Happiness economics.

• Author: Blanchflower, David G.
• Position: Research Summaries - Viewpoint essay

Despite Thomas Carlyle's claim, when he was arguing that slavery was morally superior to the market, economics is no longer the dismal science. (1) A growing body of literature in the economics of happiness and mental well-being has emerged. It is now fashionable to try to understand the pursuit of happiness, and, after a long delay, the ideas promoted originally by Richard Easterlin are attracting worldwide attention. (2) There is even a World Database of Happiness.

Anyway, I came to the topics of happiness and well-being as a labor economist who had mostly worked on wages, and who early on was struck by the stability of the Mincerian earnings function across time and space. The basic structure of a log earnings equation, no matter what dataset was used and what country it is estimated for, has a similar structure. It turns out that there are patterns in the well-being data. I am struck by the fact that there is a great deal of stability in happiness and life-satisfaction equations, no matter what country we look at, what dataset or time period, whether the question relates to life satisfaction or happiness, and how the responses are coded whether in three, four, five or even as many as ten categories.

In general, economists have focused on modeling three fairly simple questions on life satisfaction and happiness, and that is what I have done mostly in my research, primarily with Andrew Oswald at the University of Warwick, but also with David Bell at the University of Stirling; Chris Shadforth at the Bank of England, and Richard Freeman from Harvard.

Typical questions are: 1) Happiness--for example from the General Social Survey, Taken all together, how would you say things are these days--would you say that you are very happy, pretty happy, or not too happy? 2) Life satisfaction--for example from the European Eurobarometer Surveys, On the whole, are you very satisfied, fairly satisfied, not very satisfied, or not at all satisfied with the life you lead? 3) Psychological health and mental strain--for example from the British Household Panel Survey, Such as the GHQ score, which amalgamates answers to questions about how well people have been sleeping, their level of confidence, feelings of depression, among others. (3)

The micro data on happiness are easily obtainable from most data archives including ICPSR for the GSS and the Eurobarometers, the Data Archive at the University of Essex and ZACAT in Germany for the Eurobarometers, ISSP, European Social Survey, BHPS, GSOEP, European Quality of Life Survey, European Social Surveys and so on. Life satisfaction data are also now available annually from the Latinobarometers, while happiness data are also available annually in the Asianbarometers. Several of the data series extend back at least to the early 1970s. Some are panels (BHPS, GSOEP).

Economists have had longstanding reservations about the reliability of interpersonal comparisons of well-being. Psychologists, however, view it as natural that a concept such as happiness should be studied in part by asking people how they feel. One definition of happiness is the degree to which an individual judges the overall quality of his or her life as favorable. As a validation of the answers to recorded happiness levels, it turns out that answers to happiness and life satisfaction questions are correlated with: 1) objective characteristics such as unemployment; 2) assessments of the person's happiness by friends and family members; 3) assessments of the person's happiness by his or her spouse; 4) heart rate and blood-pressure measures of response to stress; 5) the risk of coronary heart disease; 6) duration of authentic or so-called Duchenne smiles (a Duchenne smile occurs when both the zygomatic major and obicularus orus facial muscles fire, and human beings identify these as "genuine" smiles); 7) skin-resistance measures of response to stress; 8) electroencephelogram measures of prefrontal brain activity.

It is apparent that most people are happy (or, more precisely, mark themselves fairly high up on a scale). This finding has subsequently been replicated in many datasets over many time periods and for numerous countries. For example, in the United States in 2006 only 13 percent of people in the GSS said they were not very happy, 56 percent were pretty happy, and 31 percent very happy. In Eurobarometer 67.2 for April-May 2007 (ICPSR#21160) for the European Union (EU) 15 in 2007, for example, 3 percent said they were not at all satisfied, while 12 percent were not very satisfied, 60 percent fairly satisfied, and 24 percent very satisfied. In the 2005 Latinobarometers, which also asked the same 4-step life satisfaction question in eighteen Latin American countries, 4.6 percent said they were not at all satisfied, 25.4 percent were not very satisfied, 39.7 percent were fairly satisfied, and 30.3 percent very...