Economics and Happiness

Economics is theoretically a social science. Hence, it should be grouped with other social sciences like psychology. However, economists have time and again tried to present themselves as a perfect science. It is for this reason that their models are more based on complex mathematical equations that are tested using empirical validity rather than on simple conjecture. It is also the reason why economists have come up with concepts like utility. In reality utility is very close to happiness and happiness is indeed the end result of all economic pursuit.

Countries like Bhutan have come up with an index called the Gross Happiness Index to measure their economic prosperity. In this article, we will have a closer look at the links between economics and happiness and how both influence each other.

Unemployment and Happiness

Traditional economic theory has always considered work to be a necessary evil. This means that ideally a person would be happier, if they could generate the same amount of income with less or no work! However, research has proved that this is not correct. People with no jobs and no purpose are likely to become depressed and unhappy regardless of the level of income that they maintain. Gainful employment is therefore a factor that positively correlates to happiness. This is unless the employment is exploitative in nature and interferes in the personal life of individuals. Apart from their own employment, the employment rate in society as a whole also affects individuals. People feel happier when they see that others are happy as well. It is difficult to be happy even if you have a job and the economy is in turmoil and all you can see around you is misery!

Income and Happiness

Extensive research has also been conducted into the relationship between income and happiness. Let’s begin at a macro level. Research clearly shows that the populations of developed countries are generally happier than the population of developing countries. However, this cannot be directly attributed to money. Developed countries have more equality between the sexes. Also, they have more respect for human rights and no political turmoil. These are factors that make people feel safe and happy.

Another important statistic to consider is that developed countries like United States and United Kingdom have a far higher rate of depression and suicide that compared to their third world peers. Economists attribute this to distribution of income between different classes in the society. Citizens of third world countries see poverty all around them. Hence they believe that poverty is the norm and adjust with it. Being poor does not have much of an impact on their happiness. On the other hand, citizens of countries like United States are exposed to the lifestyles of rich and famous every day. As a result, they start comparing their own lives with the lives of these celebrities and end up feeling sad as a result.

Advertising and Happiness

Researchers have been clear and unanimous on one aspect. Advertising does have a negative correlation with happiness in any given community. The job of advertising executives is to sell goods and services. They can only do so if they convince the customers that something is lacking in their life. Hence, advertising is aimed at reducing the self image of the consumer and presenting a product as a solution to the reduced self image. Hence countries where mass media is widely used have their consumers consistently bombarded with negative information. If this continues for a long period of time this breeds unhappiness.

Inflation and Happiness

The verdict on inflation is unanimous as well. As the inflation level in societies rises, the unhappiness comes down. This is because inflation is an indirect tax that is aimed at lower income groups. The income of the lower income groups rises at levels below the inflation rate. As a result, people are working harder and harder and end up working for a smaller wage! The lower income households anyways struggle to make ends meet. When inflation makes this situation worse, it breeds extreme unhappiness.

Welfare and Happiness

At the outset, economists were of the opinion that welfare and happiness were positively correlated. The idea of welfare stemmed out of the assumption that if government provided the minimum standard of living for everyone, then the majority of the population would be happy. However, time has shown that as people are given handouts for their survival, their sense of self worth goes down. They are then pulled into this downward spiral of depression, addictions and criminal lifestyle.

Taxes and Happiness

Taxes and happiness have an inverse relation and that comes as no surprise. When people work hard, they want to retain majority of their income. Nothing is more depressing that seeing taxes eat up a large chunk of your incomes especially when these taxes are used for welfare purposes or by corrupt politicians to enrich themselves.

The economic policies of a nation therefore have a direct effect on the happiness and quality of life that will be enjoyed by their citizens. Since the correlation does exist, economists must also take into account happiness as a metric that they need to pay close attention to.


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