IDEAS home Printed from https://ideas.repec.org/a/spr/soinre/v121y2015i3p647-674.html
   My bibliography  Save this article

Happiness and Utility in Economic Thought—Or: What Can We Learn from Happiness Research for Public Policy Analysis and Public Policy Making?

Author

Listed:
  • Norbert Hirschauer
  • Mira Lehberger
  • Oliver Musshoff

Abstract

In the past decades, a great interest has emerged in understanding the nature of people’s well-being beyond consumption opportunities. It is widely believed that happiness research based on self-reports on people’s satisfaction with life has made a significant contribution to this understanding. The growing numbers of happiness studies provoke the question whether, and eventually how, public economists should include well-being considerations into policy analysis. Aiming to contribute in answering this question, this review paper provides a survey of the general happiness conception, the formative steps of happiness research, and its relationship to the economic concepts of ordinal and cardinal utility. We furthermore describe the pitfalls of conventional utility approaches and find that both the ordinal and the cardinal approaches have shortcomings which are not shared by happiness measurements. One advantage is that self-reports on well-being reflect the consequences of people’s choices in terms of the well-being they eventually experience. Externalities, as well as the effects of bounded rationality, are inherently taken account of when using happiness measurements for the evaluation of public policies. While it is not entirely clear yet how evidence from happiness research is to be used towards enlightening policy makers, the answer will certainly depend on the policy field under consideration. In general, happiness research may make two major inroads: it may help to discover which conditions foster people’s well-being, besides the goods and services provided by the market; it may also help to develop a realistic conception of man, thus facilitating an adequate modeling of multiple-goal and potentially bounded rational real-life actors in policy impact analysis. Copyright Springer Science+Business Media Dordrecht 2015

Suggested Citation

  • Norbert Hirschauer & Mira Lehberger & Oliver Musshoff, 2015. "Happiness and Utility in Economic Thought—Or: What Can We Learn from Happiness Research for Public Policy Analysis and Public Policy Making?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 121(3), pages 647-674, April.
    • Handle: RePEc:spr:soinre:v:121:y:2015:i:3:p:647-674
    DOI: 10.1007/s11205-014-0654-2
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11205-014-0654-2
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11205-014-0654-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Daniel Kahneman & Peter P. Wakker & Rakesh Sarin, 1997. "Back to Bentham? Explorations of Experienced Utility," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 375-406.
    2. Simon Luechinger, 2009. "Valuing Air Quality Using the Life Satisfaction Approach," Economic Journal, Royal Economic Society, vol. 119(536), pages 482-515, March.
    3. Bruno Frey & Alois Stutzer, 2010. "Happiness and public choice," Public Choice, Springer, vol. 144(3), pages 557-573, September.
    4. Oswald, Andrew J. & Powdthavee, Nattavudh, 2008. "Does happiness adapt? A longitudinal study of disability with implications for economists and judges," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1061-1077, June.
    5. Paul Dolan & Daniel Kahneman, 2008. "Interpretations Of Utility And Their Implications For The Valuation Of Health," Economic Journal, Royal Economic Society, vol. 118(525), pages 215-234, January.
    6. Alan Randall, 2002. "Valuing the outputs of multifunctional agriculture," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 29(3), pages 289-307, July.
    7. Frey, Bruno S & Stutzer, Alois, 2000. "Happiness, Economy and Institutions," Economic Journal, Royal Economic Society, vol. 110(466), pages 918-938, October.
    8. Easterlin, Richard A., 2013. "Happiness, Growth, and Public Policy," IZA Discussion Papers 7234, Institute of Labor Economics (IZA).
    9. Arik Levinson, 2013. "Happiness, Behavioral Economics, and Public Policy," NBER Working Papers 19329, National Bureau of Economic Research, Inc.
    10. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    11. Bruno Frey & Alois Stutzer, 2012. "The use of happiness research for public policy," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 38(4), pages 659-674, April.
    12. Daniel Kahneman & Alan B. Krueger, 2006. "Developments in the Measurement of Subjective Well-Being," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 3-24, Winter.
    13. Paul Dolan & Tessa Peasgood, 2008. "Measuring Well-Being for Public Policy: Preferences or Experiences?," The Journal of Legal Studies, University of Chicago Press, vol. 37(S2), pages 5-31, June.
    14. Bentham, Jeremy, 1781. "An Introduction to the Principles of Morals and Legislation," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number bentham1781.
    15. Dolan, Paul & Peasgood, Tessa & White, Mathew, 2008. "Do we really know what makes us happy A review of the economic literature on the factors associated with subjective well-being," Journal of Economic Psychology, Elsevier, vol. 29(1), pages 94-122, February.
    16. Amos Tversky & Daniel Kahneman, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(4), pages 1039-1061.
    17. Ruut Veenhoven, 2000. "The Four Qualities of Life," Journal of Happiness Studies, Springer, vol. 1(1), pages 1-39, March.
    18. Rafael Di Tella & Robert MacCulloch, 2006. "Some Uses of Happiness Data in Economics," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 25-46, Winter.
    19. Bruno S. Frey, 2018. "Economics of Happiness," SpringerBriefs in Economics, Springer, number 978-3-319-75807-7, October.
    20. Alan Krueger & Daniel Kahneman & Claude Fischler & David Schkade & Norbert Schwarz & Arthur Stone, 2009. "Time Use and Subjective Well-Being in France and the U.S," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 93(1), pages 7-18, August.
    21. Colin Kirkpatrick & David Parker (ed.), 2007. "Regulatory Impact Assessment," Books, Edward Elgar Publishing, number 3846.
    22. Bernard M. S. van Praag & Barbara E. Baarsma, 2005. "Using Happiness Surveys to Value Intangibles: The Case of Airport Noise," Economic Journal, Royal Economic Society, vol. 115(500), pages 224-246, January.
    23. Daniel Kahneman, 2003. "Maps of Bounded Rationality: Psychology for Behavioral Economics," American Economic Review, American Economic Association, vol. 93(5), pages 1449-1475, December.
    24. Colin Kirkpatrick & David Parker, 2007. "Regulatory Impact Assessment: An Overview," Chapters, in: Colin Kirkpatrick & David Parker (ed.), Regulatory Impact Assessment, chapter 1, Edward Elgar Publishing.
    25. Amitava Krishna Dutt & Benjamin Radcliff (ed.), 2009. "Happiness, Economics and Politics," Books, Edward Elgar Publishing, number 13280.
    26. Derek Bok, 2010. "The Politics of Happiness: What Government Can Learn from the New Research on Well-Being," Economics Books, Princeton University Press, edition 1, number 9107.
    27. Kahneman, Daniel, 2002. "Maps of Bounded Rationality," Nobel Prize in Economics documents 2002-4, Nobel Prize Committee.
    28. Easterlin, Richard A., 1974. "Does Economic Growth Improve the Human Lot? Some Empirical Evidence," MPRA Paper 111773, University Library of Munich, Germany.
    29. Richard A. Easterlin, 2013. "HAPPINESS, GROWTH, AND PUBLIC POLICY-super-†," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 1-15, January.
    30. James Vercammen, 2011. "Agri‐Environmental Regulations, Policies, and Programs," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 59(1), pages 1-18, March.
    31. Paul A. Samuelson, 1937. "A Note on Measurement of Utility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 4(2), pages 155-161.
    32. D. Wade Hands, 2010. "Economics, psychology and the history of consumer choice theory," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 34(4), pages 633-648.
    33. Miles Cahill, 2005. "Is the Human Development Index Redundant?," Eastern Economic Journal, Eastern Economic Association, vol. 31(1), pages 1-5, Winter.
    34. Bruno S. Frey & Alois Stutzer (ed.), 2007. "Economics and Psychology: A Promising New Cross-Disciplinary Field," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062631, April.
    35. John C. Harsanyi, 1955. "Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparisons of Utility," Journal of Political Economy, University of Chicago Press, vol. 63(4), pages 309-309.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Estela Núñez-Barriopedro & Rafael Ravina-Ripoll & Eduardo Ahumada-Tello, 2020. "Happiness perception in Spain, a SEM approach to evidence from the sociological research center," Quality & Quantity: International Journal of Methodology, Springer, vol. 54(3), pages 761-779, June.
    2. Wookjae Heo & John E. Grable & Barbara O’Neill, 2017. "Wealth Accumulation Inequality: Does Investment Risk Tolerance and Equity Ownership Drive Wealth Accumulation?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 133(1), pages 209-225, August.
    3. Takis Venetoklis, 2019. "Do interactions cancel associations of subjective well-being with individual-level socioeconomic characteristics? An exploratory analysis using the European Social Survey," Quality & Quantity: International Journal of Methodology, Springer, vol. 53(6), pages 3033-3061, November.
    4. Knight, S.J; Howley, P.;, 2017. "Can clean air make you happy? Examining the effect of nitrogen dioxide (NO2) on life satisfaction," Health, Econometrics and Data Group (HEDG) Working Papers 17/08, HEDG, c/o Department of Economics, University of York.
    5. Herrera, B. & Gerster-Bentaya, M. & Knierim, A., 2018. "Farm-level factors influencing farmers satisfaction with their work," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277024, International Association of Agricultural Economists.
    6. Beatriz Herrera Sabillón & Maria Gerster‐Bentaya & Andrea Knierim, 2022. "Measuring farmers' well‐being: Influence of farm‐level factors on satisfaction with work and quality of life," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(2), pages 452-471, June.
    7. Lei Li & Yilin Zheng & Shaojun Ma, 2023. "Links of urban green space on environmental satisfaction: a spatial and temporarily varying approach," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(4), pages 3469-3501, April.
    8. Ozge Gokdemir, 2015. "Consumption, savings and life satisfaction: the Turkish case," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 62(2), pages 183-196, June.
    9. Adam Okulicz-Kozaryn, 2023. "Unhappy Metros: Panel Evidence," Applied Research in Quality of Life, Springer;International Society for Quality-of-Life Studies, vol. 18(2), pages 753-763, April.
    10. Yenniel Mendoza & Roger Loyola & Alonso Aguilar & Roberto Escalante, 2019. "Valuation of Air Quality in Chile: The Life Satisfaction Approach," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 145(1), pages 367-387, August.
    11. Ingebjørg Kristoffersen, 2017. "The Metrics of Subjective Wellbeing Data: An Empirical Evaluation of the Ordinal and Cardinal Comparability of Life Satisfaction Scores," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 130(2), pages 845-865, January.
    12. Sasaki, Hiroki, 2016. "Do Japanese Citizens Move to Rural Areas Seeking a Slower Life? Differences between Rural and Urban Areas in Subjective Well-Being," 2016 Fifth AIEAA Congress, June 16-17, 2016, Bologna, Italy 242325, Italian Association of Agricultural and Applied Economics (AIEAA).
    13. Lozada, Gabriel A., 2017. "The Hotelling Rule for Entropy-constrained Economic Growth," Ecological Economics, Elsevier, vol. 133(C), pages 35-41.
    14. David Patiño & Francisco Gómez-García & Alejandro Marín-Serrano, 2022. "Subjective Well-Being and Aversion to Macroeconomic Losses: New Evidence," Journal of Happiness Studies, Springer, vol. 23(2), pages 359-375, February.
    15. Zahwa Al-Ayyash & Maya Abou-Zeid, 2019. "Investigating commute satisfaction differences of private car users and public transport users in a developing country context," Transportation, Springer, vol. 46(3), pages 515-536, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Odermatt, Reto & Stutzer, Alois, 2017. "Subjective Well-Being and Public Policy," IZA Discussion Papers 11102, Institute of Labor Economics (IZA).
    2. O'Donnell, Gus & Oswald, Andrew J., 2015. "National well-being policy and a weighted approach to human feelings," Ecological Economics, Elsevier, vol. 120(C), pages 59-70.
    3. Powdthavee, Nattavudh & Stutzer, Alois, 2014. "Economic Approaches to Understanding Change in Happiness," IZA Discussion Papers 8131, Institute of Labor Economics (IZA).
    4. Hajdu, Tamás & Hajdu, Gábor, 2011. "A hasznosság és a relatív jövedelem kapcsolatának vizsgálata magyar adatok segítségével [Examining the relation of utility and relative income using Hungarian data]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 56-73.
    5. Matthew D Rablen, 2012. "The promotion of local wellbeing: A primer for policymakers," Local Economy, London South Bank University, vol. 27(3), pages 297-314, May.
    6. Welsch, Heinz, 2009. "Implications of happiness research for environmental economics," Ecological Economics, Elsevier, vol. 68(11), pages 2735-2742, September.
    7. Stutzer, Alois & Frey, Bruno S., 2010. "Recent Advances in the Economics of Individual Subjective Well-Being," IZA Discussion Papers 4850, Institute of Labor Economics (IZA).
    8. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2006. "Income and happiness: Evidence, explanations and economic implications," PSE Working Papers halshs-00590436, HAL.
    9. Bruno Frey & Alois Stutzer, 2012. "The use of happiness research for public policy," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 38(4), pages 659-674, April.
    10. García-Mainar, Inmaculada & Montuenga, Víctor M. & Navarro-Paniagua, María, 2015. "Workplace environmental conditions and life satisfaction in Spain," Ecological Economics, Elsevier, vol. 119(C), pages 136-146.
    11. van Hoorn, Andre, 2016. "Reliability and Validity of the Happiness Approach to Measuring Preferences," MPRA Paper 79977, University Library of Munich, Germany.
    12. repec:hum:wpaper:sfb649dp2013-035 is not listed on IDEAS
    13. Bruno S. Frey & Alois Stutzer, 2010. "Happiness: A New Approach in Economics," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 8(4), pages 3-7, 01.
    14. Byela Tibesigwa & Martine Visser & Brennan Hodkinson, 2016. "Effects of Objective and Subjective Income Comparisons on Subjective Wellbeing," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 128(1), pages 361-389, August.
    15. Beckmann, Michael & Cornelissen, Thomas & Schauenberg, Bernd, 2009. "Fixed-term Employment, Work Organization and Job Satisfaction : Evidence from German Individual-Level Data," Working papers 2009/08, Faculty of Business and Economics - University of Basel.
    16. Bruno S. Frey & Simon Luechinger & Alois Stutzer, 2010. "The Life Satisfaction Approach to Environmental Valuation," Annual Review of Resource Economics, Annual Reviews, vol. 2(1), pages 139-160, October.
    17. Stutzer, Alois, 2020. "Happiness and public policy: a procedural perspective," Behavioural Public Policy, Cambridge University Press, vol. 4(2), pages 210-225, July.
    18. Beja, Edsel Jr., 2011. "Subjective well-being approach to the valuation of income inequality," MPRA Paper 34177, University Library of Munich, Germany.
    19. Kehl, Konstantin & Stahlschmidt, Stephan, 2013. "A new perspective on the economic valuation of informal care: The well-being approach revisited," SFB 649 Discussion Papers 2013-035, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    20. Vendrik, Maarten C.M. & Woltjer, Geert B., 2007. "Happiness and loss aversion: Is utility concave or convex in relative income?," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1423-1448, August.
    21. van Hoorn, André, 2018. "Is the happiness approach to measuring preferences valid?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 73(C), pages 53-65.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:soinre:v:121:y:2015:i:3:p:647-674. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.