Tag: policy

The economics of happiness

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What role does happiness play in your decision-making?

Not that much according to most economic theory. Humans are treated as completely rationale beings – Homo Economicus. We’re supposed to decide systematically on what is best for us (to maximise utility) based on trading off costs and benefits that can all be quantified.

But we know this isn’t the case in practice. From De Bono’s work on learning 25 years ago to the latest neuroscience research on how the brain functions, the role of our emotional responses is being shown to be more and more central in shaping how we act.

And happiness? 

It’s not a straighforward concept to define. Aristotle thought it was about looking back at the whole of your life having tried to exhibit the ‘virutes’. Betham considered the greatest good for the greatest number of people. Modern surveys of happiness – such as the Oxford Happiness Questionnaire – use a rich blend of measures, also including judgements about laughter, joy and elation.

Nonetheless, the Cambridge economist Jonathan Aldred in his new book ‘The Skeptical Economist’ thinks that to understand the big value judgements of our age – on things such as global finance, climate change and development aid – we need to work with the idea of happiness as a factor in human endeavour.

Clients of ours in government reached the same conclusion when working on some scenarios of possible future changes in society. Happiness is a function of us all being social creatures. A British Medical Journal study from 2008 (based on 20 years of data) showed how happiness spreads between individuals within a network of friends and contacts. This has implications for the workplace as well as for us personally.

All those you deal with – customers, colleagues and the like – are making judgements influenced by their happiness. That might be worth thinking about.

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