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.

 

 

 

RELATED TERMS
  1. Hedonic Treadmill

    A hedonic treadmill is the tendency of a person to sustain relative ...
  2. Econometrics

    The application of statistical and mathematical theories to economics ...
  3. Economics

    Economics is a branch of social science focused on the production, ...
  4. Lawrence Klein

    An American economist and winner of the 1980 Nobel Memorial Prize ...
  5. Utilitarianism

    Utilitarianism is a moral theory that advocates actions that ...
  6. Econometrician

    An econometrician uses mathematics and statistics to model, study ...
Related Articles
  1. Personal Finance

    3 Habits Happy People Use in Financial Planning

    Following these three habits can help make you more financially sound, and potentially happier.
  2. Personal Finance

    Wealth and Well-Being Come From More Than Money

    Happiness and well-being depends on more than just money.
  3. Personal Finance

    When Higher Income Doesn't Lead to Increased Happiness

    The happiness that comes with increased income is often negated by increased debt.
  4. Insurance

    Ways Money Can Buy A Little Happiness

    Money can't buy happiness for everyone, but it may be able to buy you time, security and experiences.
  5. Retirement

    Joy in Retirement: Another Type of Diversification

    Diversifying your happiness in retirement is just as important as achieving a perfectly balanced portfolio.
  6. Financial Advisor

    How to Budget and Spend to Maximize Your Happiness

    Spending money on others and buying experiences are just two of the five key principles that lie in money correlating to happiness.
  7. Personal Finance

    10 Jobs That Make People Happy

    These careers hold the highest levels of well-being and job satisfaction.
  8. Investing

    Facebook Is a Great Stock But Bad For Your Health

    A detailed study suggests Facebook users may be less happy and less healthy
  9. Investing

    Why Colleges Want Economics to Be a STEM Major

    The answer has less to do with philosophy and more to do with immigration policies.
  10. Insights

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
RELATED FAQS
  1. What is the relationship between human capital and economic growth?

    Learn what human capital and economic growth are, how human capital is related to economic growth and see examples of the ... Read Answer >>
  2. What impact does economics have on government policy?

    Learn about the impact of economic conditions on government policy and understand how governments engineer economic conditions ... Read Answer >>
  3. What are some of the limitations and drawbacks of economics as a field?

    Find out why the field of economics is full of controversy. Policy decisions, political campaigns and personal finances are ... Read Answer >>
  4. What Are the Best Measurements of Economic Growth?

    Learn how economists and statisticians track economic growth and why GDP might not be the best measurement of real economic ... Read Answer >>
Hot Definitions
  1. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  2. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  3. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  4. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  5. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  6. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
Trading Center