Happiness, Economics and Public Policy: A Critique

If politicians and their advisers want to promote the well-being or happiness of citizens they have three ways to find out what they should do. (1) They can analyse the behaviour and the decisions of citizens to find out what they want, in other words: they can try to identify their “revealed preferences”. This is common practice in economics. (2) They can analyse the “stated preferences” of people as they express them explicitly in inquiries, referenda, polls and elections. (3) They can analyse the conditions that make people happy by comparing the conditions of people at different levels of happiness. Economists, like Helen Johns and Paul Ormerod, have an outspoken preference for the first option and they are sceptical about the third. Their argument is unbalanced because they are too critical about the authenticity and complexity of self-reported happiness and not critical enough about the authenticity and complexity of revealed preferences. Economists should appreciate the comparative advantages and additional value of each option and try to find optimal combinations with synergistic effects. Economists should appreciate happiness research as an option to assess the nature and magnitude of “externalities” within their own discipline.