Economic Policy Review ISSN 1313 - 0544

Economic Development is the Shortest Route to Happiness

Author: Petar Ganev / 20.12.2007
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The economics of happiness is one of the most modern trends in the current economic science and theory. This is an approach for valuation of prosperity, which combines techniques used by economist with those most frequently used by psychologists. While philosophers, psychologists and poets for centuries study and attempt to describe happiness, the economists recently entered this area. Some of the early economists and philosophers, starting with Aristotle and reaching to Bentham, Mill and Smith incorporated the pursuit of happiness in their work. However, with the development of economics as a science this remained on the backplane and prosperity was defined in a stricter manner, mainly associated with the economic results and the personal income. 

Richard Easterlin (1974) is the first contemporary economist, which introduces the connection between happiness and economic results.  In his study Easterlin formulates what would later become known as the "Easterlin paradox". In its simplest form, this paradox states that above a low level of income, economic growth does not improve human welfare. Or in other words, money could not buy happiness! 

This claim provoked economists to look for new parameters for description and evaluation of human development and prosperity, which are different from the traditional. Income continuous to be important, however other categories come forward such as: social and family status, health, education, working conditions, culture, etc. The development in this area of economics begins to have greater effect on various public policies, such as public finance (government expenditure and taxes), social policies and labor markets.

All this however, is based on the idea that we could measure and hence provoke happiness. Such claim however is more than wrong - it is inmoral.

In order to define the link between economics and happiness, either by Easterlin or any other economist, it is necessary first to measure happiness in various countries at various periods of time. This measurements has always been made in the following manner - through questionnaires given to a large group of people, which individually determine the level of their own happiness, for example on a scale from 1 to 10.  Is it possible however, such an exercise to provide satisfactory and close to the actual result? It is unlikely that someone would ever fairly say such words as "I am happy around 7". The quantitative measurement of happiness is a senseless exercise. People cry and smile every day and in the best case could evaluate their current state and claim that they are happier compared to a previous period.

All of this is placing a significant doubt on the contemporary economic approach to happiness. This approach is fundamentally different from the more philosophical view of the early philosopher-economists. Smith, Bentham and Lock study "the pursuit of happiness", not the happiness itself. Actually, Bentham and not Thomas Jefferson, is the cause "the pursuit of happiness" to be part of the Declaration of Independence on the same level as the right of live and liberty. While happiness itself is not directly related to economic results, the pursuit of happiness plays an important role in the development of every society.  

In order to show clearly the connection pursuit of happiness - human development - happiness, we have to define first the measurements of human development. In general, they could be classified in seven categories: human rights, environment, management, economic growth, education, health and culture.  These seven scales of development however have different value when we are talking about the goals of development and the means for that development. Actually in this division is hidden the difference between the "pursuit of happiness" and "happiness". Happiness is associated with the goals of development, while the pursuit of happiness provokes the means for such development.

Hans Rosling (2006) makes an attempt to distinguish the different measures of human happiness by indicating which are more means and which are actually the goals of the development:

 

Means

Goals

Human rights

+

+++

Environment

+

++

Management

++

+

Economic growth

+++

0

Education

++

+

Health

+

++

Culture

+

+++

Naturally the economic growth is the most important means for development and the strongest manifestation of the "pursuit of happiness". Actually the growth allowed to a very large number of people around the World to avoid the trap of poverty and to live better. That means that life is something more than an attempt to survive. It is not possible to talk about any happiness if people are fighting for their food every day. Money may not buy happiness, but they certainly could buy food, shelter and medication. On the other hand, the main goals of development are human rights and cultural development. Culture is the most important thing in life, since it is what brings joy to life. Culture and human rights however are way above economic growth.

This is the main difference in the approach of the early and contemporary economists to happiness. More than two centuries ago the economists focused on the relation pursuit of happiness - economic results. Today the focus is entirely on the relation economic result - happiness. The "Easterlin paradox" itself shows, that the economists which have attempted to explain economics purely philosophically and have avoided complex models and quantitative indicators, have been able to find the true relation between happiness (pursuit of it) and the economic consequences.