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

At this year’s American Economic Association meetings in Denver, there were the usual panels on topics like the financial crisis and the real estate market. More unusual was a 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 (kicking myself for not skiing at either place). Until a few years ago, I was one of a handful of economists studying happiness and questions as diverse as the well-being effects of commuting time, why cigarette taxes make smokers happier, and why the unemployed are happier when there are more unemployed people around them. We have since been joined by a host of others.

There is also talk of happiness as a policy objective. Remote Bhutan replaced GNP with Gross National Happiness years ago. In 2008, the Sarkozy Commission, chaired by two Nobel Prize winners, called for a worldwide effort to develop broader measures of well-being. Though U.S. conservatives criticized it as a “left-wing attempt to make our economy sclerotic like France’s,” the most recent effort to add well-being indicators to national statistics comes from the conservative Cameron government in Britain. China and Brazil are also considering using the metrics.

This is exciting for scholars. Yet the leap into policy raises a number of unresolved questions. The most important, in my view, is what definition of happiness is most relevant and appropriate for policy?

In my new book, The Pursuit of Happiness, I posit that the definition of happiness that individuals select is partly determined by their capacity to pursue fulfilling lives. In the absence of that capacity—due, for instance, to lack of education and opportunity—people may place more value on day-to-day experiences, such as friendship and religious activities. Those with more capacity are likely focused—and take happiness from—pursuing some overarching objective or achievement. (Think of the scientist trying to cure cancer who sacrifices leisure and relationships in favor of time spent in the laboratory.) Some new research, including my own, supports this intuition.

The need for definitional clarity raises conceptual challenges. For research purposes, we rely on an open-ended question, typically: “Generally speaking, how happy (or satisfied) are you with your life?,” with possible answers 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 respondents’ income, marital status, age, and employment. The resulting patterns are remarkably consistent worldwide, including in countries of different development levels.

That consistency allows us to test for the effects of variables such as inflation and governance and environmental regimes. We do not ask respondents if these phenomena make them unhappy. Instead, we account for the effects of the standard socioeconomic and demographic variables on happiness, and then compare the variance in scores that is explained by the contextual variables.

Happiness is the most commonly cited dimension of well-being. Yet scholars make finer distinctions, benchmarking happiness results against those based on questions designed to measure specific dimensions of well-being, such as innate character traits (positive and negative affect); comparisons with the best possible life; and life purpose.

Policy, meanwhile, is driven by factors ranging from norms to welfare to culture. Those factors, in turn, influence the definition of happiness. Centuries ago, Jeremy Bentham emphasized 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.

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

There is much to resolve before we can agree on happiness as a policy objective. Yet many countries are already using well-being metrics, and a low-cost experiment for the U.S. would be to add a few tried-and-true questions to our statistics. That in turn would force us to think about our benchmarks of progress; whether we value opportunity or outcomes more; and how much we should emphasize health, leisure, and friendships over productivity and innovation.

Even that would be a bold step. We can compare income across people with consensus on what it seeks to measure. While we have robust measures of the various dimensions of happiness, we do not have the same kind of consensus on the aggregate concept. Happiness is a more complicated concept than income, but 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 our public debates are so contentious, exploring tools for evaluating the well-being of our citizens rather than emphasizing the roots of their divide is a welcome change.