On the Determinants of Happiness

In the most rational sense, the pursuit of happiness is the end goal of all our actions. Utility, a word used extensively by economists, can be understood as a synonym for life satisfaction or happiness. Industrial societies and contemporary economics have overemphasized the role income plays in increasing a person’s well-being. Although this theory is generally true, income is merely a means to an end rather than an end in itself, as socio-economic determinants such as health, good governance, social capital, as well as the impact of unemployment, inequality and other important factors are either taken for granted or not considered at all in current Economic methodology. Part of this problem stems from the use of revealed preferences which are both limited in the information that they contain as well as misleading. I use data from the European Social Survey and the World Value survey, two data sets that contain expressed preferences, to bring to light some of the other determinants of happiness. I find that although income is a substantial contributor to well being, qualities such as social capital, good health, and good governance are either more important than or as important as income in itself. Accepting that the methodology is not completely sound by any means, this work attempts to provide further support to a growing number of Economists that are using valuable information contained in expressed preferences. I believe that such data can contribute a great deal to the policy arena and be a useful complement to already existing tools of research