The Pursuit of Happiness: Can We Have an Economy of Well-Being?

Happiness is a far more complicated thing to measure than income, but we capture an important dimension of well-being when we look at individual capacity to pursue a meaningful life.
Carol Graham
16 July 2011

At this year’s American Economics Association meetings in Denver, there were the usual panels on topics ranging from the global financial crisis to the real estate market. More unusual was a keynote session on whether happiness measures should replace GNP. The latter was written up (rather skeptically) by The Wall Street Journal. That same month there was a similar panel at the World Economic Forum in Davos, with Jeffrey Sachs, the once wunderkind of free markets, calling for happiness as the next United Nations Millennium Development Goal. That session was written up (less skeptically) by The New York Times. What is the world coming to?

I participated in both panels (while kicking myself for not getting to ski at either place). Until about five years ago, I was one of a handful of economists studying happiness; now we have been joined by a host of others who are studying questions as diverse as the well-being effects of commuting time, why cigarette taxes make smokers happier, and why the unemployed are less unhappy when there are more unemployed people around them.

The discussion has now moved from empirical studies that aim to better understand well-being to happiness as a policy objective. About a decade ago, the government of Bhutan replaced GNP with Gross National Happiness. In 2008, the Sarkozy Commission, chaired by two Nobel Prize–winning economists, called for a worldwide effort to develop broader measures of well-being. And while the commission was criticized by conservatives in the United States as a “left-wing attempt to make our economy sclerotic like France’s”, the most recent move to add well-being indicators to national statistics has come from the conservative Cameron government in Great Britain as described in openDemocracy’s ‘Happiness Debate’, an excellent exchange on the issues for the general reader. And two of the world’s largest economies, China and Brazil, are considering incorporating the metrics.

These are exciting times for scholars in the field, as the interest in the topic in economics and beyond opens the door to a much wider research agenda. Yet the leap into policy also raises a number of unresolved questions. The most important, in my view, are: What definition of happiness is most relevant and appropriate for policy? And how does that definition vary across different societies?

The need for definitional clarity raises conceptual challenges for those of us who rely on happiness surveys as a research tool. For the purposes of empirical research, we rely on an open-ended question, typically: “Generally speaking, how happy (or satisfied) are you with your life?” Possible answers lie on a scale running from “not at all” to “very” happy. We then compare the variance in happiness levels based on the other information that we are able to collect, such as the respondents’ income, marital status, age, residence (urban/rural), employment status, and so on. The patterns that we find are remarkably consistent across respondents worldwide, including in countries of very different development levels.

That consistency then allows us to test for the effects of other variables, such as the level of inflation and/or the nature of the governance and environmental regime. We do not ask respondents if these phenomena make them unhappy. Instead, we account for the effects of the standard socioeconomic and demographic variables (e.g., age, gender, income, and employment status) on happiness, and then can compare the variance in the scores that is explained by the contextual variables.

Happiness is the commonly cited and a general dimension of well-being. Yet scholars make distinctions between the various dimensions of well-being. We can then benchmark happiness results against those based on questions designed to measure more specific dimensions of well-being, such as innate character traits (positive and negative affect); life satisfaction compared to the best possible life; and life purpose.

This works from a research perspective. Yet it complicates the policy perspective. Policy is driven by factors ranging from norms to welfare objectives to cultural differences. Those factors, in turn, influence the definition of happiness across individuals and countries. Centuries ago, philosophers worried about happiness. Jeremy Bentham’s concept of welfare was maximizing the contentment and pleasure of the greatest number of individuals as they experienced their lives—that is, people feeling happy on a day-to-day basis. Aristotle conceived of happiness as eudaimonia: “eu,” meaning well-being or abundance, and “daimon,” meaning the power controlling an individual’s destiny. In the broader life-evaluation sense, this is the opportunity to lead a fulfilling life.

In my forthcoming book, I posit that the dimension that most matters to individuals is partly determined by their capacity to pursue a meaningful life. In the absence of that capacity—due, for instance, to lack of opportunity or education—people may place more value on day-to-day experiences, such as friendship and religion. Those with more capacity are more likely more focused on some overarching objective or achievement. (Think of the scientist trying to cure cancer who sacrifices leisure and personal relationships in favor of time spent in the laboratory.) A wide range of studies from around the world, including my own, support this intuition.

Some societies might be comfortable emphasizing happiness as contentment as a policy objective. Others, such as the U.S, which has the “pursuit” of happiness in the Declaration of Independence and has traditionally emphasized the importance of equal opportunities over that of equal outcomes, would likely opt for a eudaimonic definition of happiness. Yet promising happiness in the life fulfillment sense requires providing citizens with the tools and agency to pursue it.

Happiness is, in the end, a more complicated concept than is income. It is also a more ambitious policy objective. The fact that it is seriously on the table reflects what a parameter-shifting moment it is. At a time when so many of our public debates are divided and contentious, exploring new tools for evaluating the well-being of our citizens rather than emphasizing the roots of their divide is a welcome change.

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