Econometric approaches Human Happiness
Human Econometrics approach human happiness What Creates Happiness? The economy and the economic policies of government are major concerns for people today. Upon reflection, however, many would agree that the ultimate goal in life should be happiness and satisfaction with life, rather than economic growth, high personal income or a colorful career itself. No doubt, income and consumption (which are what economists normally analyze as proxies of welfare) do contribute to human happiness, but there are probably additional factors. For example, it might be of interest to assess to what extent factors such as marital status, age, gender, educational background, unemployment and living in a big city could affect human happiness We have found that, on average, people are happier if they are female, married, young, college graduates, rich, and not unemployed, than otherwise. This result is intuitively reasonable. It is also consistent with the well-known facts that suicides are more common among middle-aged males, and that the unemployment rate and the suicide rate move together closely. That an analysis of happiness implicitly produces an analysis of suicide is not altogether implausible, and may actually merit further exploration, given the historically high suicide rate in recent Japan . Similar results have been obtained in other developed countries. Although questions like “Would you say you are very happy?” seem rather vague and unscientific at first sight, researchers have confirmed that responses to such questions have strong and reasonable correlations with a variety of important components of human life. It might prove interesting to examine other possible determinants of happiness, including addictive behavior (e.g., smoking and alcohol consumption), personal appearance, crime rate, working and commuting hours, personnel management policy at the workplace and business cycles. Looking Ahead Happiness studies have produced some interesting insights. They have also indicated several issues to be tackled in the future. Firstly, the relationship between happiness studies and economic theory is elusive and needs to be clarified. Secondly, reliable causal inference is not as easy to make as it might appear. A typical analysis, like the one presented above, merely shows empirical associations between a reported happiness measure and individual characteristics. In general, one should be cautious about giving causal interpretations to such observed regularities. For example, it is difficult to determine whether it is really marriage that brings people constant happiness, or whether those who are happy by nature tend to get married (and not divorced). A similar consideration about the direction of causality applies to the relation between unemployment and happiness. Thirdly, it could be that relative considerations such as rivalry and habit are more important than the absolute level of each explanatory variable. That is, a comparison with others or with one’s own past may be more relevant to a person’s subjective assessment of well-being. With richer data and appropriate econometric techniques, these possibilities could in principle be tested. Some progress has already been made in The optimal policies of government and firms depend on the way people’s subjective welfare is determined in actuality. One instance is labor market policy, which we briefly discussed. Another is the pay evaluation and pay policy of firms (such as whether or how a worker’s pay should depend on his/her performance relative to his/her coworkers’), to the extent that worker productivity is a function of morale and welfare. Thus, the research of subjective well-being is potentially of huge practical importance.
