Can Social Scientists Discern High Frequency Trends in Well Being?

Summer school begins tomorrow so I will return to supplying my environmental economics lectures.  I walk into the room with a newspaper and say some random things (related to externalities and the environmental consequences of free market growth) that students find interesting and mildly amusing.  This is the essence of the liberal arts education!     I go to China in a few weeks as I seek out good food, good co-authors and good data.

In my role as an educator, I would like to point you to Angus Deaton's new NBER paper.

The Financial Crisis and the Well-Being of America

"The Great Recession was associated with large changes in income, wealth, and unemployment, changes that affected many lives. Since January 2008, the Gallup Organization has been collecting daily data on 1,000 Americans each day, with a range of self-reported well-being (SWB) questions. These data provide an opportunity to examine how large changes in the macroeconomic environment affected the emotional and evaluative lives of the population, as well as of subgroups within it. In the fall of 2008, around the time of the collapse of Lehman Brothers, and lasting into the spring of 2009, at the bottom of the stock market, Americans reported sharp declines in their life evaluation, sharp increases in worry and stress, and declines in positive affect. By the end of 2010, in spite of continuing high unemployment, these measures had largely recovered, though worry remained higher and life evaluation lower than in January 2008. The SWB measures do a much better job of monitoring short-run levels of anxiety as the crisis unfolded than they do of reflecting the evolution of the economy over a year or two. Even large macroeconomic shocks to income and unemployment can be expected to produce only small and difficult to detect effects on SWB measures. SWB, particularly evaluation of life as a whole, is very sensitive to question order effects. Asking political questions before the life evaluation question reduces reported life evaluation by an amount that dwarfs the effects of even the worst of the crisis; these order effects persist deep into the interview, and condition the reporting of hedonic experience and of satisfaction with standard of living. Methods for controlling these effects need to be developed and tested if national measures are to be comparable over space and time." 

So, Deaton appears to be reconfirming the central thesis of Daniel Gilbert's work concerning our resilience to shocks.   But, this raises a puzzle.  If we can "laugh off" such shocks, then why do voters punish the incumbent President when the economy is in recession?

Note that Deaton makes a second point, that the order in which survey questions are asked affects the answers that folks give.  This is not "new news" to contingent valuation researchers who have long noted such framing effects.   For an example, see this.

If surveys have clear weaknesses, how do we use Google Insights and other (revealed preference indicators such as a demand for a time machine) to measure trends in well being?