Michael R. Hagerty

Quality of life indexes for national policy: review and agenda for research

A number of governments and public policy institutes have developed “Quality of Life Indexes” – statistics that attempt to measure the quality of life for entire states or regions. We develop 14 criteria for determining the validity and usefulness of such QOL indexes to public policy. We then review 22 of the most-used QOL indexes from around the world. We conclude that many of the indexes are successful in that they are reliable, have established time series measures, and can be disaggregated to study subpopulations. However, many fall short in four areas: (1) indexes vary greatly in their coverage and definitions of domains of QOL, (2) none of the indexes distinguish among the concepts of input, throughput, and output that are used by public policy analysts, (3) they fail to show how QOL outputs are sensitive to public policy inputs, and (4) none have examined convergent validity against each other. We conclude that many of these indexes are potentially very useful for public policy and recommend research to further improve them.

Return Policies and the Optimal Level of "Hassle"

Abstract Return policies vary significantly across retailers; some offer very generous return policies, while others impose many restrictions on returns. We employ an analytical model to help identify potential causes for variation among retailers’ return policies. A retailer is more likely to offer a low-hassle return policy when: 1) its products’ benefits cannot be consumed in a short period of time; 2) its product line offers opportunities for cross-selling; and 3) it can obtain a high salvage value for returned merchandise. Data collected from a variety of retail stores gives support to our theoretical predictions.

Testing Maslow's Hierarchy of Needs: National Quality-of-Life Across Time

Maslows hierarchy-of-needs theory is used to predict development of Quality of Life (QOL) in countries over time. Previous data sets have not had sufficient power to test these development trends among countries. Therefore a new database was developed that includes annual quality of life time-series for 88 countries from 1960 to 1994, covering measures on all five of Maslows need-levels. Results showed significant agreement with some of Maslows predictions, including his sequence of need achievement, and parts of an S-shaped trajectory in QOL. However, his mechanism of growth – that countries must slow growth in one area to increase growth in another – was disconfirmed.

A New Dimension Reduction Approach for Data-Rich Marketing Environments: Sliced Inverse Regression

In data-rich marketing environments (e.g., direct marketing or new product design), managers face an ever-growing need to reduce the number of variables effectively. To accomplish this goal, the authors introduce a new method called sliced inverse regression (SIR), which finds factors by taking into account the information contained in both the dependent and independent variables. Sliced inverse regression objectively identifies appropriate factors through simple statistical tests for determining the number of factors to retain and for assessing the significance of factor-loading coefficients. The authors make conceptual connections between SIR and several existing approaches, including principal components regression (PCR) and partial least squares regression (PLSR). Using Monte Carlo experiments, the authors demonstrate that SIR performs better than these approaches. Two empirical examples—designing a new executive business program and direct marketing by a catalog company—are presented to illustrate the application of SIR and to show that it outperforms both PLSR and PCR in these cases. In addition, the authors discuss how direct marketers can apply SIR to analyze large databases and to thus target customers effectively. In conclusion, SIR is a promising methodology in data-intensive marketing environments.

Unifying livability and comparison theory : Cross-national time-series analysis of life-satisfaction

The two major theories of QOL judgment – livability and comparison theories – are tested. The first states that only absolute level of objective variables will affect QOL, whereas the second states that only differences in objective variables will. A 25-year, 8-nation database was developed that allows more powerful tests than previous research. Consistent with previous studies and with livability theory, absolute level of GDP/person had the largest effect on life-satisfaction. Contrary to previous research, a reliable effect was also found for differences in GDP/person and the consumer price index. The length of these effects is 9 or 10 quarters. That is, consumers take into account changes as far back as 2 or 2 1/2 years, in addition to their absolute level of GDP/person.

Was Life Better in the “Good Old Days”? Intertemporal Judgments of Life Satisfaction

Intertemporal judgments are paired comparisons between the present time and some other time (e.g. “How satisfied are you with your life these days compared to five years ago?”). These judgments can provide evidence on the question, “Is life satisfaction in developed nations increasing, decreasing, or remaining constant?” This paper provides the first review of intertemporal judgments of life satisfaction, and reports a meta-analysis of 71 such studies from 9 developed countries. Results show that in every survey that asks people how happy their own lives are now compared to some past time, a majority says they are happier now than in the past. The meta-analysis also shows that this question must be carefully distinguished from asking about quality of life of the average person, which shows a majority believing that life was better for the “average person” in the past. These two beliefs are logically inconsistent, since the average respondent actually says their satisfaction is higher now. We consider several sources of bias that may influence these results, including cognitive processing heuristics, self-appraisal (desirability) bias, and information bias in media news.

Case Study of Ecstatic Meditation: fMRI and EEG Evidence of Self-Stimulating a Reward System

We report the first neural recording during ecstatic meditations called jhanas and test whether a brain reward system plays a role in the joy reported. Jhanas are Altered States of Consciousness (ASC) that imply major brain changes based on subjective reports: (1) external awareness dims, (2) internal verbalizations fade, (3) the sense of personal boundaries is altered, (4) attention is highly focused on the object of meditation, and (5) joy increases to high levels. The fMRI and EEG results from an experienced meditator show changes in brain activity in 11 regions shown to be associated with the subjective reports, and these changes occur promptly after jhana is entered. In particular, the extreme joy is associated not only with activation of cortical processes but also with activation of the nucleus accumbens (NAc) in the dopamine/opioid reward system. We test three mechanisms by which the subject might stimulate his own reward system by external means and reject all three. Taken together, these results demonstrate an apparently novel method of self-stimulating a brain reward system using only internal mental processes in a highly trained subject.

Comparing the predictive powers of alternative multiple regression models

Mean squared error of prediction is used as the criterion for determining which of two multiple regression models (not necessarily nested) is more predictive. We show that an unrestricted (or true) model witht parameters should be chosen over a restricted (or misspecified) model withm parameters if (Pt2−Pm2)>(1−Pt2)(t−m)/n, wherePt2 andPm2 are the population coefficients of determination of the unrestricted and restricted models, respectively, andn is the sample size. The left-hand side of the above inequality represents the squared bias in prediction by using the restricted model, and the right-hand side gives the reduction in variance of prediction error by using the restricted model. Thus, model choice amounts to the classical statistical tradeoff of bias against variance. In practical applications, we recommend thatP2 be estimated by adjustedR2. Our recommendation is equivalent to performing theF-test for model comparison, and using a critical value of 2−(m/n); that is, ifF>2−(m/n), the unrestricted model is recommended; otherwise, the restricted model is recommended.

Issues in Composite Index Construction: The Measurement of Overall Quality of Life

We outline the principles for constructing a composite QOL index, and evaluate examples of current indices. We first review three of the most successful indices in economics: the Dow-Jones Industrial Average, the Consumer Price Index, and the Consumer Confidence Index, and consider why they are used so widely. We then propose seven principles for constructing a successful QOL index, and examine implications. One relatively new principle that we examine is that an index should maximize agreement with citizens, by requiring that the QOL index should correlate highly with citizens’ actual judgments of QOL when they are given full information. Fourteen existing QOL indices are then reviewed and evaluated on these criteria. We end with common criticisms of indices, and offer recommendations to construct QOL indices that are accepted by citizens and useful to policy makers.

Issues in Composite Index Construction

How can summary or composite indices of the quality of life (QOL) or well-being (W-B) of children and youths be best constructed so as to effectively measure trends over time and/or comparisons among subpopulations, states, regions, or nations? Most generally, in order to make judgments about trends in the W-B of children and youths, an individual must, at least informally, engage in the following activities: (1) select a set of indicators that are important to her or him, (2) obtain data from social reports or other news sources on the progress of those indicators, and (3) integrate those indicators across disparate domains to achieve a judgment of overall progress on children’s overall W-B.