Income and happiness: Evidence, explanations and economic implications

Abstract

“Every pitifulest whipster that walks within a skin has had his head filled with the notion that he is, shall be, or by all human and divine laws ought to be, ‘happy’ ” (Thomas Carlyle). 1. Issues Studying the causes and correlates of human happiness has become one of the hot topics in economics over the last decade, with both the size and depth of the literature increasing at an exponential rate (Kahneman and Krueger, 2006). 2 To illustrate, a search of ECONLIT for journal articles with either ‘Happiness’, ‘Life Satisfaction ’ or ‘Well-being ’ in the title, identifies 465 published articles between 1960 and 2006. Of these 363 (78%) have been published since 1995, 285 (61%) have been published since 2000, and one-third of the literature (37%, or 173 articles) has appeared in print in just the last three years. 3 Focusing only on the period 2000-2006, this measure of economists ’ interest in the ‘economics ’ or ‘science ’ of happiness places that interest at roughly half the level of interest in ‘Wages ’ and just below that in ‘Discrimination’. However, happiness is quickly catching up: it is in its ‘industrial revolution’ stage. A search for Working Papers in SSRN or RePEc confirms the booming interest in the economics of happiness. While the vast majority of the studies in this literature are empirical,