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Happiness and Utility in Economic Thought—Or: What Can We Learn from Happiness Research for Public Policy Analysis and Public Policy Making?

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  • Norbert Hirschauer
  • Mira Lehberger
  • Oliver Musshoff

Abstract

In the past decades, a great interest has emerged in understanding the nature of people’s well-being beyond consumption opportunities. It is widely believed that happiness research based on self-reports on people’s satisfaction with life has made a significant contribution to this understanding. The growing numbers of happiness studies provoke the question whether, and eventually how, public economists should include well-being considerations into policy analysis. Aiming to contribute in answering this question, this review paper provides a survey of the general happiness conception, the formative steps of happiness research, and its relationship to the economic concepts of ordinal and cardinal utility. We furthermore describe the pitfalls of conventional utility approaches and find that both the ordinal and the cardinal approaches have shortcomings which are not shared by happiness measurements. One advantage is that self-reports on well-being reflect the consequences of people’s choices in terms of the well-being they eventually experience. Externalities, as well as the effects of bounded rationality, are inherently taken account of when using happiness measurements for the evaluation of public policies. While it is not entirely clear yet how evidence from happiness research is to be used towards enlightening policy makers, the answer will certainly depend on the policy field under consideration. In general, happiness research may make two major inroads: it may help to discover which conditions foster people’s well-being, besides the goods and services provided by the market; it may also help to develop a realistic conception of man, thus facilitating an adequate modeling of multiple-goal and potentially bounded rational real-life actors in policy impact analysis. Copyright Springer Science+Business Media Dordrecht 2015

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  • Norbert Hirschauer & Mira Lehberger & Oliver Musshoff, 2015. "Happiness and Utility in Economic Thought—Or: What Can We Learn from Happiness Research for Public Policy Analysis and Public Policy Making?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 121(3), pages 647-674, April.
    • Handle: RePEc:spr:soinre:v:121:y:2015:i:3:p:647-674
    DOI: 10.1007/s11205-014-0654-2
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    2. Ingebjørg Kristoffersen, 2017. "The Metrics of Subjective Wellbeing Data: An Empirical Evaluation of the Ordinal and Cardinal Comparability of Life Satisfaction Scores," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 130(2), pages 845-865, January.
    3. Lei Li & Yilin Zheng & Shaojun Ma, 2023. "Links of urban green space on environmental satisfaction: a spatial and temporarily varying approach," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(4), pages 3469-3501, April.
    4. Knight, S.J; Howley, P.;, 2017. "Can clean air make you happy? Examining the effect of nitrogen dioxide (NO2) on life satisfaction," Health, Econometrics and Data Group (HEDG) Working Papers 17/08, HEDG, c/o Department of Economics, University of York.
    5. Sasaki, Hiroki, 2016. "Do Japanese Citizens Move to Rural Areas Seeking a Slower Life? Differences between Rural and Urban Areas in Subjective Well-Being," 2016 Fifth AIEAA Congress, June 16-17, 2016, Bologna, Italy 242325, Italian Association of Agricultural and Applied Economics (AIEAA).
    6. Lozada, Gabriel A., 2017. "The Hotelling Rule for Entropy-constrained Economic Growth," Ecological Economics, Elsevier, vol. 133(C), pages 35-41.
    7. Wookjae Heo & John E. Grable & Barbara O’Neill, 2017. "Wealth Accumulation Inequality: Does Investment Risk Tolerance and Equity Ownership Drive Wealth Accumulation?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 133(1), pages 209-225, August.
    8. Ozge Gokdemir, 2015. "Consumption, savings and life satisfaction: the Turkish case," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 62(2), pages 183-196, June.
    9. David Patiño & Francisco Gómez-García & Alejandro Marín-Serrano, 2022. "Subjective Well-Being and Aversion to Macroeconomic Losses: New Evidence," Journal of Happiness Studies, Springer, vol. 23(2), pages 359-375, February.
    10. Takis Venetoklis, 2019. "Do interactions cancel associations of subjective well-being with individual-level socioeconomic characteristics? An exploratory analysis using the European Social Survey," Quality & Quantity: International Journal of Methodology, Springer, vol. 53(6), pages 3033-3061, November.
    11. Adam Okulicz-Kozaryn, 2023. "Unhappy Metros: Panel Evidence," Applied Research in Quality of Life, Springer;International Society for Quality-of-Life Studies, vol. 18(2), pages 753-763, April.
    12. Yenniel Mendoza & Roger Loyola & Alonso Aguilar & Roberto Escalante, 2019. "Valuation of Air Quality in Chile: The Life Satisfaction Approach," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 145(1), pages 367-387, August.
    13. Zahwa Al-Ayyash & Maya Abou-Zeid, 2019. "Investigating commute satisfaction differences of private car users and public transport users in a developing country context," Transportation, Springer, vol. 46(3), pages 515-536, June.
    14. Herrera, B. & Gerster-Bentaya, M. & Knierim, A., 2018. "Farm-level factors influencing farmers satisfaction with their work," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277024, International Association of Agricultural Economists.
    15. Beatriz Herrera Sabillón & Maria Gerster‐Bentaya & Andrea Knierim, 2022. "Measuring farmers' well‐being: Influence of farm‐level factors on satisfaction with work and quality of life," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(2), pages 452-471, June.

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