Happiness and Economics: How the Economy and Institutions Affect Human Well-Being

CHAPTER 1 Happiness

Chapter 1 HAPPINESS 1.1 The Ultimate Goal? “What is happiness?” This question is probably as old as mankind itself. The greatest human minds have struggled with this issue. A large part of philosophy has been concerned with defining what a good and happy life is. Similar efforts have been made by psychologists , who have dealt with what particular ingredients and circumstances make people happy or unhappy. But there has certainly not been any consensus as to what happiness is. It means different things to different people. It is open for everyone to define for themselves what happiness is. Some people are prepared to argue that it is the ultimate goal in life. All other influences on life (and even afterlife) are taken to be reflected in the notion of happiness . Therefore all that we do is pursue happiness. One author even proclaims, “How to gain, how to keep, how to recover happiness is in fact for most men at all times the secret motive for all they do” (James 1902, p. 76). Some people disagree about happiness being the ultimate goal of human life; they see it as just one ingredient in the recipe for a good life. Thus, for example, three ultimate goals have been distinguished , none of which can be merged with, or be made subordinate to, another. They are subjective well-being (another term for happiness ), human development (which is taken to include virtue), and justice (Lane 2000). Other authors mention companionship and freedom as ultimate goals on a par with happiness. Yet others consider an even larger set of factors to be important in addition to happiness. Examples of these factors are trust, self-esteem, absence of pain, satisfaction with one’s work, and satisfaction with one’s family life and marriage. In addition to these states or outcomes, procedural aspects may play a significant role. Most persons derive great pleasure from 4 CHAPTER 1 engaging, challenging activities. The emphasis on process rather than outcomes has been called the flow aspect of life. Because happiness is such an elusive concept, it makes little sense to proceed by trying to define what happiness is. Fortunately, there is a useful way out. Instead of trying to determine what happiness is from outside, one can ask the individuals how happy they feel themselves to be. In general, it can be assumed that they are the best judges of when they are happy and when they are unhappy. While there are limits to how well people are able to evaluate their future state of well-being, it corresponds to a sensible tradition in economics to rely on the judgment of the persons directly involved, so that will be the procedure followed in this book. 1.2 Concepts of Happiness In this book, we follow a subjective notion of happiness. Even if we are restricted to such a notion of happiness, there are a number of concepts on how to capture it. It is useful to look at two polar concepts of happiness: subjective happiness and objective happiness. (See Figure 1.1.) At one extreme, we have the concept of subjective happiness , which can be captured by surveys, and is indicated on the righthand side of Figure 1.1. With the help of a single question (single-item) or several questions (multi-item) of global self-reports, it is possible to get indications of individuals’ evaluations of their life satisfaction or happiness. Behind the score indicated by a person is a cognitive process by which he or she evaluates happiness compared to other persons, past experience, and expectations of the future. Affect Physiological Psychological measures measures Cognition, memory Brain waves Objective happiness Subjective happiness Experience sampling measures Global self-reports Figure 1.1. Concepts of happiness. HAPPINESS 5 0% 10% 20% 30% 1 2 3 4 5 6 7 8 9 10 Satisfaction with life with a particular satisfaction score Percentage of persons Figure 1.2. Satisfaction with life in the United States in 1995. The number of observations is 1534. Data from World Values Survey 1995–1997, ICPSR 2790. Figure 1.2 presents an example of the measurement of subjective happiness via global self-reports. The example refers to the distribution of life satisfaction scores for 1,534 persons living in the United States in 1995. They were asked, “All things considered, how satisfied are you with your life as...