WHAT IS Happiness Economics
Happiness economics is the formal academic study of the relationship between individual satisfaction and economic issues like employment and wealth. Happiness economics attempts to use econometric analysis to discover what factors increase and decrease human well-being and quality of life.
BREAKING DOWN Happiness Economics
Happiness economics seeks to go beyond typical areas of economic study, such as income and wealth, and evaluate other factors that relate to quality of life.
The research of happiness economics has found that people in wealthier countries with high-quality institutions tend to be happier than people in countries with less wealth and poorer institutions.
The Europe-based Organization for Economic Cooperation and Development (OECD) gathers data on happiness economics and ranks its 35 member countries based on factors such as housing, income, employment, education, environment, civic engagement and health. The OECD’s purpose is to help governments design better public policies.
Measuring happiness and quality of life presents a challenge because of its normative subjective nature, but those who study happiness economics argue the importance of examining more in-depth factors affecting quality of life.
Factors of Happiness Economics
Happiness economics challenges the assumption of neoclassical economics that assumes higher income always correlates to higher levels of utility and economic welfare. At low levels of income, more money does generally increase happiness as rising income enables a person to buy goods and services considered essential to the basics of life such as food, shelter, health care and education. However, research has also shown this to be true only to a certain level of income, somewhere between $75,000 and $120,000, and income beyond that does not necessarily correlate to greater happiness.
Factors that affect happiness include the quality and type of work people are doing, as well as the amount of hours they are working. Research on happiness economics has shown that income levels alone do not necessarily correlate to happiness as much as the sense of satisfaction gained from work. Boring repetitive jobs may give little joy, while self-employment or work in creative skilled jobs can lead to greater satisfaction.
Working more can increase happiness, particularly if it is work someone enjoys, but even then there is a limit as working consistently long hours results in higher stress and less happiness. Studies have shown time for leisure to be just as important as quality of work when it comes to human well-being and happiness. Other factors that reduce happiness include unemployment, poor health, high-interest consumer debt and work commutes longer than about 20 minutes.