The Economy of Wellbeing – A study on the Economy of Happiness

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The Economy of Wellbeing – A study on the Economy of Happiness

Category: Admission Essay

Subcategory: Economics

Level: PhD

Pages: 5

Words: 1375

The Economy of Wellbeing – A study on the Economy of Happiness
Every individual wants to be happy. Economic activity, namely the production of services and goods, is without a doubt not an end in itself in the sense that it has value only to the extent that it contributes towards human happiness. However, surprisingly, economist tended to think of happiness as principally the domain of therapists and psychologists, spiritual leaders, motivational speakers, and self-help authors (White 10). It does not cause surprise to know that philosophers and psychologists have written at length about happiness, but economists are the least likely people to study happiness or emphasize its significance to policymaking. The advent of the so-called “New Welfare Economics” changed this situation considerably. During the 1930s, some scholars, including John R. Hicks, proved that human behavior, especially the demand for services and goods, might be explained in terms of ordinal (relative) utility. In other words, cardinal (absolute) measurement of utility is not necessary for analyzing how people respond to relative prices changes. Today, however, economists are at the front line of contemporary happiness studies, given incentive by their traditional focus on well-being and welfare, as well as their exploration of better approaches to understanding it, measuring it, and using it in the implementation of policy.
Why Economists should Study Happiness
Behind every score indicated by an individual lies a cognitive appraisal of the extent to which their quality of life is estimated in a positive manner. The measures of happiness have proven to be consistent, uniform, and reliable. Reported happiness is reasonably stable and responsive to changing life situations. Such progress in measurement permits the analysis of seemingly contradictory observations made four decades ago by Easterlin, who noted that happiness is not confined to economic well-being (Easterlin 90). He further observed that since the Second World War, real income in some countries has risen dramatically, even though the self-reported happiness of the population has fallen slightly or remained the same. In the United States, for instance, per capita real income augmented 2.5 times, or 150 percent (from about $11,000 to $27,000) during the period between 1946 and 1991, even though happiness remained constant (Frey and Alois 76; Sison 61). This paradox is worth explaining.
Another seemingly contradictory observation that requires explanation is the fact that individuals have always regarded work as a burden to them, even though empirical evidence points to the fact that unemployment, even in instances when unemployed people receive the same income as their employed colleagues, depresses people markedly. Some happiness research findings contribute to the knowledge on what is now considered standards views. One such view relates to the authoritative influence of nonfinancial variables on people’s satisfaction with life. However, this is not to say that economic factors, including employment, price stability, or even income, are not important, but they point to the increasing interest in other issues, such as civic virtue, social capital, or loyalty. These findings add to the accumulated knowledge on gender, ethnic, age, and race discrimination.
Other reasons also exist why economists should be interested in studying happiness. These include economic policy, as well as the effects of the state of institutions, such as the scope of social capital and the quality of governance, on the happiness of individuals. It is often unfeasible to propose Pareto improvements since social actions involve costs for some people. In this regard, an appraisal of the effects with respect to individual utilities is necessary. Economic policy must also demonstrate evidence of trade-offs, particularly those between inflation and unemployment. The functions of happiness seek to ascertain an econometric correlation between subjective well-being measure and the factors that determine happiness. For instance, happiness data from Eurobarometer Surveys, in which the respondents were asked, “On the whole, are you satisfied, fairly satisfied, not very satisfied or not at all satisfied with the life you lead?,” yielded a four-point satisfaction scale (McGuire 128). Taken together, the above illustrate the need for economists to study happiness.
Identification of the Relevant Literature
Over the past decades, a movement exists within economics has emerged that contends that utility should be considered in terms of happiness and that it can, and ought to be measured. This development has been fuelled by the mounting concerns regarding accrued evidence, from both empirical studies and real life observations, that people do not always act in a rational manner when making decisions concerning consumption. Findings from some experiments suggest that preferences are frequently not a very reliable pointer of the happiness associated with the outcomes of choices (Hausman 106; Rauschmayer, Felix, and Johannes 64). According to Moe and Dianna, individuals frequently work overtime because they expect to reap the rewards of the additional hours over the long run, conceivably in the form of a promotion or bonus income (43). When they do get the bonuses or promotions, which translate to additional income, the happiness gained from the extra money is never as high as anticipated. The concern for the anomalous correlation between preferences and happiness outcomes has occasioned a surge in the number of studies over the last two decades on the determinants of happiness. Researchers have over the years sought to determine the things that make people happy.
Key Research Questions
With the help of the question “how happy are you? ” it is possible to obtain an indicant of the happiness of individuals. I will produce a function of happiness:
H (•) = ht (Time) + hi (Income) + hg(Gender) + hd (Education) + ho (Occupation)
The happiness function depends on five fundamental components, namely the time devoted to happiness (ht) (that is, time spent on positive social interactions, such as with family and friends), an individual’s income (hi) and his or her gender (hg), their level of education attainment (hd) and occupation (ho), which frequently determines their income.
Aims and Objectives
It is reasonable to state that little is known regarding the actual character of the happiness function. Because little work has been carried out to establish empirical evidence regarding the effects of income, employment, education, and gender differences on the subjective wellbeing of the youth, this will constitute the focus of my research. I intend to research the economy of wellbeing, an approach that employs new parameters in evaluating economic performance in place of the traditional approaches of GNP and GDP measures. Specifically, I intend to investigate the effects of four variables, namely income, employment, education, and gender, on the on the wellbeing of youth in the Middle East and North Africa (MENA).
Methodology, Timescale/Research Planning
Data will be collected using questionnaires over selected areas in Mena. I will also use published data from the central banks of areas of under study to evaluate and compare the economic performance of the country with the results obtained through the data collected. The Day Reconstruction Method (DRM) will be employed as the sampling method. Using this method, respondents will be asked to reconstruct their previous day by filling the questionnaire (Dutt and Benjamin 304). The respondents will first be required to recollect the activities of the previous day by producing a series of episodes, after which they will describe each episode comprehensively by identifying where, when, what, and with whom the episodes were experienced. They will then rank these episodes according to positive affect (that is, “happy” or “enjoyable”) or negative affects (that is, “frustrating” or “depressing”). By carefully dividing the events of the previous day into some episodes, the respondents will be able to think carefully regarding their feelings during each period. In this manner, the study gets reports of emotional states, as well as measures of happiness that is not dependent on retrospection.
Happiness and utility are not identical or interchangeable terms. However, happiness, or subjective well-being, reflects people’s contentment with life. In this regard, happiness can be considered a practical approximation to a utility for some purposes. This permits the empirical study of problems that could hitherto be analyzed only on a conceptual, theoretical level. My research will contribute a new insight to the already familiar theoretical proposition, which have shown how inflation, unemployment, and income disparities affect the subjective well-being of individuals. 
Works Cited
Dutt, Amitava K, and Benjamin Radcliff. Happiness, Economics and Politics: Towards a Multi-Disciplinary Approach. Cheltenham, UK: Edward Elgar, 2009. Print.
Easterlin, Richard A. “Does Economic Growth Improve the Human Lot? Some Empirical Evidence.” Nations and Households in Economic Growth: Essays in Honor of Moses Abramowitz. Ed. Paul A. David and Melvin W. Reder. New York, NY: Academic Press, 1974. 89-125. Print.
Frey, Bruno S, and Alois Stutzer. Happiness and Economics: How the Economy and Institutions Affect Well-Being. Princeton, NJ: Princeton University Press, 2010. Print.
Hausman, Daniel M. Valuing Health: Well-being, Freedom, and Suffering. New York, NY: Oxford University Press, 2015. Print.
McGuire, Michael T. Human Nature and the New Europe. Boulder, CO: Westview Press, 1993. Print.
Moe, Karine S, and Dianna J. Shandy. Glass Ceilings and 100-Hour Couples: What the Opt-Out Phenomenon Can Teach Us About Work and Family. Athens, GA: University of Georgia Press, 2010. Print.
Rauschmayer, Felix, Ines Omann, and Johannes Frühmann. Sustainable Development: Capabilities, Needs, and Well-Being. New York, NY: Routledge, 2011. Print.
Sison, Alejo G. Happiness and Virtue Ethics in Business: The Ultimate Value Proposition. Cambridge, UK: Cambridge University Press, 2015. Print.
White, Mark D. The Illusion of Well-Being: Economic Policymaking Based on Respect and Responsiveness. New York City, NY: Palgrave Macmillan, 2014. Print.