Happiness economics

The economics of happiness or happiness economics is the quantitative and theoretical study of happiness, positive and negative affect, well-being, quality of life, life satisfaction and related concepts, typically combining economics with other fields such as psychology, health and sociology. It typically treats such happiness-related measures, rather than wealth, income or profit, as something to be maximized. The field has grown substantially since the late 20th century, for example by the development of methods, surveys and indices to measure happiness and related concepts. Its findings have been described as a challenge to the economics profession. The economics of happiness or happiness economics is the quantitative and theoretical study of happiness, positive and negative affect, well-being, quality of life, life satisfaction and related concepts, typically combining economics with other fields such as psychology, health and sociology. It typically treats such happiness-related measures, rather than wealth, income or profit, as something to be maximized. The field has grown substantially since the late 20th century, for example by the development of methods, surveys and indices to measure happiness and related concepts. Its findings have been described as a challenge to the economics profession. The subject may be categorized in various ways, depending on specificity, intersection, and cross-classification. For example, within the Journal of Economic Literature classification codes, it has been categorized under: Given its very nature, reported happiness is subjective. It is difficult to compare one person's happiness with another's. It can be especially difficult to compare happiness across cultures. However, many happiness economists believe they have solved this comparison problem. Cross-sections of large data samples across nations and time demonstrate consistent patterns in the determinants of happiness. Happiness is typically measured using subjective measures – e.g. self-reported surveys – and/or objective measures. One concern has always been the accuracy and reliability of people's responses to happiness surveys. Objective measures such as lifespan, income, and education are often used as well as or instead of subjectively reported happiness, though this assumes that they generally produce happiness, which while plausible may not necessarily be the case. The terms quality of life or well-being are often used to encompass these more objective measures. Some scientists claim that happiness can be measured both subjectively and objectively by observing the joy center of the brain lit up with advanced imaging, although this raises philosophical issues, for example about whether this can be treated as more reliable than reported subjective happiness. Micro-econometric happiness equations have the standard form: W i t = α + β x i t + ϵ i t {displaystyle W_{it}=alpha +eta {x_{it}}+epsilon _{it}} . In this equation W {displaystyle W} is the reported well-being of individual i {displaystyle i} at time t {displaystyle t} , and x {displaystyle x} is a vector of known variables, which include socio-demographic and socioeconomic characteristics. Happiness, well-being, or satisfaction with life, was seen as unmeasurable in classical and neo-classical economics. Van Praag was the first person who organized large surveys in order to explicitly measure welfare derived from income. He did this with the Income Evaluation Question (IEQ). This approach is called the Leyden School. It is named after the Dutch university where this approach was developed. Other Researchers included Arie Kapteyn and Aldi Hagenaars. Typically national financial measures, such as gross domestic product (GDP) and gross national product (GNP), have been used as a measure of successful policy. There is a significant association between GDP and happiness, with citizens in wealthier nations being happier than those in poorer nations. It has been argued that this relationship extends only to an average GDP per capita of about $15,000. In the 2000s, several studies have obtained the opposite result, so this Easterlin paradox is controversial. Historically, economists have said that well-being is a simple function of income. However, it has been found that once wealth reaches a subsistence level, its effectiveness as a generator of well-being is greatly diminished. Happiness economists hope to change the way governments view well-being and how to most effectively govern and allocate resources given this paradox.