The Economics of Happiness Research

This Encyclopedia entry aims to review the current state of the art on the economics of happiness. It is organized into past, present and future research. The past research section focuses on the moral philosophical theory of utilitarianism and the ‘method dispute’ in the late 18th and early 19th centuries. The advocates of utilitarianism understood human action as the inevitable result of subjective evaluations of the things and experiences that make people feel happy. The ‘method dispute’ started an influential debate on the measurement of utility. While the Austrian School of Economics argued that utility could be measured and quantified across time and space, the German Historical School of Economics claimed that economic and social phenomena can only be studied within a specific time, territory and cultural contexts. Present research is characterized by the strong impact of longitudinal data on the study of revealed preferences and happiness. Since the early 2000s, happiness is usually operationalized as subjective evaluations in survey questions and measured cardinally. Main findings are the distinction between absolute and relative income, the importance of income inequality, work and unemployment, and labour market policies. The section on future research reflects on approaches to go ‘beyond GDP’. Questions about the future of work will need to be addressed in times of digital automation, redistribution of working hours over the life course, as well as the expansion of social safety nets. Also, future research will have to provide more causal evidence and more social context to the individualistic focus of the contemporary happiness literature