Happiness Economics is becoming more and more popular. It touches on so many different topics and the findings from the research really make you stop and think. At Exploring Happiness we define Happiness Economics in the following way: “increasing the happiness and wellbeing in society in a sustainable way”. This is the unique core objective that we think should be used to design economic and social policies.
For us, traditional economics has got it wrong. We are told that if the economy is growing and people are getting richer, then we are making good progress. Happiness Economics has put all of this into question. In the western world, over the last 50 years we have become much richer but we haven’t become any happier. We now know that beyond a certain point, greater amounts of income do not equate to greater levels of happiness. And this is why we have created this new goal to target happiness and wellbeing in society in a sustainable way.
A key element to achieving this goal is discovering what makes people happy. This is part of what Happiness Economics is working towards by combining findings from fields such as Psychology, Sociology and Neuroscience, as well as many different fields of economics - for example health, labour, development and environmental, to mention just a few. This is necessary in order to understand what really makes people tick.
Much like with traditional economics, Happiness Economics can be split into micro and macro areas of research. On the micro level the focus is on individual happiness, where mindfulness, positive psychology and behavioural economics can play an important role. On the macro level the focus is on collective happiness where typically the goal is to measure how key economic variables such as unemployment or income affect happiness.
You may have noticed that the way we define Happiness Economics refers to achieving increases in happiness in a sustainable way. The point here is that any increase in happiness that significantly damages the environment cannot be sustainable or benefit society in the longer term. Our aim is to design killer policies, that make people feel great without damaging Mother Nature - simple!
To offer a high level insight into some of the findings in the field of Happiness Economics we have summarised six different areas of research that have produced interesting results:
Income: wealthier countries do tend to be happier than poorer countries. However, above a certain threshold in western societies, people don’t tend to become happier as their income increases over time. They care more about how their income compares against a group of people they feel they are similar to than their actual income.
Inflation: high inflation tends to decrease peoples happiness. It is often linked to political and social unrest and can contribute towards fears of a lower standard of living.
Employment: job satisfaction is what matters most for those with jobs. For those without jobs, the decrease in happiness is not only caused by the decrease in income. A persons mental health is more likely to deteriorate when unemployed, due to the fact that work gives people a place in society and offers important social benefits.
Fiscal Policy: increases in unemployment benefits tend to increase happiness in society (perhaps unsurprisingly). There is currently a lack of consistent evidence to show that fluctuations in government spending have a material impact on people’s overall happiness. This is an area of happiness research that we are interested exploring further.
Politics, Democracy & Governance: greater political participation rights increase people’s happiness. In democracies, governments have an incentive to pursue the wishes of the public. The amount that they can and want to do so indirectly reflects people’s perceptions of the governments performance.
Inequality: increases in inequality lead to decreases in happiness in society on average. There are interesting behavioural aspects to this, a recent study showed that people that have a preference towards working hard, dislike inequality less than people who care less about hard work. The intuition here is that these people feel as though inequality is less of an injustice and more as a result of the difference in people’s attitudes to work.
For more information on Happiness Economics and how it all works, including more detail of our favourite findings from Happiness Economics research, please click on the link below.