Happiness economics seeks to relate economic decisions to wider measures of individual welfare than traditional measures which focus on income and wealth. Happiness economics, therefore, is the formal study of the relationship between individual satisfaction, employment, and wealth.
Understanding happiness economics
The study of happiness economics involves surveys that ask participants to evaluate their level of happiness according to various quality-of-life traits, including economic security, leisure time, literacy level, relationships, income level, and freedom and control.
Study organizers then collate results and arrive at a score that measures the overall happiness of a demographic, region, or country.
Why should this be the case?
Neo-classical economic theory assumes higher income levels correlate with higher levels of utility and economic welfare.
This is certainly true for poorer individuals because increasing their income gives them access to food, shelter, and healthcare.
After a certain income is reached, however, there are diminishing returns on happiness as each dollar is added.
The precise point where this occurs is open to debate, but a Princeton University study found that the happiness of participants increased until they earned $75,000 per year.
Perhaps the most eloquent argument for happiness as an economic measure over metrics such as gross domestic product (GDP) came from Robert F. Kennedy, who once noted that GDP:
Does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither wit nor courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile.
Countries that incorporate happiness economics
To reflect this new paradigm in economic theory, happiness economics metrics such as Gross Domestic Happiness (GDH) have emerged in the past few decades.
According to the 2021 World Happiness Report compiled by a group of independent experts, the ten happiest countries in the world are Finland, Denmark, Switzerland, Iceland, Netherlands, Norway, Sweden, Luxembourg, New Zealand, and Austria.
The fact that European countries occupy nine of the top ten spots is due to the region’s engagement in happiness economies.
The Organisation for Economic Cooperation and Development (OECD) gathers data from 35 member nations by assessing such indicators as housing, income, civic engagement, environment, and health.
Outside of the top ten, the countries most associated with happiness economics include:
The Bhutanese were the first to consider happiness as an economic measure, with the Gross National Happiness (GNH) Index first mentioned by King Jigme Singye Wangchuck in 1972.
The country measures nine quality-of-life factors, including health, education, use of time, psychological well-being, good governance, cultural diversity and resilience, ecological diversity and resilience, community vitality, and living standards.
In recent years, French economic happiness has been outpacing traditional GDP growth.
French organizations regularly hold masterclasses on positive business, the science of wellbeing, “happy culture” dinners, and “positive lobbying” to encourage political leaders to prioritize citizen well-being.
There are also groups within France looking to spread the message of happiness economics and campaign for related criteria to be included in governmental policy.
- Happiness economics is the formal study of the relationship between individual satisfaction, employment, and wealth. The study of happiness economics involves surveys that ask participants to evaluate their level of happiness according to various quality-of-life traits.
- Happiness economics contradicts neo-classical economic theory, which suggests higher income levels correlate with higher levels of utility and economic welfare. This is only true to a certain extent and has less relevance in advanced countries with higher average incomes.
- Happiness economics is a mainstay of European nations, with many of them scoring well in the recent World Happiness Report. Countries placing outside the top ten but with a strong happiness culture include Bhutan and France.
Connected Business Concepts
Main Free Guides: