The Economics of Happiness

By Dr. Pabitra Kumar Jena and M. Nayyar Azam

IN March, the government informed the Rajya Sabha that it would become a 5 trillion dollar economy even before the IMF’s estimate of 2026-27. How does this number trickle down to the citizens here? Does economic growth and happiness have any correlation?

There’s a need to look into the intersection of economy and happiness to allow for a growth that is citizen focused, sustainable and effective.

Happiness is an inherent human desire, and economists have been concentrating a lot of their research on this topic. A sub-field of economics termed “the economics of happiness” deals with the correlation between happiness and economic growth.

What Does Happiness Mean Economically?

Although it can be challenging to define happiness, economists have made an effort to measure it using a variety of indicators, including happiness indices, subjective well-being, and life satisfaction. These measures, which are aimed at capturing people’s opinions of their own well-being, can be influenced by a variety of factors, such as personal values, wealth, health, and social relationships.

When we discuss the economics of happiness, we fundamentally want to know how variables like income and employment affect people’s happiness and sense of fulfilment in life. Happiness measurement is a complex task, though. It is a complicated, multifaceted idea that is susceptible to a wide range of internal and external variables.

Surveys and questionnaires that allow participants to rate their own level of life satisfaction or subjective well-being are methods economists have used to measure happiness. In these surveys, individuals are frequently asked how happy they are with their jobs, relationships, health, and other aspects of their lives. The average level of life satisfaction or well-being for a population can be calculated by adding together these responses.

The use of happiness indices, which are composite measurements that account for a variety of different variables thought to influence happiness, such as wealth, health, education, and social ties, is an additional strategy. The World Happiness Report, which evaluates nations based on a variety of characteristics including money, social support, freedom, and charity, is an illustration of a happiness index. It’s important to keep in mind that these measurements do have some constraints, despite the fact that they can be insightful into how societal and economic issues affect happiness. For instance, a variety of biases and cognitive heuristics, such as the propensity to place more emphasis on negative than positive experiences, can have an impact on how people perceive their own well-being. Additionally, these measures could miss out on crucial components of happiness, including finding meaning and purpose in life, which are determined by individual values and beliefs.

Despite these drawbacks, the economics of happiness has grown in importance as a field for research recently. This is due in part to the fact that decision-makers have begun to realize that ensuring citizens’ well-being cannot be achieved solely through economic growth. We must consider how economic policies affect people’s happiness and sense of fulfilment in life in order to build a truly prosperous and sustainable society.

The creation of gross national happiness (GNH) measures is one way that policymakers are doing this. GNH is a counterpart for the gross domestic product (GDP) that considers not just economic development but also other aspects including cultural preservation, environmental sustainability, and the promotion of well-being and happiness. Countries like Bhutan have already made GNH a national policy objective, and other nations are now beginning to consider this type of approach as well.

“The economics of happiness” is a fascinating and vital area of research that intends to comprehend the connection between economic factors and people’s well-being. Even though quantifying happiness is not an easy process, economists have created a number of indices and measures that can offer important insights into this intricate and multidimensional topic. We can build a more sustainable and prosperous society for all if we consider how economic policies affect people’s happiness and well-being.

The Relation Between Happiness and Income

To a certain extent, there is a positive correlation between income and happiness, which is one of the main findings of the economics of happiness. This relationship is often termed the “Easterlin Paradox,” so named after the economist Richard Easterlin who initially studied it. This paradox asserts that while money and material belongings do make people happier, the impact of income on well-being actually diminishes as income rises. While income plays an important role in determining happiness, other factors additionally have a big impact. Social ties, health, education, and personal values are a few of these. For instance, research has found that socially connected individuals typically experience greater levels of happiness than socially isolated individuals. Similarly, people who prioritize their own development and education tend to be happier and have more satisfaction with their lives.

Policymakers’ Implications

The economics of happiness has significant implications for policymakers, who are becoming increasingly conscious of the necessity to give happiness preference when making decisions. This has prompted the development of policies like the gross national happiness (GNH) initiative, which aims to evaluate and promote happiness and well-being alongside economic progress.

The necessity of reorienting economic policy away from straightforward, conventional economic development, towards more comprehensive measurements of progress is another significant conclusion of the economics of happiness. The effects of economic policies on well-being must be considered by policymakers, who must also make sure that economic growth is equitable and sustainable.

The relationship between economic growth and well-being has become more widely recognized owing to the economics of happiness. Despite the fact that income is a key indicator of happiness, other elements including social ties, health, and personal values are as crucial. In making decisions, those making decisions must prioritize people’s well-being and make sure that economic policies support fair and sustainable growth. We can make everyone in society happier and more successful by doing so.

• Views expressed in the article are the author’s own and do not necessarily represent the editorial stance of Kashmir Observer 

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