Moneymanagement’s Weblog

The Economics of Happiness

Posted in Uncategorized by moneymanagement on August 28, 2008

I was feeling particularly happy today and was wondering if it had anything to do with the fat payment I received for a writing assignment. So I set about doing some research and find out that the Freakonomics blog has beaten me to it. Since they have said it so well I will simply summarize it.

1) Rich people are happier than poor people.
2) Richer countries are happier than poorer countries.
3) As countries get richer, they tend to get happier.

Moreover, each of these facts seems to suggest a roughly similar relationship between income and happiness.

What explains these new findings? The key turns out to be an accumulation of data over recent decades. Thirty years ago it was difficult to make convincing international comparisons because there were few datasets comparing rich and poor countries. Instead, researchers were forced to make comparisons based on a handful of moderately-rich and very-rich countries. These data just didn’t lend themselves to strong conclusions.

Moreover, repeated happiness surveys around the world have allowed us to observe the evolution of G.D.P. and happiness through time — both over a longer period, and for more countries. On balance, G.D.P. and happiness have tended to move together.

There is a second issue here that has led to mistaken inferences: a tendency to confuse absence of evidence for a proposition as evidence of its absence. Thus, when early researchers could not isolate a statistically reliable association between G.D.P. and happiness, they inferred that this meant the two were unrelated, and a paradox was born.

Can you the awful lot of crowding at the right hand top corner…these are the rich happy countries.


3 Responses

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  1. Gautam Kshatriya said, on August 29, 2008 at 10:58 am

    Read up on Andrew Oswald – he’s an Economics Professor at Warwick University, and has done a lot of work on the Economics of Happiness.

    Gautam Kshatriya

  2. moneymanagement said, on August 29, 2008 at 11:01 am

    I will Thanks for the tip

  3. moneyvidya said, on August 29, 2008 at 3:58 pm

    Its also quite interesting to note that India, for its income bracket, is relatively high up in the happiness index… indeed its much higher up than China even though it has a much higher income level. This is not surprising given the fact that the Chinese have no freedoms!

    Gautam Kshatriya

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