Happiness Economics
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The economics of happiness or happiness economics is the theoretical, qualitative and quantitative study of
happiness Happiness, in the context of Mental health, mental or emotional states, is positive or Pleasure, pleasant emotions ranging from contentment to intense joy. Other forms include life satisfaction, well-being, subjective well-being, flourishin ...
and
quality of life Quality of life (QOL) is defined by the World Health Organization as "an individual's perception of their position in life in the context of the culture and value systems in which they live and in relation to their goals, expectations, standards ...
, including positive and negative affects,
well-being Well-being, or wellbeing, also known as wellness, prudential value or quality of life, refers to what is intrinsically valuable relative ''to'' someone. So the well-being of a person is what is ultimately good ''for'' this person, what is in th ...
,
life satisfaction Life satisfaction is a measure of a person's well-being, assessed in terms of mood, relationship satisfaction, achieved goals, self-concepts, and self-perceived ability to cope with life. Life satisfaction involves a favorable attitude towards on ...
and related concepts – typically tying
economics Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and intera ...
more closely than usual with other
social sciences Social science is one of the branches of science, devoted to the study of societies and the relationships among individuals within those societies. The term was formerly used to refer to the field of sociology, the original "science of soci ...
, like
sociology Sociology is a social science that focuses on society, human social behavior, patterns of Interpersonal ties, social relationships, social interaction, and aspects of culture associated with everyday life. It uses various methods of Empirical ...
and
psychology Psychology is the scientific study of mind and behavior. Psychology includes the study of conscious and unconscious phenomena, including feelings and thoughts. It is an academic discipline of immense scope, crossing the boundaries betwe ...
, as well as physical health. It typically treats subjective happiness-related measures, as well as more objective quality of life indices, rather than wealth, income or profit, as something to be maximized. The field has grown substantially since the late 20th century, for example by the development of methods, surveys and indices to measure happiness and related concepts,
Carol Graham Carol Graham (born January 29, 1962) is the Leo Pasvolsky Senior Fellow at the Brookings Institution, a College Park professor at the School of Public Policy at the University of Maryland, a research fellow at the Institute for the Study of L ...
, 2008. "happiness, economics of," ''
The New Palgrave Dictionary of Economics ''The New Palgrave Dictionary of Economics'' (2018), 3rd ed., is a twenty-volume reference work on economics published by Palgrave Macmillan. It contains around 3,000 entries, including many classic essays from the original Inglis Palgrave Diction ...
'', 2nd Edition
Abstract.
Prepublicatio
copy.
br />  • _____, 2005. "The Economics of Happiness: Insights on Globalization from a Novel Approach," ''World Economics'', 6(3), pp
41–58
(indicated there as adapted from previous source).
  • David G. Blanchflower, 2008. "Happiness Economics," ''
NBER The National Bureau of Economic Research (NBER) is an American private nonprofit research organization "committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic c ...
Reporter Online'', (2), pp
7–10.
Abstract-linked-footnote

/ref> as well as quality of life. Happiness findings have been described as a challenge to the theory and practice of economics. Nevertheless, furthering gross national happiness, as well as a specified Index to measure it, has been adopted explicitly in the
Constitution of Bhutan The Constitution of Bhutan (Dzongkha: འབྲུག་གི་རྩ་ཁྲིམས་ཆེན་མོ་; Wylie:'' 'Druk-gi cha-thrims-chen-mo'') was enacted 18 July 2008 by the Royal Government of Bhutan. The Constitution was thoroughl ...
in 2008, to guide its economic governance.


Subject classifications

The subject may be categorized in various ways, depending on specificity, intersection, and cross-classification. For example, within the ''Journal of Economic Literature'' classification codes, it has been categorized under: *
Welfare economics Welfare economics is a branch of economics that uses microeconomic techniques to evaluate well-being (welfare) at the aggregate (economy-wide) level. Attempting to apply the principles of welfare economics gives rise to the field of public ec ...
at JEL: D63 – Equity, Justice, Inequality, and Other Normative Criteria and Measurement * Health, education, and welfare at JEL: I31 – General Welfare; Basic needs; Living standards; Quality of life; Happiness *
Demographic economics Demographic economics or population economics is the application of economic analysis to demography, the study of human populations, including size, growth, density, distribution, and vital statistics. Aspects Aspects of the subject include * m ...
at JEL:J18
Public Policy Public policy is an institutionalized proposal or a decided set of elements like laws, regulations, guidelines, and actions to solve or address relevant and real-world problems, guided by a conception and often implemented by programs. Public p ...
.


Metrology

Given its very nature, reported happiness is subjective. It is difficult to compare one person's happiness with another's. It can be especially difficult to compare happiness across cultures. However, many happiness economists believe they have solved this comparison problem. Cross-sections of large data samples across nations and time demonstrate consistent patterns in the determinants of happiness. Happiness is typically measured using subjective measures – e.g. self-reported surveys – and/or objective measures. One concern has always been the
accuracy Accuracy and precision are two measures of ''observational error''. ''Accuracy'' is how close a given set of measurements ( observations or readings) are to their ''true value'', while ''precision'' is how close the measurements are to each oth ...
and
reliability Reliability, reliable, or unreliable may refer to: Science, technology, and mathematics Computing * Data reliability (disambiguation), a property of some disk arrays in computer storage * High availability * Reliability (computer networking), a ...
of people's responses to happiness surveys. Objective measures such as lifespan, income, and education are often used as well as or instead of subjectively reported happiness, though this assumes that they generally produce happiness, which while plausible may not necessarily be the case. The terms
quality of life Quality of life (QOL) is defined by the World Health Organization as "an individual's perception of their position in life in the context of the culture and value systems in which they live and in relation to their goals, expectations, standards ...
or
well-being Well-being, or wellbeing, also known as wellness, prudential value or quality of life, refers to what is intrinsically valuable relative ''to'' someone. So the well-being of a person is what is ultimately good ''for'' this person, what is in th ...
are often used to encompass these more objective measures. Micro-econometric happiness equations have the standard form: W_ = \alpha + \beta + \epsilon_. In this equation W is the reported well-being of individual i at time t, and x is a vector of known variables, which include socio-demographic and socioeconomic characteristics. Macro-econometric happiness has been gauged by some as
Gross National Happiness Gross National Happiness (GNH), sometimes called Gross Domestic Happiness (GDH), is a philosophy that guides the government of Bhutan. It includes an index which is used to measure the collective happiness and well-being of a population. Gross Nat ...
, following
Sicco Mansholt Sicco Leendert Mansholt (; 13 September 1908 – 29 June 1995) was a Dutch farmer, politician and diplomat of the Social Democratic Workers' Party (SDAP) and later the Labour Party (PvdA), who served as the President of the European Commissio ...
's 1972 introduction of the measure,"The Origin of GNH - The European GNH Institute (2018)"
/ref> and by others as a Genuine Wealth index. Anielski in 2008 wrote a reference definition on how to measure five types of capital: (1) human; (2) social; (3) natural; (4) built; and (5) financial.Anielski, 2008 Happiness, well-being, or satisfaction with life, was seen as unmeasurable in classical and neo-classical economics. Van Praag was the first person who organized large surveys in order to explicitly measure welfare derived from income. He did this with the Income Evaluation Question (IEQ). This approach is called the Leyden School. It is named after the Dutch university where this approach was developed. Other researchers included Arie Kapteyn and Aldi Hagenaars. Some scientists claim that happiness can be measured both subjectively and objectively by observing the joy center of the
brain A brain is an organ that serves as the center of the nervous system in all vertebrate and most invertebrate animals. It is located in the head, usually close to the sensory organs for senses such as vision. It is the most complex organ in a v ...
lit up with advanced imaging, although this raises
philosophical issues ''Philosophical Issues'' is an annual supplement to the journal ''Noûs'' published periodically, usually once per year. Each issue explores a specific area of philosophy through invited papers, critical studies, and book symposia. ''Philosophica ...
, for example about whether this can be treated as more reliable than reported subjective happiness.


Determinants


GDP and GNP

Typically national financial measures, such as
gross domestic product Gross domestic product (GDP) is a money, monetary Measurement in economics, measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjec ...
(GDP) and
gross national product The gross national income (GNI), previously known as gross national product (GNP), is the total domestic and foreign output claimed by residents of a country, consisting of gross domestic product (GDP), plus factor incomes earned by foreign ...
(GNP), have been used as a measure of successful policy. There is a significant association between GDP and happiness, with citizens in wealthier nations being happier than those in poorer nations. In 2002, researchers argued that this relationship extends only to an average GDP per capita of about $15,000. In the 2000s, several studies have obtained the opposite result, so this
Easterlin paradox The Easterlin paradox is a finding in happiness economics formulated in 1974 by Richard Easterlin, then professor of economics at the University of Pennsylvania, and the first economist to study happiness data. The paradox states that at a point in ...
is controversial.


Individual income

Historically, economists have said that well-being is a simple function of income. However, it has been found that once wealth reaches a subsistence level, its effectiveness as a generator of well-being is greatly diminished. Happiness economists hope to change the way governments view well-being and how to most effectively govern and allocate resources given this paradox.Andrew Oswald
''A Non-Technical Introduction to the Economics of Happiness''
1999
In 2010,
Daniel Kahneman Daniel Kahneman (; he, דניאל כהנמן; born March 5, 1934) is an Israeli-American psychologist and economist notable for his work on the psychology of judgment and decision-making, as well as behavioral economics, for which he was award ...
and
Angus Deaton Sir Angus Stewart Deaton (born 19 October 1945) is a British economist and academic. Deaton is currently a Senior Scholar and the Dwight D. Eisenhower Professor of Economics and International Affairs Emeritus at the Princeton School of Public ...
found that higher earners generally reported better life satisfaction, but people's day-to-day emotional well-being only rose with earnings until a threshold annual household pre-tax income of $75,000. Other factors have been suggested as making people happier than money.Rana Foroohar
"Money v. Happiness: Nations Rethink Priorities"
''Newsweek'', April 5, 2007.
A short term course of psychological therapy is 32 times more cost effective at increasing happiness than simply increasing income. Scholars at the University of Virginia, University of British Columbia and Harvard University released a study in 2011 after examining numerous academic paper in response to an apparent contradiction: "When asked to take stock of their lives, people with more money report being a good deal more satisfied. But when asked how happy they are at the moment, people with more money are barely different than those with less." Published in the ''Journal of Consumer Psychology'', the study is entitled "If Money Doesn't Make You Happy, Then You Probably Aren't Spending It Right" and included the following eight general recommendations: * Spend money on "experiences" rather than goods. * Donate money to others, including charities, rather than spending it solely on oneself. * Spend small amounts of money on many small, temporary pleasures rather than less often on larger ones. * Don't spend money on "extended warranties and other forms of overpriced insurance." * Adjust one's mindset to "pay now, consume later," instead of "consume now, pay later." * Exercise circumspection about the day-to-day consequences of a purchase beforehand. * Rather than buying products that provide the "best deal," make purchases based on what will facilitate well-being. * Seek out the opinions of other people who have prior experience of a product before purchasing it. In their "Unhappy Cities" paper, Edward Glaeser, Joshua Gottlieb and Oren Ziv examined the self-reported subjective well-being of people living in American metropolitan areas, particularly in relation to the notion that "individuals make trade-offs among competing objectives, including but not limited to happiness." The researchers findings revealed that people living in metropolitan areas where lower levels of happiness are reported are receiving higher real wages, and they suggest in their conclusion that "humans are quite understandably willing to sacrifice both happiness and life satisfaction if the price is right."


Social security

Ruut Veenhoven Ruut Veenhoven (born 1942) is a Dutch sociologist and a pioneer and world authority on the scientific study of happiness, in the sense of subjective enjoyment of life. His work on the social conditions for human happiness at Erasmus University Rot ...
claimed that social security payments do not seem to add to happiness. This may be due to the fact that non-self-earned income (e.g., from a lottery) does not add to happiness in general either. Happiness may be the mind's reward for a useful action. However, Johan Norberg of CIS, a free enterprise economy think tank, presents a hypothesis that as people who think that they themselves control their lives are happier, paternalist institutions may decrease happiness.The Scientist's Pursuit of Happiness
, ''Policy'', Spring 2005.
An alternative perspective focuses on the role of the welfare state as an institution that improves quality of life not only by increasing the extent to which basic human needs are met, but also by promoting greater control of one's life by limiting the degree to which individuals find themselves at the mercy of impersonal market forces that are indifferent to the fate of individuals. This is the argument suggested by the U.S. political scientist Benjamin Radcliff, who has presented a series of papers in peer-reviewed scholarly journals demonstrating that a more generous welfare state contributes to higher levels of life satisfaction, and does so to rich and poor alike.


Employment

Generally, the well-being of those who are employed is higher than those who are unemployed. Employment itself may not increase subjective well-being, but facilitates activities that do (such as supporting a family, philanthropy, and education). While work does increase well-being through providing income, income level is not as indicative of subjective well-being as other benefits related to employment. Feelings of autonomy and mastery, found in higher levels in the employed than unemployed, are stronger predictors of subjective well-being than wealth. When personal preference and the amount of time spent working do not align, both men and women experience a decrease in subjective well-being. The negative effect of working more or working less than preferred has been found across multiple studies, most finding that working more than preferred (over-employed) is more detrimental, but some found that working less (under-employed) is more detrimental. Most individuals' levels of subjective well-being returned to "normal" (level previous to time mismatch) within one year. Levels remained lower only when individuals worked more hours than preferred for a period of two years or more, which may indicate that it is more detrimental to be over-employed than under-employed in the long-term. Employment status effects are not confined to the individual. Being unemployed can have detrimental effects on a spouse's subjective well-being, compared to being employed or not working (and not looking for work). Partner life satisfaction is inversely related to the number of hours their partner is underemployed. When both partners are underemployed, the life-satisfaction of men is more greatly diminished than women. However, just being in a relationship reduces the impact unemployment has on the subjective well-being of an individual. On a broad scale, high rates of unemployment negatively affect the subjective well-being of the employed. Becoming self-employed can increase subjective well-being, given the right conditions. Those who leave work to become self-employed report greater life satisfaction than those who work for others or become self-employed after unemployment; this effect increases over time. Those who are self-employed and have employees of their own report higher life-satisfaction than those who are self-employed without employees, and women who are self-employed without employees report a higher life satisfaction than men in the same condition. The effects of retirement on subjective well-being vary depending on personal and cultural factors. Subjective well-being can remain stable for those who retire from work voluntarily, but declines for those who are involuntarily retired. In countries with an average social norm to work, the well-being of men increases after retirement, and the well-being of retired women is at the same level as women who are homemakers or work outside the home. In countries with a strong social norm to work, retirement negatively impacts the well-being of men and women.


Relationships and children

In the 1970s, women typically reported higher subjective well-being than did men. By 2009, declines in reported female happiness had eroded a gender gap. In rich societies, where a rise in income doesn't equate to an increase in levels of subjective well-being, personal relationships are the determining factors of happiness. Glaeser, Gottlieb and Ziv suggest in their conclusion that the happiness trade-offs that individuals seem willing to make aligns with the tendency of parents to report less happiness, as they sacrifice their personal well-being for the "price" of having children.


Freedom and control

There is a significant correlation between feeling in control of one's own life and happiness levels. A study conducted at the
University of Zurich The University of Zürich (UZH, german: Universität Zürich) is a public research university located in the city of Zürich, Switzerland. It is the largest university in Switzerland, with its 28,000 enrolled students. It was founded in 1833 f ...
suggested that democracy and federalism bring well-being to individuals.Bruno S. Frey & Alois Stutzer
''Happiness, Economy and Institutions''
4–5, 1999
It concluded that the more direct political participation possibilities available to citizens raises their subjective well-being. Two reasons were given for this finding. First, a more active role for citizens enables better monitoring of professional politicians by citizens, which leads to greater satisfaction with government output. Second, the ability for citizens to get involved in and have control over the political process, independently increases well-being. American psychologist Barry Schwartz argues in his book ''
The Paradox of Choice ''The Paradox of Choice – Why More Is Less'' is a book written by American psychologist Barry Schwartz and first published in 2004 by Harper Perennial. In the book, Schwartz argues that eliminating consumer choices can greatly reduce anxiety fo ...
'' that too many consumer and lifestyle choices can produce anxiety and unhappiness due to
analysis paralysis Analysis paralysis (or paralysis by analysis) describes an individual or group process where overanalyzing or overthinking a situation can cause forward motion or decision-making to become "paralyzed", meaning that no solution or course of acti ...
and raised expectations of satisfaction.


Religious diversity

National
cross-sectional data Cross-sectional data, or a cross section of a study population, in statistics and econometrics, is a type of data collected by observing many subjects (such as individuals, firms, countries, or regions) at the one point or period of time. The anal ...
suggest an
inverse relationship In statistics, there is a negative relationship or inverse relationship between two variables if higher values of one variable tend to be associated with lower values of the other. A negative relationship between two variables usually implies that ...
between religious diversity and happiness, possibly by facilitating more bonding (and less bridging)
social capital Social capital is "the networks of relationships among people who live and work in a particular society, enabling that society to function effectively". It involves the effective functioning of social groups through interpersonal relationships ...
.


Happiness and leisure

Much of the research regarding happiness and leisure relies on
subjective well-being Subjective well-being (SWB) is a self-reported measure of well-being, typically obtained by questionnaire. Ed Diener developed a tripartite model of subjective well-being in 1984, which describes how people experience the quality of their lives ...
(SWB) as an appropriate measure of happiness. Research has demonstrated a wide variety of contributing and resulting factors in the relationship between leisure and happiness. These include psychological mechanisms, and the types and characteristics of leisure activities that result in the greatest levels of subjective happiness. Specifically, leisure may trigger five core psychological mechanisms including detachment-recovery from work, autonomy in leisure, mastery of leisure activities, meaning-making in leisure activities, and social affiliation in leisure (DRAMMA). Leisure activities that are physical, relational, and performed outdoors are correlated with greater feelings of satisfaction with free time. Research across 33 different countries shows that individuals who feel they strengthen social relationships and work on personal development during leisure time are happier than others. Furthermore, shopping, reading books, attending cultural events, getting together with relatives, listening to music and attending sporting events is associated with higher levels of happiness. Spending time on the internet or watching TV is not associated with higher levels of happiness as compared to these other activities. Research has shown that culture influences how we measure happiness and leisure. While SWB is a commonly used measure of happiness in North America and Europe, this may not be the case internationally.
Quality of life Quality of life (QOL) is defined by the World Health Organization as "an individual's perception of their position in life in the context of the culture and value systems in which they live and in relation to their goals, expectations, standards ...
(QOL) may be a better measure of happiness and leisure in Asian countries, especially Korea. Countries such as China and Japan may require a different measurement of happiness, as societal differences may influence the concept of happiness (i.e. economic variables,
cultural practice Cultural practice is the manifestation of a culture or sub-culture, especially in regard to the traditional and customary practices of a particular ethnic or other cultural groups. The term is gaining in importance due to the increased controver ...
s, and
social network A social network is a social structure made up of a set of social actors (such as individuals or organizations), sets of dyadic ties, and other social interactions between actors. The social network perspective provides a set of methods for ...
s) beyond what QOL is able to measure. There seem to be some differences in leisure preference cross-culturally. Within the Croatian culture, family related leisure activities may enhance SWB across a large spectrum of ages ranging from adolescent to older adults, in both women and men. Active socializing and visiting cultural events are also associated with high levels of SWB across varying age and gender. Italians seem to prefer social conceptions of leisure as opposed to individualistic conceptions. Although different groups of individuals may prefer varying types and amount of leisure activity, this variability is likely due to the differing motivations and goals that an individual intends to fulfill with their leisure time. Research suggests that specific leisure interventions enhance feelings of SWB. This is both a top-down and bottom-up effect, in that leisure satisfaction causally affects SWB, and SWB causally affects
leisure satisfaction "Leisure refers to activities that a person voluntarily engages in when they are free from any work, social or familial responsibilities."Joudrey, A. D., & Wallace, J.E. (2009) Leisure as a Coping Resource: A Test of the Job Demand-Control-Support M ...
. This bi-directional effect is stronger in retired individuals than in working individuals. Furthermore, it appears that satisfaction with our leisure at least partially explains the relationship between our engagement in leisure and our SWB. Broadly speaking, researchers classify leisure into active (e.g. volunteering, socializing, sports and fitness) and passive leisure (e.g. watching television and listening to the radio). Among older adults, passive leisure activities and personal leisure activities (e.g. sleeping, eating, and bathing) correlate with higher levels of SWB and feelings of relaxation than active leisure activities. Thus, although significant evidence has demonstrated that active leisure is associated with higher levels of SWB, or happiness, this may not be the case with older populations. Both regular and irregular involvement in sports leisure can result in heightened SWB. Serious, or systematic involvement in certain leisure activities, such as
taekwondo ''Taekwondo'', ''Tae Kwon Do'' or ''Taekwon-Do'' (; ko, 태권도/跆拳道 ) is a Korean form of martial arts involving punching and kicking techniques, with emphasis on head-height kicks, spinning jump kicks, and fast kicking techniques. T ...
, correlates with personal growth and a sense of happiness. Additionally, more irregular (e.g. seasonal) sports activities, such as skiing, are also correlated with high SWB. Furthermore, the relationship between pleasure and skiing is thought to be caused in part by a sense of flow and involvement with the activity. Leisure activities, such as meeting with friends, participating in sports, and going on vacation trips, positively correlate with life satisfaction. It may also be true that going on a vacation makes our lives seem better, but does not necessarily make us happier in the long term. Research regarding vacationing or taking a holiday trip is mixed. Although the reported effects are mostly small, some evidence points to higher levels of SWB, or happiness, after taking a holiday.


Economic security

Poverty alleviation are associated with happier populations. According to the latest systematic review of the economic literature on life satisfaction: Volatile or high inflation is bad for a population's well-being, particularly those with a right-wing political orientation. That suggests the impact of disruptions to economic security are in part mediated or modified by beliefs about economic security.


Political stability

The Voxeu analysis of the economic determinants of happiness found that life satisfaction explains the largest share of an existing government's vote share, followed by economic growth, which itself explains six times as much as employment and twice as much as inflation.


Economic freedom

Individualistic societies have happier populations. Institutes of economic freedom are associated with increases
wealth inequality The distribution of wealth is a comparison of the wealth of various members or groups in a society. It shows one aspect of economic inequality or heterogeneity in economics, economic heterogeneity. The distribution of wealth differs from the i ...
but does not necessarily contribute to decreases in aggregate well-being or subjective well-being at the population level. In fact, income inequality enhances global well-being. There is some debate over whether living in poor neighbours make one happier. And, living among rich neighbours can dull the happiness that comes from wealth. This is purported to work by way of an upward or downward comparison effect (
Keeping up with the Joneses Keeping is a surname. Notable people with the surname include: * Charles Keeping (1924–1988), British illustrator, children's book author and lithographer * Damien Keeping (born 1982), Australian rules football coach * Frederick Keeping (1867 ...
). The balance of evidence is trending in favour of the hypothesis that living in poor neighbourhoods makes one less happy, and living in rich neighbourhoods actually makes one happier, in the United States. While social status matters, a balance of factors like amenities, safe areas, well maintained housing, turn the tide in favour of the argument that richer neighbours are happier neighbours.


Democracy

"The right to participate in the political process, measured by the extent of direct democratic rights across regions, is strongly correlated with subjective well-being (Frey and Stutzer, 2002) ... a potential mechanism that explains this relationship is the perception of procedural fairness and social mobility." Institutions and well-being, democracy and federalism are associated with a happier population. Correspondingly, political engagement and activism have associated health benefits. On the other hand, some non democratic countries such as China and Saudi Arabia top the Ipsos list of countries where the citizenry is most happy with their government's direction. That suggests that voting preferences may not translate well into overall satisfaction with the government's direction. In any case, both of these factors revealed preference and domain specific satisfaction rather than overall subjective well being.


Economic development

Historically, economists thought economic growth was unrelated to population level well-being, a phenomenon labelled the
Easterlin paradox The Easterlin paradox is a finding in happiness economics formulated in 1974 by Richard Easterlin, then professor of economics at the University of Pennsylvania, and the first economist to study happiness data. The paradox states that at a point in ...
. More robust research has identified that there is a link between economic development and the wellbeing of the population. A <2017 meta-analysis shows that the impact of infrastructure expenditure on economic growth varies considerably. So, one cannot assume an infrastructure project will yield welfare benefits. The paper doesn't investigate or elaborate on any modifiable variables that might predict the value of a project. However, government spending on roads and primary industries is the best value target for transport spending, according to a 2013 meta-analysis. 7%+/−3% per annum discount rates are typically applied as the discount rate on public infrastructure projects in Australia. Smaller real discount rates are used internationally to calculate the social return on investment by governments.


Alternative approach: economic consequences of happiness

While the mainstream happiness economics has focused on identifying the determinants of happiness, an alternative approach in the discipline examines instead what are the economic consequences of happiness. Happiness may act as a determinant of economic outcomes: it increases productivity, predicts one's future income and affects labour market performance. There is a growing number of studies justifying the so-called "happy-productive worker" thesis. The positive and causal impact of happiness on an individual's productivity has been established in experimental studies.


Timeline of developments

The idea that happiness is important to a society is not new. Many other prominent intellectuals, philosophers and political leaders throughout history, including
Aristotle Aristotle (; grc-gre, Ἀριστοτέλης ''Aristotélēs'', ; 384–322 BC) was a Greek philosopher and polymath during the Classical period in Ancient Greece. Taught by Plato, he was the founder of the Peripatetic school of phil ...
,
Confucius Confucius ( ; zh, s=, p=Kǒng Fūzǐ, "Master Kǒng"; or commonly zh, s=, p=Kǒngzǐ, labels=no; – ) was a Chinese philosopher and politician of the Spring and Autumn period who is traditionally considered the paragon of Chinese sages. C ...
, and
Plato Plato ( ; grc-gre, Πλάτων ; 428/427 or 424/423 – 348/347 BC) was a Greek philosopher born in Athens during the Classical period in Ancient Greece. He founded the Platonist school of thought and the Academy, the first institution ...
, incorporated happiness into their work. 350 B.C. – "Happiness is the meaning and the purpose of life, the whole aim and end of human existence." -Aristotle Thomas Jefferson put the "pursuit of happiness" on the same level as life and liberty in the United States'
Declaration of Independence A declaration of independence or declaration of statehood or proclamation of independence is an assertion by a polity in a defined territory that it is independent and constitutes a state. Such places are usually declared from part or all of th ...
.
Jeremy Bentham Jeremy Bentham (; 15 February 1748 Old_Style_and_New_Style_dates">O.S._4_February_1747.html" ;"title="Old_Style_and_New_Style_dates.html" ;"title="nowiki/>Old Style and New Style dates">O.S. 4 February 1747">Old_Style_and_New_Style_dates.htm ...
believed that public policy should attempt to maximize happiness, and he even attempted to estimate a "hedonic calculus". In the United States, there is no explicit policy that requires the rulers to develop the physical and mental well-being of the citizens or hold the government agencies accountable for their performance against specific measures or metrics of well-being. Until 1972 there was no formal government policy, anywhere in the world, that placed happiness and well-being as a main criterion for public policy decision making. 1789 – France adopts the Declaration: It emphasizes happiness as a fundamental right and universal goal. The following is a chronological list of happiness economics and well-being indices: 1972 – Bhutan's former king,
Jigme Singye Wangchuck Jigme Singye Wangchuck ( dz, འཇིགས་མེད་སེང་གེ་དབང་ཕྱུག་, ; born 11 November 1955) is a member of the House of Wangchuck who was the king of Bhutan (Druk Gyalpo) from 1972 until his abdicati ...
, introduced the
Gross National Happiness Gross National Happiness (GNH), sometimes called Gross Domestic Happiness (GDH), is a philosophy that guides the government of Bhutan. It includes an index which is used to measure the collective happiness and well-being of a population. Gross Nat ...
(GNH) philosophy and its four development pillars at an international conference. 2005 –
Med Jones Med Jones (a.k.a. Med Yones) is an American economist. He is the president of International Institute of Management, a U.S. based research organization. His work at the institute focuses on economic, investment, and business strategies. Career T ...
of the International Institute of Management introduced the first GNH Index and Global GNH Index Survey. The GNH Index, also known as
Gross National Well-being Gross National Well-being/Wellness (GNW) or Happiness (GNH) a socioeconomic development and measurement framework. The GNW/GNH Index consists of seven dimensions: economic, environmental, physical, mental, work, social, and political. Most wellnes ...
(GNW) Index framework served as the first integrated objective (economic) and subjective (happiness) socioeconomic development framework. Prior to the GNH Index, there were few development indices that improved upon the gross domestic product (GDP), but did not measure happiness. For example, the Genuine Progress Indicator was focused on the environmental cost of economic development, then later (in 2006) it was updated to include similar measures to the GNH Index. Another development index is the
Human Development Index The Human Development Index (HDI) is a statistic composite index of life expectancy, education (mean years of schooling completed and expected years of schooling upon entering the education system), and per capita income indicators, whi ...
(HDI) that originally focused on literacy and education but also did not measure happiness. The HDI now measures three basic dimensions of human development, health (as measured by life expectancy at birth), overall knowledge level (as measured by the literacy rate), and standard of living (as measured by GDP per capita for a given year). Among the criticisms of the HDI is the complaint that it is a mixture of stock measures (life expectancy at birth and literacy rate) and a flow measure (GDP per capita for a given year). To overcome this criticism, Hou, Walsh, and Zhang (2015) proposed a new index called HDIF (Human Development Index Flow), in which they replaced life expectancy at birth by the under-five mortality rate (for a given year), and they also replaced the literacy rate by the gross primary school enrollment ratio for a given year). They calculated both the HDI and the HDIF for many countries and found that "the HDIF and the HDI tend to converge for wealthy countries and diverge for poor countries, especially those with low HDI rankings". The development performance of poor countries improved using the HDIF while the performance of the wealthy countries declined. 2006 – The Genuine Progress Indicator was updated from a green measurement system to a broader concept that included quantitative measurement of
well-being Well-being, or wellbeing, also known as wellness, prudential value or quality of life, refers to what is intrinsically valuable relative ''to'' someone. So the well-being of a person is what is ultimately good ''for'' this person, what is in th ...
and happiness. The new measure is motivated by the philosophy of the GNH and the same notion of that subjective measures like well-being are more relevant and important than more objective measures like
consumption Consumption may refer to: *Resource consumption *Tuberculosis, an infectious disease, historically * Consumption (ecology), receipt of energy by consuming other organisms * Consumption (economics), the purchasing of newly produced goods for curren ...
. It is not measured directly, but only by means of the factors which are believed to lead to it. 2007 –
Thailand Thailand ( ), historically known as Siam () and officially the Kingdom of Thailand, is a country in Southeast Asia, located at the centre of the Indochinese Peninsula, spanning , with a population of almost 70 million. The country is bo ...
releases Green and Happiness Index (GHI). 2008 – French President
Nicolas Sarkozy Nicolas Paul Stéphane Sarközy de Nagy-Bocsa (; ; born 28 January 1955) is a French politician who served as President of France from 2007 to 2012. Born in Paris, he is of Hungarian, Greek Jewish, and French origin. Mayor of Neuilly-sur-Se ...
launched a Happiness Initiative similar to GNH, calling for the inclusion of happiness and well-being among the criteria for national governance policies. He commissioned three prominent economists, Joseph Stiglitz (USA), Amartya Sen (India), Jean-Paul Fitoussi (France), to publish a report calling for a global "statistical system which goes beyond commercial activity to measure personal well-being." Later it was described as gross domestic happiness (GDH). The GDH Index is similar to the GNH Index of 2005. 2008 – The goal of furthering gross national happiness, as well as a specified GNH Index to measure this, are instituted explicitly in the
Constitution of Bhutan The Constitution of Bhutan (Dzongkha: འབྲུག་གི་རྩ་ཁྲིམས་ཆེན་མོ་; Wylie:'' 'Druk-gi cha-thrims-chen-mo'') was enacted 18 July 2008 by the Royal Government of Bhutan. The Constitution was thoroughl ...
, to guide its government, on 18 July 2008. The included index is used to measure the collective happiness and well-being of the population. 2009 – In the United States, the
Gallup poll Gallup, Inc. is an American analytics and advisory company based in Washington, D.C. Founded by George Gallup in 1935, the company became known for its public opinion polls conducted worldwide. Starting in the 1980s, Gallup transitioned its ...
system launched the happiness survey collecting data on national scale. The Gallup Well-Being Index was modeled after the GNH Index framework of 2005. The Well-Being Index score is an average of six sub-indexes which measure life evaluation, emotional health, work environment, physical health, healthy behaviors, and access to basic necessities. In October 2009, the US scored 66.1/100. 2010 – The concept was taken seriously, as the
Centre for Bhutan Studies The Centre for Bhutan Studies and GNH Research (formerly The Centre for Bhutan Studies) is a research institute located in Thimphu, Bhutan, established in 1999 with the purpose of promoting research and scholarship in Bhutan. The president of the c ...
, under the leadership of
Karma Ura Dasho Karma Ura is the President of the Centre for Bhutan Studies and Gross National Happiness Research. He is also an active scholar, writer, painter and historian. Early life and education Karma Ura was born in Ura, Bumthang, Bhutan. He co ...
, developed a sophisticated survey instrument to measure the population's general level of well-being. Two
Canadians Canadians (french: Canadiens) are people identified with the country of Canada. This connection may be residential, legal, historical or cultural. For most Canadians, many (or all) of these connections exist and are collectively the source of ...
, Michael and Martha Pennock played a major role in developing the Bhutanese survey, which took a six- to seven-hour interview to complete. They developed a shorter international version of the survey which has been used in their home region of
Victoria, BC Victoria is the capital city of the Canadian province of British Columbia, on the southern tip of Vancouver Island off Canada's Pacific coast. The city has a population of 91,867, and the Greater Victoria area has a population of 397,237. Th ...
, as well as in Brazil. The Pennocks also collaborated with Ura in the production of a ''policy lens'' which is used by the Bhutanese GNH Commission for anticipating the impact of policy initiatives upon the levels of gross national happiness in Bhutan. 2010 – The Center for Bhutan Studies further defined the original four pillars with greater specificity into eight general contributors to happiness, which make up the
Bhutan GNH Index Gross National Happiness (GNH), sometimes called Gross Domestic Happiness (GDH), is a philosophy that guides the government of Bhutan. It includes an index which is used to measure the collective happiness and well-being of a population. Gross Nat ...
: 1) physical, mental and spiritual health; 2) time-balance; 3) social and community vitality; 4) cultural vitality; 5) education; 6) living standards; 7) good governance; and 8) ecological vitality. 2010 – The Oxford Poverty and Human Development Initiative OPHI at the University of Oxford in UK, launched the
Multidimensional Poverty Index Multidimensional Poverty Indices use a range of indicators to calculate a summary poverty figure for a given population, in which a larger figure indicates a higher level of poverty. This figure considers both the proportion of the population that ...
(MPI) for the United Nations Development Programme, (UNDP). Similar to the GNH Index of 2005, OPHI promotes collection and analysis of data on five dimensions including Quality of work, Empowerment, Physical safety, Ability to go about without shame, Psychological wellbeing. 2011 – UN General Assembly Resolution 65/309, titled "Happiness: towards a holistic approach to development" 2011 – The
Organisation for Economic Co-operation and Development The Organisation for Economic Co-operation and Development (OECD; french: Organisation de coopération et de développement économiques, ''OCDE'') is an intergovernmental organization, intergovernmental organisation with 38 member countries ...
(OECD) launched "Better Life Index" (BLI). 2011 – The
United Nations The United Nations (UN) is an intergovernmental organization whose stated purposes are to maintain international peace and international security, security, develop friendly relations among nations, achieve international cooperation, and be ...
released its first edition of the now annual
World Happiness Report The World Happiness Report is a publication that contains articles and rankings of Gross National Happiness, national happiness, based on respondent ratings of their own lives, which the report also correlates with various Quality of life, (qualit ...
. 2011 – Canadian Index of Wellbeing Network (CIW Network) released The Canadian Index of Wellbeing (CIW). 2011 – The Israeli newspaper '' Haaretz'' published an article suggesting that western GDP economics is an incomplete development model and called for the adoption of Bhutan's GNH philosophy and Jones' GNH Index in
Israel Israel (; he, יִשְׂרָאֵל, ; ar, إِسْرَائِيل, ), officially the State of Israel ( he, מְדִינַת יִשְׂרָאֵל, label=none, translit=Medīnat Yīsrāʾēl; ), is a country in Western Asia. It is situated ...
. 2011 – Chuluun Togtokh criticized the HDI in an article published in ''Nature'', calling for a revised HDI, writing that "The revised index should include each nation's per capita carbon emissions, and so become a Human Sustainable Development Index (HSDI)." Bravo (2014) provided details of how the HSDI was computed and proposed an amended HSDI by including the proportion of forested area in each country. He argued that this proposed indicator "represents an important measure of the capacity of the natural system to provide fundamental ecological services." 2012 – In a report prepared for the US Congressman Hansen Clarke, R, researchers Ben Beachy and Juston Zorn, at
John F. Kennedy School of Government The Harvard Kennedy School (HKS), officially the John F. Kennedy School of Government, is the school of public policy and government of Harvard University in Cambridge, Massachusetts. The school offers master's degrees in public policy, public ...
in
Harvard University Harvard University is a private Ivy League research university in Cambridge, Massachusetts. Founded in 1636 as Harvard College and named for its first benefactor, the Puritan clergyman John Harvard, it is the oldest institution of higher le ...
, recommended that "the Congress should prescribe the broad parameters of new, carefully designed supplemental national indicators; it should launch a bipartisan commission of experts to address unresolved methodological issues, and include alternative indicators." They proposed that the government can use the survey results to see which well-being dimensions are least satisfied and which districts and demographic groups are most deficient, so as to allocate resources accordingly. The report list the Gross National Happiness Index and its seven measurement area as one of the main frameworks to consider. 2012 – Professor Peter T. Coleman, a director of the International Center for Cooperation and Conflict Resolution at
Columbia University Columbia University (also known as Columbia, and officially as Columbia University in the City of New York) is a private research university in New York City. Established in 1754 as King's College on the grounds of Trinity Church in Manhatt ...
, suggested that Jones' GNH Index initiative could inform the
Global Peace Index Global Peace Index (GPI) is a report produced by the Institute for Economics & Peace (IEP) which measures the relative position of nations' and regions' peacefulness. The GPI ranks 163 independent states and territories (collectively accounting ...
Initiative GPI. 2012 –
South Korea South Korea, officially the Republic of Korea (ROK), is a country in East Asia, constituting the southern part of the Korea, Korean Peninsula and sharing a Korean Demilitarized Zone, land border with North Korea. Its western border is formed ...
launched Happiness Index citing the GNH Index framework. 2012 – The government of
Goa Goa () is a state on the southwestern coast of India within the Konkan region, geographically separated from the Deccan highlands by the Western Ghats. It is located between the Indian states of Maharashtra to the north and Karnataka to the ...
,
India India, officially the Republic of India (Hindi: ), is a country in South Asia. It is the seventh-largest country by area, the second-most populous country, and the most populous democracy in the world. Bounded by the Indian Ocean on the so ...
, published a strategy for socioeconomic development citing the GNH Index as a model for measuring happiness. 2012 – The city of
Seattle Seattle ( ) is a seaport city on the West Coast of the United States. It is the seat of King County, Washington. With a 2020 population of 737,015, it is the largest city in both the state of Washington and the Pacific Northwest regio ...
in Washington, launched its own happiness index initiative, emphasizing measures similar to the GNH Index. 2013 – The
Social Progress Index The Social Progress Index (SPI) measures the extent to which countries provide for the social and environmental needs of their citizens. Fifty-four indicators in the areas of basic human needs, foundations of well-being, and opportunity to progre ...
SPI was launched by Michael Porter 2013 – The president of Singapore,
Tony Tan Tony Tan Keng Yam (; born 7 February 1940) is a Singaporean former politician who served as the seventh president of Singapore between 2011 and 2017. He did not seek for a second term as president in 2017 due to a constitutional amendment ...
, proposed that in addition to building up substantial financial reserves, Singapore needed to focus on building up its "
social reserves Social Reserves refer to the intangible ties that bind a country together. As a resource, they may be contrasted to a country's financial reserves. The term bears some similarity to the Bhutanese concept of Gross national happiness, in that it atte ...
", a concept that appears to have parallels to GNH. 2013 – Economist Karol Jan Borowiecki motivates that well-being indices can be obtained from the way people communicate, as is established in psychology, and compiles the first well-being indices covering the life-time of a person. 2013 – A joint commission led by the Conseil économique et social, the Conseil supérieur pour un développement durable and the Observatoire de la Compétitivité introduces a set of indicators measuring the quality of life in Luxembourg. The conclusions of the commission are summarised in a document titled " Projet PIBien-être", which identifies 64 indicators belonging to 11 different domains to assess quality of life in Luxembourg. p. 101. 2014 – The government of
Dubai Dubai (, ; ar, دبي, translit=Dubayy, , ) is the most populous city in the United Arab Emirates (UAE) and the capital of the Emirate of Dubai, the most populated of the 7 emirates of the United Arab Emirates.The Government and Politics of ...
launched its localized Happiness Index to measure the public's contentment and satisfaction with different government services. 2014 – The
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and North ...
launched its own well-being and happiness statistics. 2015 – Within the " Projet PIBien-être" launched in 2013, STATEC (National Institute of Statistics and Economic Studies of the Grand Duchy of Luxembourg) presents a preliminary analysis of the "Luxembourgish Index of Well-being" (LIW), a first proposal of synthetic indicator measuring the quality of life in Luxembourg. The presentation entitled "Preliminary Assessment of Quality of Life in Luxembourg" was delivered by Marcin Piekałkiewicz on 16 December 2015. 2017 – The Minderoo Foundation launched the Global Slavery Index, providing a map of the estimated prevalence of modern slavery. The information allows an objective comparison and assessment of both the problem and adequacy of the response in 167 countries.


Related studies

The
Satisfaction with Life Index The Satisfaction with Life Index was created in 2007 by Adrian G. White, an analytic social psychologist at the University of Leicester, using data from a metastudy. It is an attempt to show life satisfaction in different nations. In this calcu ...
is an attempt to show the average self-reported happiness in different nations. This is an example of a recent trend to use direct measures of happiness, such as surveys asking people how happy they are, as an alternative to traditional measures of policy success such as GDP or GNP. Some studies suggest that happiness can be measured effectively. The
Inter-American Development Bank The Inter-American Development Bank (IDB or IADB) is an international financial institution headquartered in Washington, D.C., United States of America, and serving as the largest source of development financing for Latin America and the Caribb ...
(IDB), published in November 2008 a major study on happiness economics in Latin America and the Caribbean. There are also several examples of measures that include self-reported happiness as one variable. Happy Life Years, a concept brought by
Dutch Dutch commonly refers to: * Something of, from, or related to the Netherlands * Dutch people () * Dutch language () Dutch may also refer to: Places * Dutch, West Virginia, a community in the United States * Pennsylvania Dutch Country People E ...
sociologist Ruut Veenhoven, combines self-reported happiness with
life expectancy Life expectancy is a statistical measure of the average time an organism is expected to live, based on the year of its birth, current age, and other demographic factors like sex. The most commonly used measure is life expectancy at birth ...
. The
Happy Planet Index The Happy Planet Index (HPI) is an index of human well-being and environmental impact that was introduced by the New Economics Foundation in 2006. Each country's HPI value is a function of its average subjective life satisfaction, life expectan ...
combines it with life expectancy and ecological footprint.
Gross National Happiness Gross National Happiness (GNH), sometimes called Gross Domestic Happiness (GDH), is a philosophy that guides the government of Bhutan. It includes an index which is used to measure the collective happiness and well-being of a population. Gross Nat ...
(GNH) is a concept introduced by the King of
Bhutan Bhutan (; dz, འབྲུག་ཡུལ་, Druk Yul ), officially the Kingdom of Bhutan,), is a landlocked country in South Asia. It is situated in the Eastern Himalayas, between China in the north and India in the south. A mountainous ...
in 1972 as an alternative to
GDP Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...
. Several countries have already developed or are in the process of developing such an index.
Andrew Revkin Andrew C. Revkin is an American science and environmental journalist, author and educator. He has written on a wide range of subjects including destruction of the Amazon rain forest, the 2004 Asian tsunami, sustainable development, climate chan ...

"A New Measure of Well-Being From a Happy Little Kingdom"
''The New York Times'', October 4, 2005, ereinafter "New Measure"
Bhutan's index has led that country to limit the amount of deforestation it will allow and to require that all tourists to its nation must spend US$200 Allegedly, low-budget tourism and deforestation lead to unhappiness. After the military coup of 2006,
Thailand Thailand ( ), historically known as Siam () and officially the Kingdom of Thailand, is a country in Southeast Asia, located at the centre of the Indochinese Peninsula, spanning , with a population of almost 70 million. The country is bo ...
also instituted an index. The stated promise of the new Prime Minister
Surayud Chulanont Surayud Chulanont ( th, สุรยุทธ์ จุลานนท์, , ; born 28 August 1943) is a Thai politician. He was the Prime Minister of Thailand and head of Thailand's interim government between 2006 and 2008. He is a former sup ...
is to make the Thai people not only richer but happier as well. Much like GDP results, Thailand releases monthly GNH data.Thailand's Gross Domestic Happiness Index Falls
, Monsters and Critics, 2007
The Thai GNH index is based on a 1–10 scale with 10 being the happiest. As of May 13, 2007, the Thai GNH measured 5.1 points. The index uses poll data from the population surveying various satisfaction factors such as security, public utilities, good governance, trade, social justice, allocation of resources, education and community problems.
Australia Australia, officially the Commonwealth of Australia, is a Sovereign state, sovereign country comprising the mainland of the Australia (continent), Australian continent, the island of Tasmania, and numerous List of islands of Australia, sma ...
,
China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...
,
France France (), officially the French Republic ( ), is a country primarily located in Western Europe. It also comprises of Overseas France, overseas regions and territories in the Americas and the Atlantic Ocean, Atlantic, Pacific Ocean, Pac ...
and the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and North ...
are also coming up with indexes to measure national happiness. The UK began to measure national wellbeing in 2012. North Korea also announced an international Happiness Index in 2011 through
Korean Central Television Korean Central Television (KCTV; ) is a television service operated by the Korean Central Broadcasting Committee, a state-owned broadcaster in North Korea. It is broadcast terrestrially via the Pyongyang TV Tower in Moranbong-guyok, Pyongy ...
. North Korea itself came in second, behind #1 China. Canada released the Canadian Index of Wellbeing (CIW) in 2011 to track changes in wellbeing. The CIW has adopted the following working definition of wellbeing: The presence of the highest possible quality of life in its full breadth of expression focused on but not necessarily exclusive to good living standards, robust health, a sustainable environment, vital communities, an educated populace, balanced time use, high levels of democratic participation, and access to and participation in leisure and culture
Ecuador Ecuador ( ; ; Quechua: ''Ikwayur''; Shuar: ''Ecuador'' or ''Ekuatur''), officially the Republic of Ecuador ( es, República del Ecuador, which literally translates as "Republic of the Equator"; Quechua: ''Ikwadur Ripuwlika''; Shuar: ''Eku ...
's and
Bolivia , image_flag = Bandera de Bolivia (Estado).svg , flag_alt = Horizontal tricolor (red, yellow, and green from top to bottom) with the coat of arms of Bolivia in the center , flag_alt2 = 7 × 7 square p ...
's new constitutions state the indigenous concept of "good life" ("buen vivir" in
Spanish Spanish might refer to: * Items from or related to Spain: **Spaniards are a nation and ethnic group indigenous to Spain **Spanish language, spoken in Spain and many Latin American countries **Spanish cuisine Other places * Spanish, Ontario, Can ...
, "sumak kawsay" in
Quichua Kichwa (, , also Spanish ) is a Quechuan language that includes all Quechua varieties of Ecuador and Colombia (''Inga''), as well as extensions into Peru. It has an estimated half million speakers. The most widely spoken dialects are Chimborazo ...
, and "suma qamaña" in
Aymara Aymara may refer to: Languages and people * Aymaran languages, the second most widespread Andean language ** Aymara language, the main language within that family ** Central Aymara, the other surviving branch of the Aymara(n) family, which today ...
) as the goal of sustainable development.


Neoclassical economics

Neoclassical, as well as classical economics, are not subsumed under the term ''happiness economics'' although the original goal was to increase the happiness of the people. Classical and neoclassical economics are stages in the development of
welfare economics Welfare economics is a branch of economics that uses microeconomic techniques to evaluate well-being (welfare) at the aggregate (economy-wide) level. Attempting to apply the principles of welfare economics gives rise to the field of public ec ...
and are characterized by mathematical modeling. Happiness economics represents a radical break with this tradition. The measurement of ''subjective'' happiness respectively
life satisfaction Life satisfaction is a measure of a person's well-being, assessed in terms of mood, relationship satisfaction, achieved goals, self-concepts, and self-perceived ability to cope with life. Life satisfaction involves a favorable attitude towards on ...
by means of survey research across nations and time (in addition to objective measures like lifespan, wealth, security etc.) marks the beginning of happiness economics.


Criticism

Some have suggested that establishing happiness as a metric is only meant to serve political goals. Recently there has been concern that happiness research could be used to advance authoritarian aims. As a result, some participants at a happiness conference in Rome have suggested that happiness research should not be used as a matter of public policy but rather used to inform individuals. Even on the individual level, there is discussion on how much effect external forces can have on happiness. Less than 3% of an individual's level of happiness comes from external sources such as employment, education level, marital status, and socioeconomic status. To go along with this, four of the
Big Five Personality Traits The Big Five personality traits is a suggested taxonomy, or grouping, for personality traits, developed from the 1980s onward in psychological trait theory. Starting in the 1990s, the theory identified five factors by labels, for the US English ...
are substantially associated with life satisfaction, openness to experience is not associated. Having high levels of internal
locus of control Locus of control is the degree to which people believe that they, as opposed to external forces (beyond their influence), have control over the outcome of events in their lives. The concept was developed by Julian Rotter, Julian B. Rotter in 1954 ...
leads to higher reported levels of happiness. Even when happiness can be affected by external sources, it has high
hedonic adaptation The hedonic treadmill, also known as hedonic adaptation, is the observed tendency of humans to quickly return to a relatively stable level of happiness despite major positive or negative events or life changes. According to this theory, as a perso ...
, some specific events such as an increase in income, disability, unemployment, and loss (bereavement) only have short-term (about a year) effects on a person's overall happiness and after a while happiness may return to levels similar to unaffected peers. What has the most influence over happiness are internal factors such as genetics, personality traits, and internal locus of control. It is theorized that 50% of the variation in happiness levels is from genetic sources and is known as the genetic set point. The genetic set point is assumed to be stable over time, fixed, and immune to influence or control. This goes along with findings that well-being surveys have a naturally positive baseline. With such strong internal forces on happiness, it is hard to have an effect on a person's happiness externally. This in turn lends itself back to the idea that establishing a happiness metric is only for political gain and has little other use. To support this even further it is believed that a country aggregate level of SWB can account for more variance in government vote share than standard macroeconomic variables, such as income and employment.Ward, George (2015) ''Is happiness a predictor of election results?'' CEP Discussion Papers, CEPDP1343. Centre for Economic Performance, London School of Economics and Political Science, London, UK.


Technical issues

According to Bond and Lang (2018), the results are skewed due to the fact that the respondents have to "round" their true happiness to the scale of, e.g., 3 or 7 alternatives (e.g., very happy, pretty happy, not too happy). This "rounding error" may cause a less happy group seem happier, in the average. This would not be the case if the happiness of both groups would be normally distributed with the same variance, but that is usually not the case, based on their results. For some not-implausible log-normal assumptions on the scale, typical results can be reversed to the opposite results. They also show that the "reporting function" seems to be different for different groups and even for the same individual at different times. For example, when a person becomes disabled, they soon start to lower their threshold for a given answer (e.g., "pretty happy"). That is, they give a higher answer than they would have given at the same happiness state before becoming disabled.


See also


Researchers


References and notes


Bibliography

Books * * * * Gaucher, Renaud (2009). ''Bonheur et économie. Le capitalisme est-il soluble dans la recherche du bonheur?'' L'Harmattan, collection L'esprit économique. * * * Articles * * * The entire issue of ''Daedalus'' is devoted to happiness and may repay exploration. * * *


External links

* {{DEFAULTSORT:Happiness Economics Applied ethics Economic ideologies Happiness Economic indicators Happiness indices Welfare economics de:Glücksforschung#Ökonomische Glücksforschung