In a peaceful hillside town, Teresa and her family share a moment of joy with a simple bar of convenience store chocolate by the fireplace.
Happiness, characterised by the feelings of joy, gladness, satisfaction and well-being has caught the attention of economists. Why? Well, economists are wrapped around human welfare, and for a long time, were reliant upon observing people’s choices to understand preference. Despite that, they began to discover the domains in which assumptions fall short, and decided to simply ask people about their well-being to unravel the whole happiness puzzle.
Happiness can be gauged through surveys with inquiring questions like “generally speaking, how happy are you with your life?” or “overall, how would you say things are these days, would you say that you are very happy, pretty happy, or not too happy?”. The levels of joy could be measured through a zero-to-ten scale, or just informative data collection.
It’s likely we’ve heard of the term income before, right? On average, higher income is positively associated with people’s happiness. This could be due to the theory that “people with higher income have more opportunities to achieve whatever they desire: in particular, buying more material goods and services, and have a higher status in society.” However, correlations don’t prove causation. Doubtlessly, one of the most essential reasons for this is that individuals compare themselves to other individuals. It is not necessary that the level of income matters, but instead one’s position relative to other individuals. This is the idea of relative income by Robert Pollak.
Let’s say for instance we raise everybody’s income, but raising everyone’s income does not raise happiness for everyone. Reason being? This is because in comparison to others, income has not improved. Various economists in the past have observed the behaviour in which individuals compare themselves significantly to others in relation to income, consumption, status or utility. There is this notion of “conspicuous consumption”, meaning serving to impress other people. People tend to look upwards when making comparisons, thus aspirations tend to be above the level reached. The overall theory can be looked at as a “hedonic treadmill” where aspirations rise with income, and after basic needs are met, relative rather than absolute income levels matter for well-being.
Next, let’s talk about unemployment. A neo-classical economic theory constitutes work as an unpleasant necessity and unemployment being seen as voluntary. Picture it like this: some people think of work as a bit of a downer, and they reckon being unemployed is more of a choice. They opt for unemployment benefits and leisure time over a dissatisfying wage, yet they’ll choose to work if the offered wage meets a desirable threshold of higher income / position. But hold up! There’s also this interesting classic study “Marienthal'' that peeked into the lives of an unemployed community in Austria. Turns out, being out of a job can tend to mess with people big time. It revealed that unemployment takes a toll on individuals, resulting in passive resignation cutting social ties, disruption from daily routines and a sense of lacking contribution to society. Interestingly, a different happiness pattern showed satisfaction through: the self-employed with their work, and the paid employees with job security.
In conclusion, happiness is a subjective experience varying in individuals. It is important to do what you love! While there is this paradoxical concept of a “set point” of happiness that every individual supposedly returns to over time, even after major events like winning the lottery, it’s essential to take that with a grain of salt and remember, happiness depends upon ourselves, Aristotle.
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