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. Economics

    Economics is a branch of social science focused on the production, ...
  3. Utilitarianism

    Utilitarianism is a moral theory that advocates actions that ...
  4. Economic Man

    Economic man refers to an idealized human being assumed to act ...
  5. Economic Growth Rate

    An economic growth rate is a measure of economic growth, typically ...
  6. Normative Economics

    Normative economics is a perspective of "what ought to be" rather ...
Related Articles
  1. Personal Finance

    How Money Can Buy You Happiness

    Research shows that money can buy you happiness if you spend it the right way.
  2. 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.
  3. Insights

    How to Find Happiness Through Work

    Besides earning more money, doing these things can foster financial and emotional health.
  4. Personal Finance

    Optimize Your Spending to Increase Your Happiness

    It's not about how much money you have or make, it's about how you spend it.
  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. Retirement

    3 Proven Ways to Be Happier in Retirement

    To ensure a happier retirement, focus on the three things you can actually control: health, time and income.
  7. Insights

    Standard of Living Vs. Quality of Life

    What is the difference between a standard of living and quality of life? Find out in this breakdown.
  8. Retirement

    When Retirement's Getting You Down

    The secret to avoiding depression in retirement is to replace the social connections, steady routine and sense of purpose that your work life delivered.
  9. Insights

    Is Infinite Economic Growth on a Finite Planet Possible?

    While the finite nature of Earth's resources limits the direction of economic growth, it does not mean that infinite economic growth is impossible.
RELATED FAQS
  1. 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 >>
  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 >>
Trading Center