Happiness, Philosophy and Economics

Happiness research is a new, rapidly growing and provocative aspect of economic science. In fact, there are now over 1,800 published papers on the subject, and it might be said that the ‘dismal science’ has come to be obsessed with happiness. This research provides a number of interesting and unique contributions, scores of which relate to fundamental economic theories, including standard consumer behaviour theory, and, more generally, welfare economics. The best-known of these previous findings is the ‘Easterlin Paradox’ – the finding that self-reported happiness does not always appear to grow in tandem with rising per capita income levels, thereby rather confronting the expectations of orthodox economics. One focus of this dissertation therefore is to extend the empirical evidence on this score and to test specific hypotheses designed to throw further light on this seemingly paradoxical relationship between income and happiness. ‘Happiness’ remains an elusive concept, and while its subject matter was long deemed to be so subjective and intangible as to make empirical ‘science’ impossible, that ‘impossibility’ is far from accepted now. Even today, however, definitional and conceptual issues remain a significant challenge, and for that reason this dissertation accepts the need to focus on both empirical and philosophical dimensions of happiness economics. The empirical side of this dissertation sets out to address two main research questions. First, we endeavour to test whether the relationship between income and subjective well-being is subject to a satiation or ‘basic needs’ point. This objective is achieved through a new technique developed in this dissertation and also through well-known econometric techniques used for detecting threshold effects. In the main, using data from multiple cross-country datasets, the results imply diminishing marginal utility to income, but no evidence of a satiation point. The second empirical objective addresses the issue of whether ‘ignorance is bliss’, and incorporates less familiar attitudinal questions within the empirical framework in order to investigate the question of whether an examined or an unexamined life is linked to happiness. Addressing this objective requires the use of factor variables and interaction terms in ordered choice models. In such contexts, the correct partial effects are not routinely calculated in standard econometric software, and, in consequence, correct formulae are derived here for calculating these partial effects for an ordered probit model. Using two international datasets, we find the direct effect on life satisfaction of often spending time reflecting on the meaning and purpose of life is negative, although this effect is mitigated if an individual reports to be religious.Moreover, attitudes towards the meaning of life are found to have differing effects on subjective well-being: individuals who do not believe that there is meaning to life or who believe that there is little one can do to change the course of their lives are unhappier than those who hold opposite views. In turn, individuals who believe that life is meaningful because God exists or who believe that the meaning of life must come from the individual are happier than those who disagree with such outlooks. Taken together, the results on both research questions imply a possible need to redefine some major welfare goals at both domestic and international levels. In order to ensure that the importance of highly significant definitional questions is not just glossed over, this dissertation includes a second, economic philosophy dimension, which broaches questions raised by alternative definitions of happiness. In this context it is necessary to address critiques of utilitarianism and welfare economics, and in so doing to address their underpinning a priori understandings of such keywords as ‘man’ (‘humankind’), ‘freedom’, ‘rationality’, ‘teleology’, and ‘ontology’ – and hence ‘happiness’. Several economists, including a small minority writing explicitly about ‘happiness economics’, have already sought to do this – for example Myrdal, Sen, Etzioni, Tilman, Schumacher and Aldred – but even within this group there remain controversies and divisions. An attempt is made here to add clarity to the understanding of the wellsprings of those divisions. This is done by exploring the recent methodology writings of Tony Lawson and others, and – in keeping with the present surge of emphasis on pluralism in the teaching of economics – by extending the range of alternative philosophical teachings about the meaning of happiness to include the alternative conception of human well-being embedded in the writings of prominent Catholic thinkers. In this way, the ability to offer a critical perspective on the claims made in the mainstream happiness economics literature is sharpened, as is the ability to be wary of prospective pitfalls in deriving possible public policy reforms from the extant empirical literature. In this dissertation, contributions are thus made in three areas, namely: in developing econometric techniques; in analysing data and extending extant empirical results; and in highlighting definitional and philosophical issues important to the apprehension of debates on happiness. Ultimately both the empirical and economic philosophy sections of this dissertation throw light on the derivation of policy implications