Three Big Questions for Larry Summers, Janet Yellen, and Anyone Else Who Wants to Head the Fed

Here is a link to my 27th column on Quartz, “Three big questions for Larry Summers, Janet Yellen, and anyone else who wants to head the Fed.”

Update: I am delighted that Gerald Seib and David Wessel flagged this column in their August 2, 2013 Wall Street Journal “What We’re Reading” feature. They write

University of Michigan economist Miles Kimball says the best candidate to take over as leader of the Fed will back negative short-term interest rates, nominal GDP targeting, and high equity requirements for banks and financial firms. If a candidate is chosen who opposes any of these three, Mr. Kimball predicts another serious financial crisis in the next two decades. [Emphasis added.]

In their last sentence, they go beyond what I intend when I write

But any candidate for the Fed who gives negative answers to these three questions will be indicating a monetary policy and financial stability philosophy that would leave the economy in continued danger of slow growth (with little room for error) and high unemployment in the short run, and the virtual certainty of another serious financial crisis a decade or two down the road.

Let me clarify. First, it is not these beliefs by the Fed Chief alone that would lead to a financial crisis, but the philosophy that would answer my three questions in the negative, held more generally–by the Fed Chief and other important players around the world. But of course, the Fed Chief is a hugely important player on the world stage.  Second, I write “who gives negative answers to these three questions” meaning negative answers to all three. To separate out the causality more carefully, what I have in mind with the parallel structure of my final sentence in the column (quoted just above) is 

1. Rejection of both negative interest rates and nominal GDP targeting–and perhaps rejection of negative interest rates alone–“would leave the economy in continued danger of slow growth (with little room for error) and high unemployment in the short run."  
2. Rejection of high equity requirements for banks and other financial firms would lead to "the virtual certainty of another serious financial crisis a decade or two down the road." 

Outtakes: Here are two passages that I had to cut to tighten things up, but that you may find of some interest:

In brief, the Fed put itself in the position of getting bad results using unpopular methods. By July 2009, the Fed’s job approval rating in a Gallup poll was down to 30%, below the job approval rating for the IRS . By the time of the 2012 presidential election campaign, Republican crowds enthusiastically chanted the title of Republican candidate Ron Paul’s book End the Fed.

…in a 32-second exchange with Charlie Rose that is well worth watching for the nuances, President Obama said “He’s already stayed a lot longer than he wanted, or he was supposed to.” The praise for Bernanke in the Charlie Rose interview is so tepid and ungenerous that my interpretation is the same as US News and World Report editor-in-chief Mortimer Zuckerman’s in his July 25, 2013 Wall Street Journal op-ed “Mistreating Ben Bernanke, the Man Who Saved the Economy”: “This comment made it clear that Mr. Bernanke’s days were numbered.” 

The Government and the Mob

Here is a link to my 26th column on Quartz: “The US government’s spying is straight out of the mob’s playbook.” The title above better represents my broader theme: what governments need to do to foster economic growth.

I pitched this column to my editors as an Independence Day column. I am proud of our American experiment: attempting government of the people, by the people, and for the people. This column is about the principles behind that American experiment, from an economic perspective. 

Examining the Entrails: Is There Any Evidence for an Effect of Debt on Growth in the Reinhart and Rogoff Data?

Here is a link to my 25th column on Quartz, written with Yichuan Wang: “Autopsy: Economists looked even closer at Reinhart and Rogoff’s data–and the results might surprise you.”

Yichuan recently finished his first year as an undergraduate at the University of Michigan. His blog is Synthenomics. You can find Yichuan on Twitter here.  

After Crunching Reinhart and Rogoff's Data, We Found No Evidence That High Debt Slows Growth

Here is a link to my 24th column on Quartz, “After crunching Reinhart and Rogoff’s data, we’ve concluded that high debt does not slow growth,” coauthored with Yichuan Wang. The title chosen by our editor is too strong, but not so much so that I objected to it; the title of this post is more accurate.

Yichuan only recently finished his first year at the University of Michigan. Yichuan’s blog is Synthenomics. You can see Yichuan on Twitter here. Let me say already that from reading Yichuan’s blog and working with him on this column, I know enough to strongly recommend Yichuan for admission to any Ph.D. program in economics in the world. He should finish has bachelor’s degree first, though. 

I genuinely went into our analysis expecting to find evidence that high debt does cause low growth, though of course, to a much smaller extent than low growth causes high debt. I was fully prepared to argue (first to Yichuan and then to the world) that even a statistically insignificant negative effect of debt on growth that was plausibly causal had to be taken seriously from a Bayesian perspective. Our analysis set out the minimal hurdles I felt had to be jumped over to convince me that there was some solid evidence that high debt causes low growth. A key jump was not completed. That shifted my views.

I hope others will try to replicate our findings. That should let me rest easier.

From a theoretical point of view, I am especially intrigued by the possibility that any effect on growth from refinancing difficulties might depend on a country’s debt to GDP ratio compared to that of other countries. What I find remarkable is that despite the likely negative effect of debt on growth from refinancing difficulties, we found no overall negative effect of debt on growth. It is as if there is some other, positive effect of debt on growth to the extent a country’s relative debt position stays the same. Besides the obvious, but uncommonly realized, possibility of very wisely deployed deficit spending, I can think of two intriguing mechanisms that could generate such an effect. First, from a supply-side point of view, lower tax rates now could make growth look higher now, perhaps at the expense of growth at some future date when taxes have to be raised to pay off the debt, with interest. Second, government debt increases the supply of liquid (and often relatively safe) assets in the economy that can serve as good collateral. Any such effect could be achieved without creating a need for higher future taxes or lower future spending by investing the money raised in corporate stocks and bonds through a sovereign wealth fund.

I have thought a little about why borrowing in a currency one can print unilaterally makes such a difference to the reactions of the bond market to debt. One might think that the danger of repudiating the implied real debt repayment promises by inflation would mean the risks to bondholders for debt in one’s own currency would be almost the same as for debt in a foreign currency or a shared currency like the euro. But it is one thing to fear actual disappointing real repayment spread over some time and another thing to have to fear that the fear of other bondholders will cause a sudden inability of a government to make the next payment at all.  

Note: Brad Delong writes:

Miles Kimball and Yichuan Wang confirm Arin Dube: Guest Post: Reinhart/Rogoff and Growth in a Time Before Debt | Next New Deal:

As I tweeted,

1. .@delong undersells our results. I would have read Arin Dube’s results alone as saying high debt *does* slow growth.
2. *Of course* low growth causes debt in a big way. But we need to know if high debt causes low growth, too. No ev it does!

In tweeting this, I mean, if I were convinced Arin Dube’s left graph were causal, the left graph seems to suggest that higher debt causes low growth in a very important way, though of course not in as big a way as slow growth causes higher debt. If it were causal, the left graph suggests it is the first 30% on the debt to GDP ratio that has the biggest effect on growth, not any 90% threshold. Yichuan and I are saying that the seeming effect of the first 30% on the debt to GDP ratio could be due in important measure to the effect of growth on debt, plus some serial correlation in growth rates. The nonlinearity could come from the fact that it takes quite high growth rates to keep a country from have some significant amounts of debt–as indicated by Arin Dube’s right graph, which is more likely to be primarily causal.

By the way, I should say that Yichuan and I had seen the Rortybomb piece on Arin Dube’s analysis, but we were not satisfied with it. But I want to give credit for this as a starting place for Yichuan and me in our thinking.

Brad Delong’s Reply: Thanks to Brad DeLong for posting the note above as part of his post “DeLong Smackdown Watch: Miles Kimball Says That Kimball and Wang is Much Stronger than Dube.”

Brad replies:

From my perspective, I tend to say that of course high debt causes low growth–if high debt makes people fearful, and leads to low equity valuations and high interest rates. The question is: what happens in the case of high debt when it comes accompanied by low interest rates and high equity values, whether on its own or via financial repression?

Thus I find Kimball and Wang’s results a little too strong on the high-debt-doesn’t-matter side for me to be entirely comfortable…

My Thoughts about What Brad Says in the Quote Just Above: As I noted above, my reaction is to what we Yichuan and I found is similar to Brad’s. There must be a negative effective of debt on growth through the bond vigilante channel, as Yichuan and I emphasize in our interpretation. For example, in our final paragraph, Yichuan and I write:

…other than the danger from bond market vigilantes, we find no persuasive evidence from Reinhart and Rogoff’s data set to worry about anything but the higher future taxes or lower future spending needed to pay for that long-term debt.

The surprise is the pattern that when countries around the world shifted toward higher debt than would be predicted by past growth, that later growth turned out to be somewhat higher than after countries around the world shifted to lower debt. It may be possible to explain why that evidence from trends in the average level of debt around the world over time should be dismissed, but if not, we should try to understand those time series patterns. It is hard to get definitive answers from the relatively small amount of evidence in macroeconomic time series, or even macroeconomic panels across countries, but given the importance of the issues, I think it is worth pondering the meaning of what limited evidence there is from trends in the average level of debt around the world over time. That is particularly true since in the current crisis, many people have, recommended precisely the kind of worldwide increase deficit spending–and therefore debt levels–that this limited evidence speaks to. 

I am perfectly comfortable with the idea that the evidence from trends in the average level of debt around the world over time is limited enough so theoretical reasoning that shifts our priors could overwhelm the signal from the data. But I want to see that theoretical reasoning. And I would like to get reactions to my theoretical speculations above, about (1) supply-side benefits of lower taxes that reverse in sign in the future when the debt is paid for and (2) liquidity effects of government debt (which may also have a price later because of financial cycle dynamics). 

Matt Yglesias’s Reaction: On MoneyBox, you can see Matthew Yglesias’s piece “After Running the Numbers Carefully There’s No Evidence that High Debt Levels Cause Slow Growth.” As I tweeted:

Don’t miss this excellent piece by @mattyglesias about my column with @yichuanw on debt and growth. Matt gets it.

In the preamble of my post bringing the full text of “An Economist’s Mea Culpa: I Relied on Reihnart and Rogoff” home to supplysideliberal.com, I write:

In terms of what Carmen Reinhart and Ken Rogoff should have done that they didn’t do, “Be very careful to double-check for mistakes” is obvious. But on consideration, I also felt dismayed that they didn’t do a bit more analysis on their data early on to make a rudimentary attempt to answer the question of causality. I wouldn’t have said it quite as strongly as Matthew Yglesias, but the sentiment is basically the same.    

Paul Krugman’s Reaction: On his blog, Paul Krugman characterized our findings this way:

There is pretty good evidence that the relationship is not, in fact, causal, that low growth mainly causes high debt rather than the other way around.

Kevin Drum’s Reaction: On the Mother Jones blog, Kevin Drum gives a good take on our findings in his post “Debt Doesn’t Cause Low Growth. Low Growth Causes Low Growth.” He notices that we are not fans of debt. I like his version of one of our graphs:

Mark Gongloff’s Reaction: On Huffington Post, Mark Gongloff’s “Reinhart and Rogoff’s Pro-Austerity Research Now Even More Thoroughly Debunked by Studies” writes:

…University of Michigan economics professor Miles Kimball and University of Michigan undergraduate student Yichuan Wang write that they have crunched Reinhart and Rogoff’s data and found “not even a shred of evidence” that high debt levels lead to slower economic growth.

And a new paper by University of Massachusetts professor Arindrajit Dube finds evidence that Reinhart and Rogoff had the relationship between growth and debt backwards: Slow growth appears to cause higher debt, if anything….

This contradicts the conclusion of Reinhart and Rogoff’s 2010 paper, “Growth in a Time of Debt,” which has been used to justify austerity programs around the world. In that paper, and in many other papers, op-ed pieces and congressional testimony over the years, Reinhart And Rogoff have warned that high debt slows down growth, making it a huge problem to be dealt with immediately. The human costs of this error have been enormous….

At the same time, they have tried to distance themselves a bit from the chicken-and-egg problem of whether debt causes slow growth, or vice-versa. “The frontier question for research is the issue of causality,” [Reinhart and Rogoff] said in their lengthy New York Times piece responding to Herndon. It looks like they should have thought a little harder about that frontier question three years ago.

There is an accompanying video by Zach Carter.

Paul Andrews Raises the Issue of Selection Bias: The most important response to our column that I have seen so far is Paul Andrews’s post “None the Wiser After Reinhart, Rogoff, et al.” This is the kind of response we were hoping for when we wrote “We look forward to further evidence and further thinking on the effects of debt.” Paul trenchantly points out the potential importance of selection bias: 

What has not been highlighted though is that the Reinhart and Rogoff correlation as it stands now is potentially massively understated. Why? Due to selection bias, and the lack of a proper treatment of the nastiest effects of high debt: debt defaults and currency crises.

The Reinhart and Rogoff correlation is potentially artificially low due to selection bias. The core of their study focuses on 20 or so of the most healthy economies the world has ever seen. A random sampling of all economies would produce a more realistic correlation. Even this would entail a significant selection bias as there is likely to be a high correlation between countries who default on their debt and countries who fail to keep proper statistics.

Furthermore Reinhart and Rogoff’s study does not contain adjustments for debt defaults or currency crises.  Any examples of debt defaults just show in the data as reductions in debt. So, if a country ran up massive debt, could’t pay it back, and defaulted, no problem!  Debt goes to a lower figure, the ruinous effects of the run-up in debt is ignored. Any low growth ensuing from the default doesn’t look like it was caused by debt, because the debt no longer exists!

I think this issue needs to be taken very seriously. It would be a great public service for someone to put together the needed data set. 

Note that Paul Andrews views are in line with our interpretation of our findings. Let me repeat our interpretation, with added emphasis:

…other than the danger from bond market vigilantes, we find no persuasive evidence from Reinhart and Rogoff’s data set to worry about anything but the higher future taxes or lower future spending needed to pay for that long-term debt.

Of course, it is disruptive to have a national bankruptcy. And nationalbankruptcies are more likely to happen at high levels of debt than low levels of debt (though other things matter as well, such as the efficiency of a nation’s tax system). And the fear by bondholders of a national bankruptcy can raise interest rates on government bonds in a way that can be very costly for a country. The key question for which the existing Reinhart and Rogoff data set is reasonably appropriate is the question of whether an advanced country has anything to fear from debt even if, for that particular country, no one ever seriously doubts that country will continue to pay on its debts.

QE or Not QE: Even Economists Need Lessons in Quantitative Easing, Bernanke Style

Here is a link to my 23d column on Quartz: “Even economists need lessons in quantitative easing, Bernanke style.”

As I tweeted,

My editor @mitrakalita was amazing, supporting me in doing a very serious treatment of QE on Quartz

Even so, there are many issues I raise in the column that deserve discussion, but would ideally call for a back-and-forth dialogue with Martin Feldstein himself to make the issues understandable.

An Economist's Mea Culpa: I Relied on Reinhart and Rogoff

Here is a link to my 22d column on Quartz: “An economist’s mea culpa: I relied on Reinhart and Rogoff.”

Let me also reprint here from my update to “Noah Smith Joins My Debate with Paul Krugman: Debt, National Lines of Credit and Politics” in the light of recent events:

You can see what I have to say in the wake of Thomas Herndon, Michael Ash and Robert Pollin’s critique of Carmen Reinhart and Ken Rogoff’s work on national debt and growth in my column “An economists mea culpa: I relied on Reinhart and Rogoff.” (You can see my same-day reaction here.) Also, on the substance, see Owen Zidar’s nice graph in his post “Debt to GDP & Future Economic Growth.” I sent a query to Carmen Reinhart and Ken Rogoff about whether any adjustments are needed to the two figures from the paper with Vincent Reinhart that I display below, but it is too soon to have gotten a reply. I think that covers most of the issues that recent revelations raise. 

Note that I have revised “What Paul Krugman got wrong about Italy’s economy.” [My post “Noah Smith Joins My Debate with Paul Krugman: Debt, National Lines of Credit and Politics”] is now the go-to source for what I originally said there, relying on “Debt Overhangs, Past and Present” (which has Vincent Reinhart as a coauthor along with Carmen Reinhart and Ken Rogoff). 

One final thought. Given the spotlight they put on Reinhart and Rogoff, and the spotlight that is therefore on them as well, Thomas Herndon, Michael Ash and Robert Pollin may not be as careful as they should be. Am I mistaken in what I said in this tweet:

Herndon, Ash & Pollin report 11% p-value for 30-60% debt GDP vs. BOTH 60-90% and >90% bins, but don’t report p-value for 60-90% vs. >90% !

One way or the other, they should report the p-value for the 60-90% bin vs. the above 90% bin alongside the test they do report, which is less germane to the controversy about the 90% threshold. They should have made the results of the 60-90% vs. above 90% statistical test impossible to miss. How easy is it to find their report of that statistic in their paper?

Note on Comments on this Blog: I want to encourage more commentary on my blog. I need to approve each comment unless you are whitelisted. But if you send me a tweet to let me know you need a comment approved, I will get to it quicker, and normally approve it and whitelist you. I do try to enforce a certain level of civility and decorum (including a language filter), but on substance, I want a robust debate. For Quartz columns, the link I post on my blog (usually the day after the column appears) is a good place to make comments.

Optimal Monetary Policy: Could the Next Big Idea Come from the Blogosphere?

Here is the link to my 21st Column on Quartz: “This economic theory was born in the blogosphere and could save markets from collapse.”

Even before I started blogging, Noah Smith told me I should write a post about NGDP targeting. This is that post. And it is also the post on “Optimal Monetary Policy” that I have been promising for some time.

Why Austerity Budgets Won't Save Your Economy

Here is a link to my 20th column on Quartz: “Why Austerity Budgets Won’t Save Your Economy.”

The link has the abbreviated title “Austerity is Bad Economic Policy”:

http://qz.com/69302/austerity-is-bad-economic-policy/

To interpret that abbreviated title, let me claim that austerity plus electronic money is so dramatically different from austerity alone, that it would not be called “austerity."

Four More Years! The US Economy Needs a Third Term of Ben Bernanke

Here is a link to my 19th column on Quartz: “Four More Years: The US economy needs a third term of Ben Bernanke.”

Show Me the Money!

“Here is a link to my 18th column on Quartz: "The Stanford economists are so wrong: A tighter budget won’t be accompanied by tighter monetary policy.” I honestly couldn’t think of a good working title of my own before my editor Mitra Kalita gave it the title it has on Quartz. But it finally came to me what I wanted my version of the title to be: the main theme is short-run monetary policy dominance, so my title is “Show Me the Money!”

The heart of this column is a discussion of the paper I wrote with Susanto Basu and John Fernald: “Are Technology Improvements Contractionary?”

What Paul Krugman Got Wrong About Italy's Economy

Here is a link to my 17th column on Quartz: “What Paul Krugman got wrong about Italy’s Economy.” My original working title was “How Italy and the UK Can Stimulate Their Economies Without Further Damaging Their Credit Ratings.”

Monetary Policy and Financial Stability

Here is a link to my 16th column on Quartz: “Queasy Money: We should stop expecting monetary policy alone to save the US economy.”

How to Stabilize the Financial System and Make Money for US Taxpayers

Here is a link to my 15th column on Quartz: “How to stabilize the financial system and make money for US Taxpayers.” My proposal for A US Sovereign Wealth Fund is about more than monetary policy.

Off the Rails: How to Get the Recovery Back on Track

Here is a link to my 14th column on Quartz: “Off the Rails: What the heck is happening to the US economy? How to get the recovery back on track." 

This column gives a better overall picture of my economic policy stance than any other single post so far. From the conclusion:

---

Franklin Roosevelt famously said:

The country needs and, unless I mistake its temper, the country demands bold, persistent experimentation. It is common sense to take a method and try it: If it fails, admit it frankly and try another. But above all, try something.

We at such a moment again. The usual remedies have failed. It is time to try something new. Any one of these proposals could make a major difference. In combination, they would transform the world.

John Taylor is Wrong: The Fed is Not Causing Another Recession

Here is a link to my 13th column on Quartz: “John Taylor is wrong: The Fed is not causing another recession.” It is the two-paragraph précis of yesterday’s post “Contra John Taylor.”

Twitter provided some reviews of these two pieces that I liked. Here are a few:

• Noah Smith: Miles Kimball bellows, turns green, shreds his clothes, and hurls John Taylor into low Earth orbit
• Daniel Altman: With @TimHarford smacking down Rachman and @mileskimballsmacking down Taylor, I think the Internets are won for today.
• Tomas Hirst: An excellent post from @mileskimball explaining why #QE scaremongers are wrong
• Jonathan Prober: Thought your elaboration upon your agreement with Taylor on scope of Fed intertwined with your discussion of SWF was top notch
• Matthew Yglesias

Yes, There is an Alternative to Austerity Versus Spending: Reinvigorate America's Nonprofits

Here is a link to my 12th column on Quartz: “Read His Lips–Yes, there is as alternative to austerity versus spending: Reinvigorate America’s nonprofits.”

I like the name my editor, Mitra Kalita, gave to the link itself, as well:

http://qz.com/43702/in-the-debate-over-taxes-and-government-there-is-a-third-way-reinventing-americas-nonprofit-sector/

Why the US Needs Its Own Sovereign Wealth Fund

Here is a link to my 11th column on Quartz: “Why the US Needs Its Own Sovereign Wealth Fund.

Read His Lips: Why Ben Bernanke Had to Set Firm Targets for the Economy

Here is a link to my 10th column on Quartz, inspired by the Fed’s announcement on Wednesday, December 12, 2012: “Clear Indicator–Read his lips: Why Ben Bernanke had to set firm targets for the economy.”

Could the UK be the First Country to Adopt Electronic Money?

Here is a link to my 9th column on Quartz: “Could the UK be the First Country to Adopt Electronic Money?”

In draft, this column had the working title “How the Transition to Electronic Money Rewards the First Movers and Punishes the Laggards.”

Judging the Nations: Wealth and Happiness Are Not Enough

Here is a link to my 8th column on Quartz: “Emotional Indicator: Obama the libertarian? Americans say they’d be happy if government got out of their way.”

The title of this post is the original working title of the column. 

In early drafts, I related what I say in the Quartz column to Jonathan Haidt’s six moral tastes in his book The Righteous Mind: Why Good People Are Divided by Politics and Religion. Here is a New York Times book review by William Saletan, and here is a good passage from Jonathan Haidt summarizing his theory, chosen by Bill Vallicella, in Bill’s post “Jonathan Haidt on Why Working Class People Vote Conservative.”

There is a key chunk of text making the link to Jonathan Haidt’s theory that was appropriately cut for being too wonkish, but that I think you might find valuable

1. for making that connection and 
2. for more carefully stating the key findings about people’s preferences in hypothetical policy choices from my paper with Daniel Benjamin, Ori Heffetz and Nichole Szembrot. 

Here it is:

The most important boon people want for the nation as a whole is freedom. In the words we used for the choices we gave them, the #1, #2, #10, #13, #18 and #23 things people want for the nation are

• freedom from injustice, corruption, and abuse of power in your nation
• people having many options and possibilities in their lives and the freedom to choose among them;
• freedom of speech and people’s ability to take part in the political process and community life;
• the amount of freedom in society;
• people’s ability to dream and pursue their dreams; and
• people’s freedom from emotional abuse or harassment.

The next most important boons people want for the nation are goodness, truth, loyalty, respect and justice. On our list, the #3, #6, #8, #17, #19 and #21 most highly-valued aspects of the good society are

• people being good, moral people and living according to their personal values;
• people’s freedom from being lied to, deceived or betrayed
• the morality, ethics, and goodness of other people in your nation; and
• people having people around them who think well of them and treat them with respect
• the quality of people’s family relationships
• your nation being a just society.

The exact picture of “goodness” and “justice” might differ from one person to the next, but it is clear that they represent more than just money and happiness.  University of Virginia psychologist Jonathan Haidt,  in his brilliant book The Righteous Mind: Why Good People Are Divided by Politics and Religion argues that morality comes in six flavors (“The righteous mind is like a tongue with six tastes.”):

1. liberty vs. oppression,
2. fairness vs, cheating,
3. sanctity vs. degradation,
4. loyalty vs. betrayal,
5. authority vs subversion, and 
6. care vs. harm.

The first five of Haidt’s flavors of morality are well represented above.  The fourth flavor of morality, care vs. harm, is the one many authors focus on, to the exclusion of the others. It is the bread and butter aspects of people’s lives. In our findings, care vs. harm is reflected in 11 of the top 25 (numbers 4, 7, 9, 11, 12, 13, 16, 18, 22, 24, 25), including “the overall well-being of people and their families” in your nation, people’s health, financial security, and freedom from pain; “people having people they can turn to in time of need” and a “sense of security about life and the future in general” and balance, as reflected in the items “people’s mental health and emotional stability,” “how much people enjoy their lives” and “how peaceful, calm and harmonious people’s lives are.”

In addition to all of these, people want meaning, as reflected by #5 and #14 on our list: “people’s sense that they are making a difference, actively contributing to the well-being of other people, and making the world a better place, and “people’s sense that their lives are meaningful and have value.”  In addition to his discussion of key dimensions of morality, in The Righteous Mind: Why Good People Are Divided by Politics and Religion, Jonathan Haidt emphasizes the importance of meaning—in particular, the importance of feeling one is a part of a larger whole. One of his central metaphors is “We are 90 percent chimp and 10 percent bee.” That is, Haidt believes that perhaps 90% of the time we are out for ourselves, however gently, but perhaps 10% of the time we are out for a higher cause (like the general good of everyone in our group) to the deepest level of our beings. A sense of “meaning” often comes from making that connection to something greater than ourselves.  

You can see my other posts on happiness in the happiness sub-blog linked at my sidebar, and here:

http://blog.supplysideliberal.com/tagged/happiness