Happiness and Well-Being

Abstract

The objective of happiness is rising on the political agenda in several countries and this calls for measures of how well nations perform in creating great happiness for a great number, analogous to measures of success in creating wealth, such as GDP. The golden rule in economics has always been that well-being is a simple function of income. But in the debate covering the role of economics in society, an often repeated cliché is that money cannot buy happiness beyond a threshold of material well-being. The contrary idea is indeed slyly cultivated by advertising, which tries to convince us that the acquisition of certain goods or services will make us happier.¹ If it is true that money alone cannot buy happiness, it is also true that poverty and the lack of money generate misery. Usually increased household income generates an improvement in the living conditions of the poor and as incomes rise from very low levels, human wellbeing improves. But several researchers² have observed that, in rich countries, where the average income is above a threshold level (say €20,000 per year), additional income does not correlate with more happiness. This means that poor people benefit more than rich people from an added euro of income. It also means that causes other than income influence the level of happiness.