[Economists have been trying to quantify happiness](Truck and Barter](http://truckandbarter.com/mt/archives/2006/06/the_hedonic_tre.html) or well-being in numerical terms for years.

The housing wealth effect has been one of the more important linkages between the housing market and consumer patterns in the current economy.

Can we infer that the more propserous a household is, the happier it is? (I can imagine a huge swath of the population shaking their heads “NO!” to that comment.) I do a lot of real estate consulting in divorce cases and I KNOW this to be a false statement.

So lets back up. Rather than prosperity, lets say we associate well-being on national basis with GDP and see if that ties into housing.

Gross Domestic Product (GDP) deals with output and the wealth effect deals with consumption.

The OECD report showed there is a correlation between GDP and leisure time [OECD]. They looked at a large array of countries and interviewed residents about their happiness and charted it against their nation’s GDP.

Work may drive growth, but for most people, more free time contributes to well-being, as long as it is not accompanied by lower income. Still, one often-heard remark about the gap in economic performance between OECD countries is that US workers may earn more money but they work longer hours, whereas Europeans prefer more leisure to more work, or indeed, more money, and so are better off.

To more accurately measure happiness using GDP, the OECD report [Yale Economic Review] compares multiple alternative measures of happiness:

  • “national accounts indicators,” such as net national income, more accurately reflect economic resources because they correct for transfer payments and other market factors.

  • “extended monetary measures,” integrates non-market factors such as leisure time into traditional monetary statistics.

  • neglected social influences which affect happiness and yet cannot be easily reflected in economic statistics. They separate social indicators into four rough categories: self-sufficiency, equity, health, and social cohesion, and identify proxies such as average years of schooling and infant mortality to help quantify the indicators and find that most correlate well with output data.

The authors conclude in their study that GDP, while flawed can be a pretty good indicator of happiness on a country-wide basis.

At the same time, GDP can be correlated with new home sales. I correlated GDP with the New York housing market to the same effect.

Therefore, since housing can correlate with GDP and GDP correlates to well-being (happiness), can we infer that (how we feel about our) housing, affects our happiness?

Sure its a stretch, just like an adjustable rate mortgage thats about to reset.

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One Response to “Measuring GDH (Gross Domestic Happiness), By Way Of Housing”

  1. Anonymous says:

    I’m sure it can affect it in some way, but I just read an article in a magazine (can’t remember which one, sorry) that said no matter what we have, we are never truly happy, and that we always need the next thing to bring us some euphoria. It was actually interesting – the theory was that nature never intended for us to be completely blissful, or we would stop trying to survive and carry on the species.