What good is happiness?

Economica, 2015

In this paper, we study interpersonal comparisons of wellbeing. We show that using subjective wellbeing (SWB) levels can be in conflict with individuals' judgments about their own lives. We propose therefore an alternative wellbeing measure in terms of equivalent incomes that respects individual preferences. We show how SWB surveys can be used to derive the ordinal information about preferences needed to calculate equivalent incomes. We illustrate our approach with Russian panel data (RLMS‐HSE) for the period 1995–2003 and compare it to standard wellbeing measures such as expenditures and SWB. We find that different groups are identified as worst off. For nothing is more certain, than that despair has almost the same effect on us with enjoyment, and that we are no sooner acquainted with the impossibility of satisfying any desire, than the desire itself vanishes. David Hume, A Treatise of Human Nature

There is enough evidence to be confident that individuals are able and willing to provide a meaningful answer when asked to value on a finite scale their satisfaction with their own lives, a question that psychologists have long and often posed to respondents of large questionnaires. Without taking its limitations and criticisms too lightly, some economists have been using this measure of self-reported satisfaction as a proxy for utility so as to contribute to a better understanding of individuals' tastes and hopefully behavior. By means of satisfaction questions we can elicit information on individual likes and dislikes over a large set of relevant issues, such as income, working status and job amenities, the risk of becoming unemployed, inflation, and health status. This information can be used to evaluate existing ideas from a new perspective , understand individual behavior, evaluate and design public policies, study poverty and inequality, and develop a preference based valuation method. In this article I first critically assess the pros and cons of using satisfaction variables, and then discuss its main applications.

2018

In the current paper, we focus on the study of the happiness economics. The main objective of the thesis is to discover which are the variables that affect the subjective well-being of the Spanish population and if the variable of income is among them. Firstly, we present a review of the study of happiness or subjective well-being, just like the different systems of measurement. Secondly, we introduce some psychological theories about happiness that are used in economics, and in particular, we focus on the "Easterlin ́s paradox". Moreover, we make a logistic analysis, in order to seek which variables explain the subjective well-being in Spain. Proposed logit models show the importance of expected variables such as health state and those related to personal relationships. On the other hand, income appears as explanatory, once we had already dropped variables related with social status, in such a way that the role that income plays is relative. This coincides with the Easter...

Journal of Happiness Studies, 2008

If politicians and their advisers want to promote the well-being or happiness of citizens they have three ways to find out what they should do. (1) They can analyse the behaviour and the decisions of citizens to find out what they want, in other words: they can try to identify their "revealed preferences". This is common practice in economics. (2) They can analyse the "stated preferences" of people as they express them explicitly in inquiries, referenda, polls and elections. (3) They can analyse the conditions that make people happy by comparing the conditions of people at different levels of happiness. Economists, like Helen Johns and Paul Ormerod, have an outspoken preference for the first option and they are sceptical about the third. Their argument is unbalanced because they are too critical about the authenticity and complexity of self-reported happiness and not critical enough about the authenticity and complexity of revealed preferences. Economists should appreciate the comparative advantages and additional value of each option and try to find optimal combinations with synergistic effects. Economists should appreciate happiness research as an option to assess the nature and magnitude of "externalities" within their own discipline.

Economics and Philosophy, 2008

The economics of happiness is an influential research programme, the aim of which is to change welfare economics radically. In this paper I set out to show that its foundations are unreliable. I shall maintain two basic theses: (a) the economics of happiness shows inconsistencies with the first person standpoint, contrary claims on the part of the economists of happiness notwithstanding, and (b) happiness is a dubious concept if it is understood as the goal of welfare policies. These two theses are closely related and lead to a third thesis: (c) happiness should be replaced by autonomy as the fundamental goal of welfare economics. To defend my claims I shall show that a hedonic approach to happiness leads to an awkward trilemma. Furthermore, I shall clarify the meaning of “happiness” and “autonomy”, along with their conceptual relationships.

Journal of Economic Perspectives, 2006

Happiness research is based on the idea that it is fruitful to study empirical measures of individual welfare. The most common is the answer to a simple well-being question such as “Are you Happy?” Hundreds of thousands of individuals have been asked this question, in many countries and over many years. Researchers have begun to use these data to tackle a variety of important questions in economics. Some require strong assumptions concerning interpersonal comparisons of utility, but others make only mild assumptions in this regard. They range from microeconomic questions, such as the way income and utility are connected, to macroeconomic questions such as the tradeoff between inflation and unemployment, including large areas in political economy. Public policy is another area where progress using happiness data is taking place. Given the central role of utility notions in economic theory, we argue that the use of happiness data in empirical research should be given serious considera...

Foundations and Trends® in Microeconomics, 2010

This paper deals with the concept of happiness in economics. Of late there has come into life a branch of happiness economics and it is this field that will be our concern. Actually, not only economists are interested in quantifications of happiness but also researchers in other disciplines. Notably there are several psychologists who investigate happiness as well. We mention Schimmack et al.

2011

The question of how to measure and aggregate happiness is more than a century old. In recent years, its relevance has risen due to efforts to replace the GDP with an index more indicative of well-being, though such efforts are fraught with serious conceptual problems. After briefly recalling these problems, we suggest to address them by using instead of the common ordinal utility an alternative quantity that is maximized in economic transactions. This quantity counts the number of future possibilities a commodity opens. The big advantage of this approach is that, in principle, the number of possibilities is an objective measure which allows for intra-and interpersonal comparison. We lay out the framework of the model and then discuss its relevance for social welfare. While we do here not explicitly compute a measure supplementing the GDP, we sketch how this could be done in practice. * [email protected]

The Journal of Socio-Economics, 2006

The paper provides an overview of a symposium concerning life satisfaction and welfare economics. It provides a brief summary of the papers contained within the symposium and identifies four kinds of issues that arise from, and are addressed by, the burgeoning work on happiness and capabilities approaches to welfare economics.

Review of Economics and Statistics, 2003

A large literature in macroeconomics assumes a social objective function, W(π, U), where inflation, π, and unemployment, U, are bads. This paper provides some of the first formal evidence for such an approach. It uses data on the reported well-being levels of approximately one quarter of a million randomly sampled Europeans and Americans from the 1970's to the 1990's. After controlling for personal characteristics, year dummies and country fixed effects, we find that the data trace out a W(π, U) function. It is approximately a linearly additive "misery index". The paper calculates the implied dollar value of a low inflation rate. It also examines the structure of happiness equations across countries and time.