Introduction
The economics of happiness is a unique approach to assessing the subjective-well-being of individuals within the context of economic theory. The economics of happiness utilises expansive notions of utility and combines economic measurements with those more commonly used by psychologists to assess the general life-satisfaction felt by people. The economics of happiness is a broader stake of behavioural economics that seeks to understand the pecuniary and non-pecuniary factors that lead to the maximization of happiness.
The goal of this essay is to develop a greater understanding of the concept of the economics of happiness. It will show how and why this type of theory goes a long way in explaining the type of choices made by individuals. This essay will portray that a return to the theories of Adam Smith, Jeremy Bentham and John-Stuart Mill have been made by modern day economists like Richard Easterlin, and so, while being a relatively new branch of economic study, has its roots in the thinking of early economists.
This essay will define happiness and show how happiness research can be adapted to economic theory, and show which economic insights can be gained from this research. By showing both pecuniary and non-pecuniary factors that determine happiness, this essay will show that the return to measuring happiness as a behavioural tool, is a valid and useful branch of economics. Some economic theory explained by happiness data includes the Easterlin Paradox, Aspiration Level Theory and the Relative Income Hypothesis, each which proves that indeed money alone does not buy happiness.
Defining Happiness
Happiness is a term that has been criticised for being very vague in its definition, but can be defined as a satisfaction w ...