Dr Nattavudh (Nick) Powdthavee is a behavioural economist in the Department of Economic at Nanyang Technological University, Singapore, and is the author of The Happiness Equation: The Surprising Economics of Our Most Valuable Asset. He obtained his PhD the economics of happiness from the University of Warwick. Discussions of his work have appeared in over 50 major international newspapers in the past five years, including the New York Times and the Guardian, as well as in the Freakonomics and Undercover Economist blogs.
It’s not often in our lifetime that we could almost hear the intellectual tide turning. The year was 1993. The main perpetrators were Andrew Oswald and Andrew Clark; two British economists who, in October that year, organised the world’s first ever economics of happiness conference at London School of Economics and Political Sciences. Posters advertising the event were put up weeks in advance. A hundred chairs were put out in the famous Lionel Robbins building, waiting to be filled by many of the world’s greatest minds. The meeting, the organisers thought, was going to be revolutionary to economics science. Perhaps it was even going to be historical, not so dissimilar to the one which was held a few months earlier in Cambridge where British mathematician Andrew Wiles presented the proof of Fermat’s Last Theorem to a few hundred academics before him.
Imagine their disappointment when only eight people turned up on the day*. It was official; the world’s first ever economics of happiness conference was no less of a complete and utter failure.
Fast forward eighteen years to 2011. Happiness is currently one of the hottest topics in world’s politics and economic research. The British Prime Minister David Cameron has set out a plan to measure and improve people’s happiness – or in his compound term “general well-being”. The French president Nicholas Sarkozy has already launched an inquiry into happiness, commissioning Nobel Prize winners Joseph Stiglitz and Amartya Sen to look at how policies on Gross Domestic Products (GDP) sometimes trampled over the government’s other goals, such as sustainability and work-life balance. There are now over two hundred thousand economic papers on the World Wide Web written exclusively on “happiness”, “life satisfaction”, or “subjective well-being”.
How did we get here so fast in just less than two decades?
Of course, one of the early issues that people have with the economics of happiness (and you’d be forgiven if you yourself did laugh at the idea) is that happiness is hardly a measurable concept. This is a big deal for economists who like to call themselves quasi-scientists (in that they mainly deal with objectively measurable data such as income and inflation rates). If what people say about the way they are feeling is subjective by definition, how can it be analysed and quantified?
This issue, I feel, has now been resolved almost entirely. Working alongside scientists, psychologists have been able to provide objective confirmations that what people say about their own happiness does indeed provide useful information about their true inner well-being. For instance, self-rated happiness has been shown to correlate significantly with the duration of “Duchenne” or genuine smiles a person give during a day, as well as the quality of memory, blood pressure, brain activities, and even heart beats per second. More remarkably, scientists have been able to show that how happy we feel about our lives today have important predictive power of whether or not we will still be alive, forty or fifty years from now. Put it simply, we really do mean what we say.
The last two decades had also seen a substantial rise in the number of newly available data sets which are impossibly large by previous standards. And by applying appropriate statistical tools on these randomly drawn samples, researchers are able to explore whether or not the determinants of individual’s happiness (which is normally captured by asking individuals to rate their happiness from “1.not too happy”, “2.pretty happy”, or “3.very happy”) are the same in America as they are in Great Britain, South Africa, and China (which they are, thus lending further credence to the idea that such answers should be taken seriously).
So, what are the interesting results happiness economists have discovered so far? Well, for a start, happiness is U-shaped in age. On average, we are likely to be happier with our life at the younger and older age points in our life-cycle, with the minimum point occurring somewhere around mid-40s. Money buys little happiness, whilst other people’s money tends to make us feel unhappy with ours. The big negatives in our life include, for example, unemployment and ill health. Yet these negative experiences hurt us less subjectively if we happened to know a lot of other unemployed people (or in the case of ill health, other people with the same illness as ours). Marriage and friendships are extremely valuable, although there is little statistical evidence to suggest that children make parents any happier than their non-parents counterpart. And more recently, happiness economists have been able to put dollar, pound, or euro values on happiness (or unhappiness) from seemingly priceless experiences or life events that come with no obvious market values such as time spent with friends, getting married, losing one’s job, and even different types of bereavement.
It’s difficult to try and forecast how important this kind of work will be in the political arena in the forthcoming century. It’s possible that future governmental policies may shift entirely from the pursuit of wealth towards more non-materialistic goals as a result of these findings. We may even witness a replacement of GDP for a more general well-being index such as the GNH (or Gross National Happiness) altogether, although this is probably unlikely to happen. However, one thing’s for sure; economics as a dismal science will never be the same again.
*Of those eight, five were speakers especially invited to speak at the conference by the organisers.