Some Uses of Happiness Data in Economics

Abstract

Economists are trained to infer preferences from observed choices; that is, economists typically watch what people do, rather than listening to what people say. Happiness research departs from this tradition. Instead, happiness researchers have been particularly interested in self-reports of well-being, which may be as simple as an answer to a question with the general form: "Are you very happy, pretty happy, or not too happy?" Hundreds of thousands of individuals have been asked this kind of question, in many countries and over many years, and as reviewed in Frey and Stutzer (2002), researchers have begun to use these data to tackle a variety of questions.Richard Easterlin (1974) was the first economist to make prominent use of happiness data when he reported that despite increases in personal income over time, people were not reporting an increasing level of happiness. This paper begins with a recap of Easterlin's puzzle and the various attempts that have been offered to resolve it by questioning either the interpretation of the happiness surveys or the underlying economic assumption of what economists should include in utility functions. The paper then discusses other examples of research using happiness surveys: to evaluate whether public policies have positive effects on social welfare, like taxes on cigarettes; to determine the welfare costs of inflation and unemployment; and to investigate determinants of political economy like whether the happiness of Europeans is more affected by inequality than the happiness of Americans.

Satisfaction with fishing and the desire to leave

“…In our study, we find that the level of income relative to others in the economy is not a key driver of satisfaction, but changes in income over time affects the satisfaction with income, and also overall satisfaction with fishing. This is in contrast to studies or other industries or groups (e.g., Tella and MacCulloch 2006;Clark et al 2008) which suggest that change in incomes is less important than relative income. In most occupations, incomes tend to move in a positive direction (at least in nominal terms).…”

“…While income adds to life satisfaction up to a certain point, beyond that point additional income does very little (Cummins 2000). Others have found that individual satisfaction is generally found to be correlated with relative income (Tella and MacCulloch 2006;Clark et al 2008;Boyce et al 2010), meaning the level of income relative to others or how that income has changed relative to others. However, overall happiness or satisfaction is affected by a wide range of factors other than income, including an individual's personal circumstances (including their health, relationships, and ability to achieve desired outcomes from life, factors often correlated with demographic characteristics such as marital status, age, education and household characteristics), and the broader societal circumstances they live in (such as whether they live in a safe community, have positive social capital, and a just and fair government, to name a few) (Peiró 2006;Vemuri and Costanza 2006;Welsch 2009;Frey and Stutzer 2010;Diener et al 2013).…”

“…Recent developments in the area of the economics of happiness suggest that subjective measures of happiness or satisfaction provide a better indicator of the level of utility than economic measures such as income alone (Tella and MacCulloch 2006). While income adds to life satisfaction up to a certain point, beyond that point additional income does very little (Cummins 2000).…”

Local neighbors as positives, regional neighbors as negatives: Competing channels in the relationship between others’ income, health, and happiness

“…SWB metrics have been shown to be psychometrically sound, internally consistent and comparable across individuals, over time, and for different levels of economic development (Diener et al, 1999;Helliwell et al, 2010;Krueger & Schkade, 2008). Further, they are increasingly used in public policy and economic analyses (Diener et al, 2009;Di Tella & MacCulloch, 2006;O'Donnell, 2013;Stiglitz et al, 2010;Stone & Mackie, 2013). Indeed, some countries (e.g., Bhutan, Britain, and France) are now including SWB metrics in official statistics.…”

Estimating the causal effect of alcohol consumption on well-being for a cross-section of 9 former Soviet Union countries

“…", again with a VAS between 1 = Very unhappy and 10 = Very happy (Table 1). These questions draw upon a longstanding literature in psychology (Diener, Suh, Lucas, & Smith, 1999) and their use is rapidly expanding and gaining prominence within economics more generally (Di Tella & MacCulloch, 2006) and health economics in particular (Oswald & Powdthavee, 2008). Subjective well-being questions have been validated and modelled across contexts and countries (Blanchflower & Oswald, 2004) and are regarded as good empirical approximation of individual well-being and utility (Frey & Stutzer, 2002;Oswald & Powdthavee, 2008).…”