The purpose of this thesis is to analyse and compare scientific research in the economics of happiness. This study field has expanded significantly over the last forty years and some wider conclusions need to be made.
This literature review looks in great detail at all concepts behind happiness and subjective well being, provides deeper understanding of GDP as a measure of welfare with issues around it and finally analyses ‘Easterlin Paradox’ and its updates.
Table of Contents
Chapter 1: Introduction
Chapter 2: Happiness
2.1 Terms and definitions
2.2 Measuring well-being
2.3 Issues with measuring well-being
2.4 Determinants of subjective well-being
Chapter 3: Beyond GDP
3.1 Overview
3.2 Flaws of GDP
3.3 Defence of GDP as a measure of well-being
Chapter 4: Easterlin Paradox revised
4.1 Original Easterlin Paradox
4.2 Hagerty and Veenhoven critique
4.3 Stevenson and Wolfers critique
Chapter 5: Conclusions
Research Objectives and Core Themes
The dissertation aims to critically analyze the scientific literature surrounding the economics of happiness, evaluating the validity of traditional welfare metrics like GDP in light of modern subjective well-being research, with a specific focus on the implications of the Easterlin Paradox.
- The relationship between income and subjective well-being across different economic strata.
- Limitations and flaws of Gross Domestic Product (GDP) as a comprehensive metric for societal welfare.
- The influence of relative income, social comparison, and human adaptation on perceived happiness.
- Critical academic discourse regarding the "Easterlin Paradox" and its varying empirical interpretations.
Excerpt from the Dissertation
2.3.2 Remembered utility
Another issue with measuring well-being is the way people feel about experiences in real-time can be different to to the way they remember it after they are over. That means that a distinction needs to be made between experienced utility and remembered utility. Cartwright (2011) defines experienced utility as the sum of instantaneous utilities (measures of pleasure or pain) over the duration of the event, while remembered utility as the utility a person thinks an event gave them. Body of evidence suggests that remembered utility is ‘path dependent’ - people do not perfectly remember experienced utility. It was illustrated with a study by Daniel Kahneman et al. (1993), where subjects were analysed experiencing and evaluating pain. Participants were asked to put their hand in cold water (14°C) for 60 seconds. After seven minutes, participants were asked to immerse their hand in cold water for 90 seconds (water was kept at 14°C for the first 60 seconds and increased to 15°C for the last 30 seconds). At the end of the experiment, individuals were asked to plot their level of discomfort during the tests, thus representing respondents’ remembered utility. Figure 2.1 shows the surprising results - although experienced utility was less for the 90-second than 60-second trial, because of extra 30 seconds of discomfort, 69 percent of participants noted they would prefer to repeat the 90-second trial. The study suggests that remembered utility depends both on the highest and/or lowest utility experienced, and the utility of the end can be described as peak-end evaluation. It can also be assumed that individuals forget lots of good/bad moments and remember an event based on only a few instances, process which is called duration neglect.
Chapter Summary
Chapter 1: Introduction: Outlines the importance of happiness as a policy goal and provides an overview of the scope and objectives of this dissertation.
Chapter 2: Happiness: Discusses the theoretical definitions of well-being, methodologies for measurement, and the various personal and social determinants that influence happiness levels.
Chapter 3: Beyond GDP: Evaluates the historical reliance on Gross Domestic Product and critiques its sufficiency as a measure of total societal welfare or living standards.
Chapter 4: Easterlin Paradox revised: Examines the foundational research of Richard Easterlin and analyzes the subsequent academic debate regarding the correlation between income growth and national happiness.
Chapter 5: Conclusions: Synthesizes the findings, advocating for the integration of behavioral insights and subjective measures into future economic policy frameworks.
Keywords
Economics of Happiness, Subjective Well-being, GDP, Easterlin Paradox, Utility, Income Inequality, Adaptation, Social Comparison, Behavioral Economics, Welfare Measurement, Economic Growth, Life Satisfaction, Public Policy, Hedonic, Eudaimonic
Frequently Asked Questions
What is the primary focus of this dissertation?
The paper focuses on the field of happiness economics, investigating how well-being is measured, the limitations of traditional economic indicators like GDP, and the debates surrounding the relationship between income and happiness.
What are the key thematic areas addressed?
The work covers definitions of happiness, determinants of subjective well-being (such as income, personality, and social factors), critiques of GDP as a welfare metric, and the long-standing academic debate known as the Easterlin Paradox.
What is the central research question?
The research explores whether current economic metrics sufficiently capture human welfare and seeks to understand if economic progress truly translates into increased societal happiness over time.
Which scientific methods are primarily utilized?
The dissertation is a literature review that synthesizes and compares empirical research, longitudinal studies, and cross-sectional data from psychology and economics journals.
What constitutes the main body of the work?
The main body examines the conceptualization of well-being, the practical challenges of measuring it, the flaws of GDP, and detailed critiques of the Easterlin Paradox by researchers like Hagerty, Veenhoven, Stevenson, and Wolfers.
Which keywords best characterize this research?
Core keywords include Economics of Happiness, Subjective Well-being, Easterlin Paradox, GDP, Life Satisfaction, and Behavioral Economics.
What is the "U-index" mentioned in the text?
Proposed by Kahneman, the U-index is a method designed to measure the proportion of time an individual spends in an "unpleasant" state, providing a way to assess well-being that avoids language or cultural biases.
How does "adaptation" affect reported happiness?
The text explains that individuals often adapt to major life events—both positive and negative—meaning that their initial emotional impact diminishes over time, and they eventually return to a "baseline" level of satisfaction.
Why is GDP often considered a flawed metric for well-being?
GDP is described as a measure of market production, not well-being. It excludes non-market activities, fails to account for income inequality, and treats all expenditures—even those resulting from disasters or negative events—as positive contributors to economic welfare.
- Quote paper
- Julius Matuzevicius (Author), 2016, Economics of Happiness, Munich, GRIN Verlag, https://www.grin.com/document/345087
