Happiness and economics: insights for policy from the new ‘science’ of well-being

Abstract

Behavioral economists’ revival of homo-sapiens now includes the study of happiness. The analysis is based on surveys of the subjective well-being of myriad individuals within and across countries. It is a tool for better understanding human well-being, and for answering questions that revealed preference based approaches cannot answer, including the welfare effects of institutional arrangements individuals cannot change; of choices that are the result of addiction and self-control problems; and of situations in which they do not have agency. This paper reviews the methods; key research questions, including the causal properties of well-being; and potential policy applications.