Economics of happiness
In the 1950s, Richard Easterlin examined whether income promoted happiness in the population on the basis of opinion surveys. In his famous article published in 1974, he has observed that, in a given country, people with higher incomes are more likely to claim to be happy.
However, in international comparisons, at least for countries with income high enough to meet basic needs, the expressed level of happiness does not vary much with the national per capita income. Finally, although the per capita income increased steadily in the United States between 1946 and 1970, expressed happiness recorded no upward trend in the long run, and even decreased between 1960 and 1970. Facing the Easterlin paradox, the standard public policies, which are based exclusively on economic growth, seem to be missing their target. If growth and wealth are not what count, the primary goal should be to identify the factors for happiness. The “economics of happiness” is essentially a positive, interdisciplinary, and empirical literature. It describes what is, but does not study what ought to be. Happiness studies are interdisciplinary in the sense that they belong to economics, cognitive sciences, humanities and social sciences. Notice it constitutes an alternative to the standard economic model. First, it moves away from the revealed preference model and from the usual assumptions of rationality. Then the overall satisfaction of individuals is at stake, rather than just the satisfaction they derive from the consumption of market goods. It consists in conducting econometric studies of happiness, emotion, subjective well-being, quality of life, life satisfaction - in so far as those terms are, in this specific context, interchangeable - to identify their factors. Measurement of happiness often relies on self-assessment scales, based on responses to questionnaires in which participants express how happy they feel.Since the Easterlin paradox, many studies have tried to explain why, at the aggregate level, growth of national income did not necessarily enhance well-being. The results of the economics of happiness reveal that poverty reduces happiness more than wealth increases it; an increase of income for a poor person is more likely to increase his or her happiness than an increase in income for a rich person. Happiness can be enhanced by reducing inequalities, improving working conditions, the reduction of working time and, in some cases, neutralizing the negative effects of unemployment and some school reforms. Besides, we learn that the influence of purely economic factors in the happiness of people is generally overestimated in our representations as compared with factors. However, unemployment and labour relations can have considerable influence in the lives of people. Unemployment kills happiness, even after individuals get their jobs back. Some think happiness may constitute a yardstick, and that it is possible to transcribe it in money measures, which allow cost-benefit analysis to be completed.
Gathering information on the factors to enhance or to avoid decreasing of happiness, as well as on the measure of happiness, most likely may be of great help for policymakers. It appears to be a particularly innovative and important contribution to understanding the determinants of happiness, for making ex post evaluation of certain public policies, and to complete the data needed by policymakers who should not be satisfied with economic data. Nevertheless, the analyses of surveys have given rise to many criticisms, at the methodological and the normative level. Some highlight difficulties in interpreting the replies, challenge their reliability, and doubt that cross-country comparisons are meaningful. More generally, the very status of subjective data is discussed. If individuals are happy with what they have and what they do, they may be happy out of adaptation.
This becomes highly problematic if adaptation is nothing but resignation. Beyond the methodological criticisms, some question its ability to formulate policy recommendations. At a pinch this research could justify the administration of tranquilizers to everyone, as in Layard (2005). Although hardly anybody would seriously defend this view, this counter-intuitive example invites us to beware of any possible manipulations of happiness indicators. Furthermore, economics of happiness describes what could be the target of a benevolent policymaker - as did classical utilitarianism. However, it disregards any justifications of the relevance of the happiness criterion as it pretends to be a pure positive science. Happiness may be important for individuals, yet this does not imply governments are responsible for enhancing it.Lucie Davoine (2009: 905) concludes: “happiness is a useful criterion to evaluate society’s state, but should not be the only one: happiness data can allow avoiding paternalism and ethnocentrism, but happiness economics face several and serious challenges that should prevent researchers from transforming satisfaction scores into the only barometer of public action”.