Since Jeremy Bentham, utilitarians have argued that happiness, not just income or wealth, is the maximand of individual and social welfare. By contrast, Rawls and followers argue that to share a common perception of living in a just society is the “ultimate good” and that individuals have a moral ability to evaluate just institutions. In this paper we argue that just institutions, apart from their intrinsic value, also have an instrumental value, both in economic performance and in happiness. Thus happiness -- or subjective well being -- is analyzed as being a function of economic well-being, the quality of public institutions and social ties. Cross section individual data from citizens in OECD countries show that income, education and the perceived quality of institutions have the highest impact on life satisfaction, followed by social capital. Country analysis shows a non linear but positive influence of per capita GDP on life satisfaction, but also that unemployment and inflation reduce average happiness, the former effect being stronger. Finally, better quality public institutions and having more social capital also bring more happiness. We conclude with some policy implications.
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Paper provided by Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon. in its series Working Papers with number
2008/40.
Length: Date of creation: Jul 2008 Date of revision: Handle: RePEc:ise:isegwp:wp402008
Contact details of provider: Postal: Department of Economics, School of Economics and Management (ISEG), Technical University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL Web page: http://www.iseg.utl.pt/departamentos/economia/
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Find related papers by JEL classification: D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement D69 - Microeconomics - - Welfare Economics - - - Other D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation J10 - Labor and Demographic Economics - - Demographic Economics - - - General Z13 - Other Special Topics - - Cultural Economics - - - Social Norms and Social Capital; Social Networks Economic Anthropology
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