Happiness economics is the study of a country's
quality of lifeThe term quality of life is used to evaluate the general well-being of individuals and societies. The term is used in a wide range of contexts, including the fields of international development, healthcare, and political science. Quality of life should not be confused with the concept of...
by combining economists' and psychologists' techniques. It relies on more expansive notions of utility than does conventional
economicsEconomics is the social science that studies the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
. Although its usefulness is yet to be determined, it has become a subject of interest and often a measure of comparison with the traditional forms of measuring market health such as GDP and GNP.
This field of studies is also called " The economy of happiness".
Worldwide happiness
The
Satisfaction with Life IndexThe Satisfaction with Life Index was created by Adrian G. White, an Analytic Social Psychologist at the University of Leicester, using data from a metastudy...
is an attempt to show the average self-reported
happinessHappiness is a state of mind or feeling characterized by contentment, love, satisfaction, pleasure, or joy. A variety of philosophical, religious, psychological and biological approaches have striven to define happiness and identify its sources....
(
subjective life satisfactionSubjective life satisfaction is a measure of an individual's perceived level of well-being and happiness. It is frequently assessed in surveys, by asking individuals how satisfied they are with their own lives...
) 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 to GDP or GNP. Some studies suggest that happiness can be measured effectively. The Inter-American Development Bank (IDB), published in November 2008 a major study on happiness economics in Latin America and the Caribbean ("Beyond Facts: Measuring Quality of Life", http://www.iadb.org/idbdocs/1776308.pdf).
There are also several examples of measures that includes self-reported happiness as one variable. Happy Life Years, a concept brought by
DutchThe Dutch people are the dominant ethnic group of the Netherlands.Dutch people, or descendants of Dutch people, are also found in migrant communities world wide, notably in Canada, Australia, South Africa, New Zealand and the United States....
sociologist Ruut Veenhoven, combines self-reported happiness with
life expectancyLife expectancy is the expected number of years of life remaining at a given age. It is denoted by e
x, which means the average number of subsequent years of life for someone now aged x, according to a particular mortality experience...
. The
Happy Planet IndexThe Happy Planet Index is an index of human well-being and environmental impact that was introduced by the New Economics Foundation in July 2006. The index is designed to challenge well-established indices of countries’ development, such as Gross Domestic Product and the Human Development Index...
combines it with life expectancy and
ecological footprintThe ecological footprint is a measure of human demand on the Earth's ecosystems. It compares human demand with planet Earth's ecological capacity to regenerate. It represents the amount of biologically productive land and sea area needed to regenerate the resources a human population consumes and...
.
Gross national happinessThe concept of gross national happiness is an attempt to define quality of life in more holistic and psychological terms than gross national product....
is a concept introduced by the King of
BhutanThe Kingdom of Bhutan is a landlocked nation in South Asia, located at the eastern end of the Himalaya Mountains and is bordered to the south, east and west by the Republic of India and to the north by People's Republic of China. Bhutan is separated from the nearby state of Nepal to the west by...
as an alternative to GDP but there is as yet no exact definition.
Happiness and GDP
Typically market health measures such as GDP and GNP have been used as a measure of successful policy. Although on average richer nations tend to be happier than poorer nations, some studies have indicated that beyond an average
GDP per capita of about $15,000 (most of the world's nations have less than this), studies indicate the average income in a nation makes little difference to the average self-reported happiness. Other economists have disputed the accuracy of these studies, finding a logarithmic correlation between GDP per capita and self-reported happiness.
Still others point out that since life expectancy has continued to increase in nations wealthier than this, often partly attributed to economic growth, Happy Life Years have continued to increase.
It has been argued that happiness measures could be used not as a replacement for more traditional measures but as a supplement.
What makes people happy? — Determinants of happiness
Given its very nature, reported happiness is subjective. It is difficult to compare one person’s happiness with another. It can be especially difficult to compare happiness across cultures. However, happiness economists believe they have solved this comparison problem. Cross-sections of large data samples across nations and time demonstrate consistent patterns in the determinates of happiness.
Abraham MaslowAbraham Harold Maslow was an American psychologist. He is noted for his conceptualization of a "hierarchy of human needs", and is considered the founder of humanistic psychology.-Biography:...
theorized that human happiness is the outcome of meeting a set of needs. He listed these in order of priority, leading to a pyramid called
Maslow's hierarchy of needsMaslow's hierarchy of needs is a theory in psychology, proposed by Abraham Maslow in his 1943 paper A Theory of Human Motivation, which he subsequently extended to include his observations of humans' innate curiosity....
. The set of needs includes physiological, safety, love/belonging, esteem, and self-actualization needs. These needs can be used as a basis for evaluating the overall happiness level of individuals.
Micro-econometric happiness equations have the standard form: . In this equation is the reported well-being of individual at time , and is a vector of known variables, which include socio-demographic and socioeconomic characteristics..
Other factors have been suggested as making people happier. Money correlates with happiness, but the rate diminishes with more money. One study, when corrected for social status, showed no correlation between income and happiness. However, the amount of spare time people have, as well as their control over how much spare time they have, correlates with happiness. More generally, there is a significant correlation between feeling in control of one's own life and happiness levels. Losing one's job can be a great source of unhappiness.
Children tend to decrease parental happiness, at least until they leave for college, although in terms of a broader life narrative the opposite may be true. Married people are happier, but it is unclear if this is due to the marriage or if already happy people tend to marry.
Marriage, children and how happy they make us, provide a perfect case study for these questions. Gilberts writes that prospective parents know that raising children will be laborious, yet they believe it will make them very happy. In fact, studies show it does just the opposite, and that levels of parental happiness don't rise until kids leave for college (so much for the empty-nest theory). Still, if happiness is thought of in terms of a broader life narrative, rather than just specific moments of teething, diaper changing and petty-cash culling, it's pretty clear that kids do add value. Happiness politicians know that welfare states need more kids to plug the coming labor shortage — but should they actively encourage something that will make people unhappy, at least in the short run? Likewise marriage—married couples test happier, but it's unclear if that's because happy people marry. Whether or not politicians back policies that support marriage and having kids doesn't really matter, because people embrace these happiness myths quite willingly. "We are the product of our genes and our societies," says Gilbert. Traditions will trump the empirical evidence that money and kids won't make us happy.
One concern has always been the accuracy and
reliabilityIn statistics, reliability is the consistency of a set of measurements or measuring instrument, often used to describe a test. This can either be whether the measurements of the same instrument give or are likely to give the same measurement , or in the case of more subjective instruments, such as...
of people’s responses to happiness surveys. To make happiness metrics more credible, scientists have new tools at their disposal. Some claim that happiness can be measured by observing the joy center of the
brainThe brain is the center of the nervous system in all vertebrate, and most invertebrate, animals. Some primitive animals such as jellyfish and starfish have a decentralized nervous system without a brain, while sponges lack any nervous system at all...
lit up with advanced imaging, although this raises
philosophical issuesType physicalism is a theory, in philosophy of mind, which asserts that mental events are type-identical to the physical events in the brain with which they are correlated...
.
A study conducted at the
University of ZurichThe University of Zurich , located in the city of Zurich, is the largest university in Switzerland, with over 24,000 students. It was founded in 1833 from the existing colleges of theology, law, medicine and a new faculty of philosophy...
suggested that democracy and federalism bring well-being to individuals. 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.
Higher
economic freedomEconomic freedom is a term used in economic research and policy debates. As with freedom generally, there are various definitions, but no universally accepted concept of economic freedom...
, as measured by both the Heritage and the Fraser indices, correlates strongly with higher self-reported happiness.
Given the subjective nature of the response to happiness surveys, different approaches have looked at other factors in an individual's life; for example happiness being inversely related to levels of stress,
allergyAllergy is a disorder of the immune system often also referred to as atopy. Allergic reactions occur to normally harmless environmental substances known as allergens; these reactions are acquired, predictable, and rapid. Strictly, allergy is one of four forms of hypersensitivity and is called type...
,
asthmaAsthma is a predisposition to chronic inflammation of the lungs in which the airways are reversibly narrowed. Asthma affects 7% of the population of the United States, and 300 million worldwide...
and other chronic conditions. By this measure, the happiness of many developed nations in the world has gone down over the past 50 years.
Development of a Happiness Index
The idea that happiness is important to a society is not new. Thomas Jefferson put the “pursuit of happiness” on the same level as life and liberty in the United States
http://www.bartleby.com/100/298.html Jeremy BenthamJeremy Bentham was an English jurist, philosopher, and legal and social reformer. He was the brother of Samuel Bentham. He was a political radical, and a leading theorist in Anglo-American philosophy of law...
believed that public policy should attempt to maximize happiness, and he even attempted to estimate a "hedonic calculus". Many other prominent economists and philosophers throughout history, including
AristotleAristotle was a Greek philosopher, a student of Plato and teacher of Alexander the Great. He wrote on many subjects, including physics, metaphysics, poetry, theater, music, logic, rhetoric, politics, government, ethics, biology, and zoology.Together with Plato and Socrates , Aristotle is one of...
, incorporated happiness into their work.
Several countries have already developed or are in the process of developing a gross national happiness index (GNH). His Majesty King Jigme Singye Wangchuck of
BhutanThe Kingdom of Bhutan is a landlocked nation in South Asia, located at the eastern end of the Himalaya Mountains and is bordered to the south, east and west by the Republic of India and to the north by People's Republic of China. Bhutan is separated from the nearby state of Nepal to the west by...
, is credited with creating the first such index. In 1972, the King was concerned about the problems afflicting other developing countries which were focused on economic growth. While a work in progress, the example set by Bhutan is starting to catch on in other parts of the world. 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, extensive tourism and deforestation lead to unhappiness.
After the military coup of 2006,
ThailandThe Kingdom of Thailand is an independent country that lies in the heart of Southeast Asia.It is bordered to the north by Laos and Burma, to the east by Laos and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the west by the Andaman Sea and Burma...
also instituted an index. The stated promise of the new Prime Minister
Surayud ChulanontGeneral Surayud Chulanont is a Thai political figure. He was the Prime Minister of Thailand and head of Thailand's Interim Government between 2006 and 2008...
is to make the Thai people not only richer but happier as well. Much like GDP results, Thailand releases monthly GNH data. The Thai GNH index is based on a 1-10 scale with 10 being the most happy. 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.
AustraliaAustralia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the continental mainland , the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans...
,
CanadaCanada is a country occupying most of northern North America, extending from the Atlantic Ocean in the east to the Pacific Ocean in the west and northward into the Arctic Ocean...
,
ChinaChina is a cultural region, an ancient civilization, and, depending on perspective, a national or multinational entity extending over a large area in East Asia....
,
FranceFrance , officially the French Republic , is a country located in Western Europe, with several overseas islands and territories located on other continents. Metropolitan France extends from the Mediterranean Sea to the English Channel and the North Sea, and from the Rhine to the Atlantic Ocean...
and the
United KingdomThe United Kingdom of Great Britain and Northern Ireland is a sovereign state located off the northwestern coast of continental Europe. It is an island country, spanning an archipelago including Great Britain, the northeastern part of Ireland, and many small islands...
are also coming up with indexes to measure national happiness.
EcuadorEcuador , officially the Republic of Ecuador , literally, "Republic of the equator") is a representative democratic republic in South America, bordered by Colombia on the north, Peru on the east and south, and by the Pacific Ocean to the west. It is one of only two countries in South America that...
's Constituent Assembly is also incorporating the concept of "good life" ("buen vivir" in Spanish or "sumak kawsay", in the indigenous Quichua), as the goal of sustainable development.
Goals of Happiness Economics
The goal of happiness economics is to determine from what source people derive their well-being. Historically, economists have said that well-being is a simple function of income. It has been found that once wealth reaches a subsistence level, its effectiveness as a generator of well-being is greatly diminished. This paradox has been referred to as the
Easterlin paradoxThe Easterlin Paradox is a key concept in happiness economics. It is named for economist Richard Easterlin who discussed the factors contributing to happiness in the 1974 paper "Does Economic Growth Improve the Human Lot? Some Empirical Evidence." Easterlin found, as expected by most economists,...
. It appears that this paradox results from a "
hedonic treadmillBrickman and Campbell coined the term "Hedonic Treadmill" in their essay "Hedonic Relativism and Planning the Good Society" , which appeared in M.H. Apley, ed., Adaptation Level Theory: A Symposium, New York: Academic Press, 1971, pp 287–302...
." This means, aspirations increase along with income and after basic needs are met, relative rather than absolute levels of income influence well-being. Happiness economists hope to change the way governments view well-being and how to most effectively govern and allocate resources given this paradox.
Criticism of Happiness Economics
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.
In addition, survey findings can lead to subjective interpretations. For example, a happiness study conducted in
RussiaRussia , officially known as both Russia and the Russian Federation , is a country in northern Eurasia . It is a semi-presidential republic, comprising 83 federal subjects...
during the 1990s indicated that as unemployment grew, the well-being of both those employed and unemployed rose. The interpretation of this could be that it resulted from diminished expectations and respondents who were less critical of their own situation when many around them were unemployed, or it could be interpreted as being the result of everyone benefitting from the unpaid work that the unemployed were able to do for their families and communities with their increased time resource.
See also
- Economics
Economics is the social science that studies the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
- Gross National Happiness
The concept of gross national happiness is an attempt to define quality of life in more holistic and psychological terms than gross national product....
- Happiness
Happiness is a state of mind or feeling characterized by contentment, love, satisfaction, pleasure, or joy. A variety of philosophical, religious, psychological and biological approaches have striven to define happiness and identify its sources....
- Happy Planet Index
The Happy Planet Index is an index of human well-being and environmental impact that was introduced by the New Economics Foundation in July 2006. The index is designed to challenge well-established indices of countries’ development, such as Gross Domestic Product and the Human Development Index...
- Subjective life satisfaction
Subjective life satisfaction is a measure of an individual's perceived level of well-being and happiness. It is frequently assessed in surveys, by asking individuals how satisfied they are with their own lives...
Researchers
- Richard Easterlin
Richard A. Easterlin is University Professor and Professor of Economics at the University of Southern California. He is a member of the National Academy of Sciences and the American Academy of Arts and Sciences...
- Bruno Frey
Bruno S. Frey is a Swiss economist and a professor at the University of Zurich. He is one of the world's leading welfare economists...
- Richard Layard
- Andrew Oswald
Andrew Oswald is a Professor of Economics at the University of Warwick, UK. He is currently a Professorial Fellow of the ESRC.He has held posts at Oxford, the London School of Economics, Princeton, Dartmouth and Harvard....