Some Uses of Happiness Data in Economics

TLDR

Happiness research uses large‑scale survey responses to empirical measures of individual welfare, enabling economists to examine micro‑ and macroeconomic questions—from income‑utility relationships to inflation‑unemployment tradeoffs and public policy—often with only mild assumptions about interpersonal utility comparisons. The authors contend that, given the centrality of utility in economic theory, happiness data deserve serious consideration in empirical research.

Abstract

Happiness research is based on the idea that it is fruitful to study empirical measures of individual welfare. The most common is the answer to a simple well-being question such as “Are you Happy?” Hundreds of thousands of individuals have been asked this question, in many countries and over many years. Researchers have begun to use these data to tackle a variety of important questions in economics. Some require strong assumptions concerning interpersonal comparisons of utility, but others make only mild assumptions in this regard. They range from microeconomic questions, such as the way income and utility are connected, to macroeconomic questions such as the tradeoff between inflation and unemployment, including large areas in political economy. Public policy is another area where progress using happiness data is taking place. Given the central role of utility notions in economic theory, we argue that the use of happiness data in empirical research should be given serious consideration.