Happiness: A Revolution in Economics (Munich Lectures) (Bruno S. Frey)
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Psychologists have taught us how to measure happiness and thus to fill the concept of utility with life.
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The measurable concept of happiness or life satisfaction allows us to proxy the concept of utility
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overestimate the satisfaction they derive from having a higher income in the future, and they underestimate the utility gained from immaterial aspects of life, such as friendship and social relations.
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It has been suggested that extending individuals' political participation rights and decentralizing political decision making have positive influences on life satisfaction.
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governments should only provide the conditions that allow people to become and remain happy.
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Today there are many ways to proxy utility by measuring subjective well-being,
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as in the literature, the terms 'happiness', 'well-being', and 'life satisfaction' are used interchangeably.
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The idea that individuals have happiness as their ultimate goal in life is not undisputed.
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People sometimes are fully engaged in challenging activities and gain great pleasure from them. They are then subject to a "flow" experience
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outcomes? In the assessment of institutions, it is important to understand whether processes themselves are a source of utility.
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people underestimate the speed with which they adapt to new experiences. As a result of these misguided predictions, there are systematic errors in decision making.
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optimism is important for env sustsinsbility
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differently than persons who are dissatisfied. Happy people are more optimistic, more sociable, and more enterprising,
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they can be expected to have a longer time horizon and to be willing to take more risk, which
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is there a link between happiness and trust?
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increase a person's willingness to help others. Happier people have been found to gain higher pleasure and/or lower psychic costs from aiding others
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esm102 - same situation as for demo trans: it is a system
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Happiness: A Revolution in Economics (Munich Lectures) (Bruno S. Frey)
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Is Happiness a Cause, or an Effect?
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This "modern" view of utility has been influenced by the positivistic movement in philosophy.
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In the vast literature on anomalies in decision making (e.g., Thaler 1992; Frey and Eichenberger 1994), it is questioned whether utility can generally be derived from observed choices.'
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utility in hedonistic terms in the broadest sense. This is emphasized by the term experienced utility, proposed by Kahneman et al. (1997). There are many research questions for which it is useful to take experienced utility, measured by reported subjective well-being, as a proxy for decision utility.
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Kahneman and Krueger (2006) propose a "U-Index" (U standing for 'unpleasant') to avoid this cardinality concern. The U-Index is defined as the fraction of time per day that an individual spends in an unpleasant state.
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people who do voluntary work report higher life satisfaction (Argyle 1999; Meier and Stutzer 2008; chapter 7 below). But volunteering does not necessarily make people happier.
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that richer people, on average, report higher subjective well-being.2 The
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income does "buy happiness."
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Human beings are unable and unwilling to make absolute judgments. Rather, they constantly draw comparisons from their environment, from the past, or from their expectations of the future 4 Thus, people notice and react to deviations from aspiration levels.5
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the development of income and happiness diverges like open scissors.
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Human beings are unable and unwilling to make absolute judgments. Instead, they are constantly drawing comparisons from the past or from their expectations of the future.
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Evidence from Peru and Russia indicates that economic development is accompanied by extensive social mobility.
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on the other hand, it suggests that the notion that people in poor countries are happier because they live under more "natural" and less stressful conditions is a myth.
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In many countries nowadays, watching television occupies almost as much time as working.
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Over their entire life (including youth and old age), many people spend more time in front of their TV than doing paid work.
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The theory of revealed preference has been questioned, most prominently by Sen (1982, 1995).
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They have a self-control problem, which is induced mainly by television's offer of immediate benefits at very low immediate costs;
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the extent of television viewing does not generally maximize utility, and on average people become less happy.'
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These causality issues cannot be resolved with an extensive set of control variables in a multiple regression analysis or with panel data. Instead, it would be advisable to study large-scale, externally influenced changes in people's opportunities for watching television.
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Television lends itself to overconsumption in the sense that individuals later regret that they devoted so much time to viewing.
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At the same time, it offers entertainment value and is considered to be one of the best ways of reducing stress.
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In general, self-control problems and time-inconsistent preferences have been confirmed in many laboratory experiments; and the theory has been applied to many issues.
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the empirical results show that individuals have systematically imperfect foresight and control over their own behavior in a major present-day human activity.
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Two main avenues have been pursued: Stated Preference Methods
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Revealed Preference Methods
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The most prominent examples are the Hedonic Method, the Travel Cost Approach, and the Averting Behavior Method. Revealed Preference Methods are based on stringent assumptions, crucial elements are inherently difficult to measure, and non-use values cannot be captured.
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Life Satisfaction Approach
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used to value a wide range of public goods and bads, and negative and positive externalities. Hitherto, the approach was used only to value externalities in the environmental realm.
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The first section considers the evidence that citizens are made happier when the institutions of direct democracy strengthen political participation rights.
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the finding that more decentralized decision making increases individual happiness.
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More basic is the advice that happiness should come as a side product and cannot be achieved by aiming at being happy.
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"hedonic paradox."
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Kahneman (1999) emphasizes the hedonic quality of current experience as a major determinant of happiness.
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Children lower parents' life satisfaction, but make them happy once they leave the household.
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Economists' research on happiness has produced a substantial number of interesting insights into the determinants and the nature of happiness. These are some of the major results: • Most people, during most periods, in most countries, are satisfied with their lives. • Economic conditions-income, employment, price stability, fair income distribution-are important determinants of happiness. • Non-material aspects-family, friendships,
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other social ties-matter greatly for happiness. • People tend to adjust to their basic level of happiness after positive and negative life events, but the speed and the extent of such adjustment differ depending on whether it relates to income, employment or other areas. • People are status seekers and always compare themselves to others. • Marriage makes people happy-but not for long. • Children lower parents' life satisfaction, but make them happy once they leave the household. • Extensive television viewing makes active people less happy. • Helping others by volunteering and by giving financial support increases happiness. • People make systematic errors about their happiness with respect to both the past and
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the future (misprediction); they are subject to weakness of will. • Procedural utility matters to happiness above and beyond outcome utility. • Culture has little effect on the marginal effect of the various determinants of happiness. • Political institutions-in particular, opportunities for citizens to participate via democracy and federalism-are significant determinants of life satisfaction. • The value of public goods can be measured (using the Life Satisfaction Approach).
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