Economics of Happiness: What Really Counts?

Abstract

The study of happiness was initially examined psychologically, then expanded to incorporate social and, finally, economic aspects to investigate the reasons for the disparities in happiness levels across countries. Numerous scholars from various fields of expertise have developed an interest in studying happiness as a topic, as it has become a global issue. The notable work of Easterlin known as “Easterlin Paradox” postulates that happiness varies linearly with income at a point in time, both within and across nations. However, the long-term growth rates of happiness and income are not significantly linked. The economics of happiness is a multidisciplinary study of the relationship between economic conditions and subjective well-being or happiness. Happiness economics can be examined from both a microeconomic and macroeconomic perspective, providing valuable insights into both individual well-being and societal gain. The economics of happiness has received a lot of attention recently, especially in terms of understanding the differences in life satisfaction between rich and developing countries. Wealthier countries are happier as a group than poorer countries; happiness seems to increase with wealth up to a limit, but not beyond it. Public policy has a substantial impact on happiness economics by changing the well-being of individuals and society through numerous mechanisms such as fiscal policy, public spending, health impact assessment, and family assistance. The expanding national emphasis on subjective well-being accentuates the need to include happiness in governmental decisions. Keywords: happiness, subjective well-being, Easterlin Paradox