The economics of happiness.

AuthorHelliwell, John F.

This emerging field broadens economic analysis by using measures of subjective well-being to help address a core issue in economics--how to make best use of scarce resources--by redefining "best use." It is now more than 40 years since Richard Easterlin first advocated using measures of subjective well-being to judge the quality of life. (1) I came to see the necessity of such a broadening only after seeing that it was inadequate to assess the consequences of democracy (2) and of social capital (3) solely in terms of their linkages to economic growth.

Measures of subjective well-being seemed like natural candidate measures of welfare. But to understand and assess their suitability required a broader disciplinary perspective. A useful starting point was to see if life satisfaction assessments from around the world supported Aristotle's prediction that people would report higher life satisfaction if they had better life circumstances, in the form of family, friends, good health, and sufficient material means, while also being supported from the one side by positive emotions and on the other by a sense of life purpose. Aristotle's presumptions were supported remarkably well by World Values Survey data, with two-level modeling revealing the joint importance of individual and national-level variables. (4) The fact that life evaluations could be explained by income and other life circumstances permitted calculation of compensating differentials to compare the relative importance of different aspects of life. (5)

My subsequent work expanded the analysis to show that life evaluations depend more on the quality of government than on the institutions of democracy, (6) especially when the former is at low levels, that workplace trust, as shown in the figure, is a very strong predictor of life satisfaction, even more so for women than men, (7) and that the quality and quantity of social connections at work, at home, and in the neighborhood are perhaps the most important supports for life satisfaction. (8)

But what about suicide in those supposedly happy Scandinavian countries? A proper answer to this question required expertise from other disciplines. How well are modern international differences in suicide rates explained by the same factors exposed by Emile Durkheim's careful research more than a century ago? (9) Can the same model consistently explain both life satisfaction and suicide rates? World Values Survey data showed that the same factors that had been found to be associated with international differences in life satisfaction were also associated with international differences in suicide rates, of course with the signs reversed. Sweden fit both models perfectly. Its very high subjective well-being and fairly average suicide rates were reconciled by the differing relative importance of some factor--such as divorce, religion, and government quality--between the suicide and life satisfaction models. (10) Social trust and community connections were strongly and equally important in both models. Indeed, subsequent research suggested that higher levels of social trust were associated with significantly lower death rates from both suicides and traffic fatalities. (11)

The apparent usefulness of happiness data spurred deeper digging and a mixture of research methods to untangle two-way linkages between subjective well-being and other variables. It also led to research to establish the meaning and value of different ways of measuring subjective well-being, (12) to assess the extent to which...

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