have empirical “answers.” We make no pretense of offering any.

They do argue that their evidence means that “politics matters,” in that it affects subjective assessments of how good life is.

Find the article here (gated) or here (ungated pdf).