Dr. Maya. K . Neeraj Kumar
Happiness, often defined as a state of mind or feeling characterized by contentment, love, satisfaction, pleasure, or joy, is a concept that spans all spheres of human life. Traditionally, happiness has been considered an integral part of both philosophy and psychology. Philosophers like Aristotle viewed happiness as the ultimate end, the final result of all human actions. Psychology, particularly positive psychology, examines the mental and emotional aspects of happiness, exploring how individuals can achieve a fulfilling life. However, the study of happiness is not confined to these fields alone.
Economics, too, has long been intertwined with the concept of happiness. Adam Smith, often called the “Father of Economics,” addressed happiness in his works The Wealth of Nations (1776) and The Theory of Moral Sentiments (1759). Smith believed that happiness was the ultimate goal of life, but he also emphasized that the relationship between wealth and happiness was not straightforward. In The Theory of Moral Sentiments, he noted that the belief that the rich are happier than the poor is often a deception. While wealth, social recognition, and fortune may appear to lead to happiness, Smith suggested that these external markers do not guarantee genuine well-being. This nuanced perspective on happiness in economics was further developed by Jeremy Bentham, who introduced the concept of utilitarianism. Bentham’s principle of “the greatest happiness for the greatest number” established happiness as a key measure of societal welfare. His emphasis on utility, defined as the balance of pleasure over pain, laid the groundwork for utility theory, later expanded by neo-classical economists like Menger, Jevons, and Walras. Through this lens, economics contributes valuable insights into the pursuit of happiness at both individual and societal levels.
However , the neo-classical economists further followed the Bentham concept of utility, but they focused on utility in the context of individual choice and market behaviour. Bentham’s utilitarianism was about maximising social welfare by increasing happiness and minimising suffering. Unlike Bentham’s broad social focus, Jevons, Walras, and Menger were interested in how utility drives market behaviour, price formation, and resource allocation. It changes the focus of the transformation of money to the true well-being of the people and makes it more market-centric. Neoclassical or mainstream economics, however, tends to overlook the process of transforming commodities into happiness, limiting its discussion to mere transactions and market dynamics without delving into the deeper aspects of our well-being. In his book Principle of Economics, Marshall emphasised that while having wealth and material resources is essential, it is not the only factor contributing to human well-being.
Recent Developments in Conceptualising Welfare
According to neo-classical economists such as Menger, Jevons and Warlas, consumption plays a vital role. An increase in income leads to higher consumption, which in turn enhances utility. It was widely understood that improving people’s welfare could be achieved through increasing income. According to Arthur Pigou, welfare can be expressed directly and indirectly through monetary measures. However, in the recent development in conceptualising people’s welfare, Richard Easterlin’s work in 1974 introduced the Easterlin Paradox, which challenged the direct relationship between happiness and income, suggesting that higher income does not necessarily equate to greater happiness. This insight prompted academics and professionals to recognise that human well-being is a multifaceted and complex concept that cannot be fully represented by income alone. A prominent advocate for a broader understanding of welfare is Amartya Sen (1999). His capabilities perspective argues that development should focus not just on economic growth but also on social opportunities such as equality, health, and political freedoms. Sen’s approach has significantly influenced the creation of alternative development indicators, like the Human Development Index (HDI), which evaluates progress across various dimensions of human welfare. Moreover, the subjective well-being or Happiness approach complements these alternative perspectives on development and well-being. Subjective well-being surveys allow individuals to express their happiness directly rather than being categorised based on objective indicators like GDP. This method directly assesses welfare outcomes. According to Frey (2010), research on happiness indicates that reported subjective well-being is a better measure of overall social and economic welfare.
Happiness and Policy Decision
Happiness studies are essential for understanding the complexities of individual well-being, particularly within the context of a rapidly developing economy. One significant aspect of these studies is their ability to provide insights into the relationship between income and life satisfaction. Contrary to the conventional belief that higher income leads to greater happiness, research reveals a nuanced dynamic where increased income may reduce the likelihood of low life satisfaction without necessarily enhancing high life satisfaction. This understanding helps both policymakers and individuals set realistic expectations and priorities. Additionally, happiness studies offer valuable policy implications by identifying key demographic and socio-economic factors, such as education, health, and social capital, that positively influence well-being. By addressing these determinants, governments can implement targeted interventions to enhance quality of life beyond mere economic growth.
Furthermore, happiness studies highlight the adverse effects of environmental pollution on life satisfaction, emphasizing the need for sustainable development. Research indicates that individuals often tolerate additional pollution when compensated financially, rather than proactively seeking to minimize it. This finding is critical for shaping environmental policies that balance economic progress with ecological preservation. Another important contribution of happiness studies is their assessment of life satisfaction efficiency, which measures how effectively resources are converted into well-being. By identifying areas of inefficiency, particularly those exacerbated by environmental pollution, these studies offer actionable insights for improving societal welfare. Overall, happiness studies provide a comprehensive understanding of the factors that shape individual and collective well-being, guiding the creation of policies that promote sustainable and inclusive growth.
While happiness research has expanded significantly in developed countries, there remains a notable lack of similar investigations in India. Given the country’s unique socio-economic landscape and rapid development, exploring the determinants of happiness from an economic perspective can yield valuable insights. Such research can inform policymakers on how to effectively enhance well-being by addressing factors like income inequality, environmental challenges, and access to quality healthcare and education. Understanding these dynamics within the Indian context will contribute to a more holistic approach to sustainable and inclusive growth.
(Dr. Maya. K is Assistant Professor Department of Economics Christ (Deemed to be University) Bengaluru, Neeraj Kumar is Research Scholar Department of Econometrics University of Madras)
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