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The economics of happiness

The number of Americans who said, ‘yes, I am happy with my life’ peaked in 1956, but ever since then has fallen slowly but steadily. During this time our levels of world GDP per capita have increased dramatically, and according to the non-satiation principle of conventional microeconomics, our experience of higher utility means that should all be happier – yes?

We live in a finite world of perpetual economic growth. Levels of material wellbeing have never been so high. The walls between trading nations have been removed thanks to globalisation and technology. Why then does the economically paradoxical notion of ‘happy peasants and frustrated millionaires’ exist? Happiness economics takes a new approach to assessing welfare based on expansive notions of utility. Conventional economics has the aim of the efficient allocation of scarce resources to satisfy infinite needs. If increasing utility does not fundamentally achieve individual happiness, then what is the point of it all?

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