In this article, we will talk about the Economics of Happiness. We often confuse The notion of ” the Economy of Well-being” – and that of ” the Economics of Happiness”. In reality, they are very close but distinct.
In his quest for happiness, since the dawn of time, men have always sought to achieve happiness. Even Science did not stay on the sidelines. The Science of Well-being or the Science of Happiness was born to answer the problem: How to be Happy? Or, How to achieve happiness? Or, How to go about achieving well-being?
It is in this sense that several scientific and philosophical works, the written press and the researchers speak about the Science of well-being. In fact, many disciplines come into play when we talk about the science of well-being. Positive Psychology, Philosophy, Political Science, Economics of Well-being, Economics of Happiness, Behavioral Neurobiology, and Comparative Inter-country Sociology can be mentioned.
The Economy of Well-Being or the Economics of Happiness
On the one hand, In Economics, the word “well-being” is closely associated with the expression “Economy of Well-being”, which itself refers to the search for the means to implement in order to arrive at situations that are considered as the best possible for, and by, the community. This branch of economic analysis has been at the very heart of the Political Economy since its inception. For example, Adam Smith’s Research on the Nature and Causes of the Wealth of Nations (1776), a work often regarded as the founder of the discipline, does not merely study, or describe, the “causes” of the wealth of nations; it includes many suggestions and suggestions on what needs to be done to increase this wealth – since it contributes to the well-being of the community. Adam Smith devotes the last part of his book (Book V) to what the state (the “sovereign”) must do to improve the collective well-being.
In economics, the concept of well-being is often reduced to its simplest expression, that of the satisfaction provided by the consumption of what is called baskets of goods. The theorist assumes that the consumer assigns a score to each basket of goods, so that if basket A gives him more satisfaction than basket B, then the score assigned to A is greater than that attributed to B. The economists call ” utility “this note – and express it as a mathematical function U (Q) in the case of any basket Q.
On the other hand, the Economics of Happiness is a recent branch of the Economy that has been in full swing since the 1990s. A true academic discipline, it strives to observe and analyze the economic determinants of the subjective well-being of individuals as stated in the surveys.
The Economics of Happiness Is Part of a Long Tradition
The Economics of Happiness is part of a long tradition begun in the 19th century by economists (such as Francis Edgeworth) who considered that it was possible to directly measure the well-being of individuals. This tradition was, however, confined to supporting roles in the 20th century, during which economists ‘obsession was to model individuals’ rational behaviors rather than to evaluate and understand the satisfaction that individuals derive from their actual behaviors, whether they are rational or not.
Economists have long been reluctant to take an interest in the well-being and preferences of individuals because, on the one hand, they were judged a priori as unobservable (only behaviors are observable) and therefore impossible to analyze and, d on the other hand, they were supposed to be revealed by the decisions made. And, following this logic, there would indeed be nothing to say about happiness. If individuals were fully rational, they would take decisions that maximize their well-being.
However, many types of research since the 1970s gathered within the Behavioral Economy, showed that the rationality of the economists is a chimera and that it is quite possible, even probable, that the individuals do not make the decisions that maximize their well-being. Moreover, it can be measured through subjective surveys of declared happiness. There are a number of elements that suggest that the answers given in these surveys are relatively reliable, enough to feed a rigorous academic reflection on the determinants of happiness.
Some pioneering empirical work had led the way in the second half of the 20th century, such as those by Richard Easterlin on the ambiguous relationship between income and happiness (as early as the 1970s) and those on job satisfaction (Hamermesh in the late 1970s) and the consequences of these results on the theoretical measure of well-being (Van-Praag) and on the definition of public policies (Richard Layard in the early 1980s).
It was nevertheless necessary to wait until the turn of the century and the growing interest, among others, of psychologists for hedonic psychology (which is interested in pleasure) or even positive psychology (which looks at the blossoming of individuals) for these heterodox economists, find a theoretical corpus likely to support their own work.
Since then, these “deviant” economists feel less and less alone … Research is pouring in from all parts concerning the relation between the particular situation of the individuals (their incomes, their level of consumption, their status in the face of employment …) or the macroeconomic environment (the level of growth, inequality, unemployment, inflation …) and the happiness that individuals bring back when questioned. This happiness is estimated from the answers to questionnaires, which relate mostly to the cognitive dimension of happiness (the satisfaction of life), to its emotional dimension (positive and negative emotions in everyday life), or to both components at a time.
The observations made in these multiple studies lead us to question the validity of our economic choices in order to achieve happiness. Do we do what it takes to be happy? This is the central question of the Economics of Happiness.
The Economics of Happiness is an emerging branch of the economy. It differs from the welfare economy in that it does not base its analyzes on well-being, that is, on objective well-being, that is, health, education, the environment, etc., but on happiness, which is a subjective conscious state.
Money, work, consumption … Do we do everything to be happy? “Not often,” says Mickaël Mangot, a teacher at Essec Paris. 20 Minutes met this economist on the occasion of the publication of his book Happy as Croesus? Unexpected lessons of the economy of happiness (Editions Eyrolles).
*** Note: We collected the interview via the website (20 minutes).
An Economist Who Speaks of Happiness, Is It Legitimate?
Of course! Research proves that, by default, humans do not know how to best use their time and money to be happy. But the economy is precisely the science that studies the best possible use of our resources in order to achieve a goal … For example, to access the happiness that is, according to surveys, the primary goal of individuals.
Can the Economy Help Us Be Happier?
Absolutely, especially if we look at how we use our money. The Economics of Happiness teaches us that conventional consumption, even of very expensive goods (cars, houses), has a very ephemeral impact on our feeling of being happy. Conversely, giving to people in need or regularly offering small gifts to loved ones contributes greatly to happiness. Here are two of the thirty economic lessons I give in my book to help us be happier.
Conversely, What Is Bad for Happiness?
TV! Surveys show that the more time you spend in front of a screen, the less you are happy. Because, this hobby is solitary, passive, and modifies our perception of reality. Movies, TV shows, and commercials present us with a world where people are more beautiful and richer, which makes us want to work and consume more … The ideal would be to sell your TV or, at least, to remember that in most series, the lifestyle of the heroes is simply incompatible with the profession they practice.
Why Are We Not Able to Naturally Make the Best Decisions for Our Happiness?
Partly, because we rationalize too much. For example, many of us will choose our profession based on our salary, prestige, and career prospects. These are a priori logical and objective criteria, but it is not the right grid to be happy at work. These people should rather ask themselves how much autonomy, what sense or what kind of interactions with others this future job will offer them. It is these subjective and social criteria that ultimately make us truly happy.
” Money Does Not Make Happiness “: Economically, Is It True?
Not quite. Studies show that the higher a person’s income, the happier he is … up to a certain threshold. The increase in income has less impact when you have already a high income: 500 euros more per month has a much greater impact on happiness for someone who earns 1,000 euros than for someone who earns 10,000.
What Is the Threshold from Which Money Has Less Impact on Happiness?
It is difficult to define precisely, but as soon as you belong to the wealthy class, you have captured most of the happiness that money can bring you. In France, this affluent class starts at 2,200 net Euros per month for a single person and 5,000 euros for a couple with two children, according to INSEE. […].
This interview leads us to ask ourselves this question: What are the possible determinants of happiness according to the Economics of Happiness?
Determinants of Happiness
Before addressing the question of measuring happiness, let’s try to see what determines happiness. Bruno Frey (2000, p.13) holds that happiness is a function of four types of factors.
Happiness = f (personal properties, socio-demographic factors, economic factors, institutional factors)
This perfectly summarizes the long experience of a multitude of psychological and sociological research that has investigated in a multitude of directions – ranging from genetic factors to the analysis of the impact of individual, societal, economic, and institutional conditions. Without going into details let’s take some results.
It does not seem impossible that genetic factors have an impact on the degree of happiness. Indeed, the predisposition to depression seems partly due to genetic factors. Moreover, it is widely confirmed that the relational framework has a definite influence: single people (single or divorced) seem less happy than married people. Very few differences are noted between the degree of happiness of young and old or between men and women.
Cultural differences do have an impact, but there is – according to some studies – only marginal. Some, however, point to different implications for emotions, aspirations, and norms. As we point out, happiness is largely determined by the perception of life. As such, social phenomena can play.
However, here we should remember that rich people are – on the whole – happier than poor people. But there are nuances in the evolution of this correlation. In addition, it is confirmed that people with too strong inclinations for material wealth are generally less happy.
On the other hand, some relatively poor people may still have a relatively good level of happiness if certain conditions are met. Studies in India (Robert Biswas Diener) have shown that people living in very difficult and precarious material conditions, but having an active religious faith, benefiting from a family nucleus and/or a circle of friends, and having even a modest activity is relatively happy.
Nevertheless, all these results are only trend averages. All kinds of exceptions are observed. It is so with the correlation between external factors and inner feelings. Thus, at optimal external conditions, subjective perception of a low degree of happiness may be associated. This is a dilemma of dissatisfaction. On the other hand, a high degree of happiness in difficult external conditions is characterized by a paradox of satisfaction.
On the basis of all these philosophical reflections, as well as numerous psychological and sociological analyzes, some determinants of happiness are advanced:
Friendship / Family
It would not be the multitude of relationships that would be important, but the existence of a core of trust relationship (guaranteeing security and protection ” Geborgenheit “).
Valuing Activity
It is essential to have rewarding and motivating activities. Laziness is not a determinant of happiness. On the other hand, happy people do not seem to take pleasure in their comfort; they have a certain taste for risk; they are willing to make new experiences. In addition, happy people are not particularly gratified by “luck in life”, but they perceive and experience events differently: They are not “problem-oriented” but rather “solution-oriented”. They attack problems and seek solutions.
Achievable Goal
Knowing why one lives, having a purpose, a purpose seems to be another dynamic factor of happiness. Some of the goals must be very concrete and achievable (or even verifiable). Thus, happy people seem to have a personal motivation ability. Beyond pleasure, even fear or frustration can become sources of motivation (Viktor Frankl). These people are willing to learn from defects, through failures. Knowing how to focus on the events of the present seems to be an important condition of happiness. To get there at best, experts suggest refocusing every 90 minutes for 90 seconds. Listen to his breathing and become more aware of his being.
In the same sense, it is essential to look after its capacity for recovery; it is useful to apply oneself to it by giving oneself very small means: that is, listening to music, meditating, walking.
Positive Perception of the World
While not denying or avoiding problems and difficulties, it is important to also see the qualities and successes. A happy person is, in general, attentive to positive things. Psychologists recommend that at least one day be identified, such a positive and constructive vision contributes to happiness.
Moreover, it seems largely confirmed that believers are happier. One reason is that they have meaning in life and beyond; in addition, they have landmarks. Psychologists also experience that people more inclined to gratitude are happier.
Conclusion on the Science of Well-Being in the Economics of Happiness
The end of this article is devoted to the Economics of Happiness. It would be wise to remember that happiness is a state of mind. And as such, it is a function of a multitude of characteristics which are among others the chances of life, the events of life, the emotions, and an internal process of evaluation.
The economy is one of many factors involved in determining happiness. The Economics of Happiness tries to answer the question which every human being asks: Money makes happiness? Does having a high salary mean living happily? Hence the link between Money and Happiness. On this subject, I would like to personally give my point of view: ” Money does not make happiness, but money is necessary for happiness, or I must say, money is an element that contributes to happiness. ” (Thomson Dablemond)
Overall, there is both Economy (of wealth) and health: its absence can lead to misery, but its presence is not a guarantee of happiness (Myers, Diener 1995). In other words: Money does not make happiness, but the lack of money can be the source of misery and misery.
Most of the time, the Economy seems to affect happiness only indirectly:
Money can buy :
– A house, but not a home
– A bed, but not sleep
– A clock, but not the time
– Books, but not knowledge
– A sexual pleasure, but not love
– Drugs, but not health.
Given these aspects, the Economy has an interest in focusing on the ends, especially because a too pronounced inclination toward material satisfactions is counterproductive for happiness and also for the Economy.
At the end of our article, it would be wise to consider the ambivalent and reciprocal relationship between Economics and Happiness, like many other relationships, is largely influenced by our perception and is likely to evolve as this perception changes.
May each reader still find much happiness in his life – with or without the contribution of the economy! ” Happiness is relative “.
You have just gone through the Science of Well-being in the Economics of Happiness. Below, we offer other articles also addressing in the sense of the Science of Well-being:
– General Introduction – The Science of Well-being
– The Science of Well-being in Positive Psychology
– The Science of Well-being in Neuroscience