Happiness economics

Economics studies scarcity and the allocation of resources. Central to societies’ economic objectives is the reduction in scarcity and central to that is economic growth. Certainly, economic growth is a major objective of all governments. They know that they will be judged by their record on economic growth.

But what do we mean by economic growth? The normal measure is growth in GDP. But does GDP measure how much a society benefits? Many people argue that GDP is a poor proxy for social benefit and that a new method of establishing the level of human well-being and happiness is necessary

And it’s not just at macro level. As we saw in a previous news article, A new felicific calculus? happiness and unhappiness are central to economists’ analysis of consumer behaviour. If we define ‘utility’ as perceived happiness, standard consumer theory assumes that rational people will seek to maximise the excess of happiness over the costs of achieving it: i.e. will seek to maximise consumer surplus.

There have been three recent developments in the measurement of happiness. ‘Understanding Society’ is a £48.9m government-funded UK study following 40,000 households and is run by the Institute of Social and Economic Research (ISER) at the University of Essex. It has just published its first findings (see link below).

The second development is the work by the ONS on developing new measures of national well-being and includes a questionnaire asking about the things that matter to people and which should be included in a measure or measures of national well-being.

The third development will be an addition of five new questions to the Integrated Household Survey:

• Overall, how satisfied are you with your life nowadays?
• Overall, how happy did you feel yesterday?
• Overall, how anxious did you feel yesterday?
• Overall, to what extent do you feel the things you do in your life are worthwhile?

But after all this, will we be any closer to getting a correct measure of human well-being? Will the results of such investigations help governments devise policy? Will the government be closer to measuring the costs and benefits of any policy decisions?

Married for less than five years, young, childless: survey finds that’s happiness Guardian, David Sharrock (27/2/11)
The UK’s largest household longitudinal study launches its early findings EurekAlert (28/2/11)
Happiness Studied in Britain MeD India (1/3/11)
Statisticians to tackle ticklish issue of happiness Financial Times (24/2/11)
Survey to ask ‘How happy are you?’ BBC News (24/2/11)
ONS happiness questions revealed The Telegraph, Tim Ross (24/2/11)
What makes us happy? The Telegraph (7/3/11)
Bhutan’s ‘Gross National Happiness’ index The Telegraph, Dean Nelson (2/3/11)
Bhutan’s experiment with happiness The Third Pole (China), Dipika Chhetri (25/2/11)
Gross National Happiness: The 10 Principles The Huffington Post (China), Nancy Chuda (24/2/11)
You’re asking me if I’m happy? What kind of a question is that? Independent, Natalie Haynes (26/2/11)
Happiness = Work, sleep and bicycles BBC News blogs, Mark Easton’s UK, Mark Easton (25/2/11)
The Future of Consumption and Economic Growth Minyanville, Professor Pinch and Conor Sen (14/2/11)
Happiness: A measure of cheer Financial Times (27/12/10)

ONS site
Well-being: Measuring national well-being ONS
Consultation: Measuring national well-being ONS
Consultation: Measuring national well-being: the questions ONS
The measurement of subjective well-being ONS, Stephen Hicks (4/2/11)
Integrated Household Survey ONS

Understanding Society site
Early findings from the first wave of the UK’s household longitudinal study Understanding Society, Jon Burton, Heather Laurie and Peter Lynn Institute for Social and Economic Research, University of Essex


  1. For what reasons might GDP be a poor measure of human well-being?
  2. How suitable is a survey of individuals for establishing the nation’s happiness?
  3. How suitable are each of the four specific questions above for measuring a person’s well-being?
  4. Why, do you think, has average life satisfaction not increased over the past 30 years despite a substantial increase in GDP per head?
  5. Give some examples of ways in which national well-being could increase for any given level of GDP. Explain why they would increase well-being.
  6. Should other countries follow Bhutan’s example and use a ‘groass national happiness index’ to drive economic and social policy?
  7. If human well-being could be accurately measured, should that be the sole driver of economic and social policy?
  8. Do people’s spending patterns give a good indication of the things that give them happiness?