Government decentralisation

The decentralisation of decision making is an alternative means for better fulfilment of the voters’ preferences: individuals tend to leave dissatisfying jurisdictions, while they are attracted to those caring for the population’ spreferences at low cost. The study for Switzerland mentioned above (Frey and Stutzer, 2000) reveals a statistically significant positive effect of decentralisation on subjective well-being. For local autonomy, the proportion of people who indicate being completely satisfied with life increases by 2.6 percentage points, compared to a situation in which the communes are one standard deviation less autonomous vis-à-vis their canton.

Conclusions

Happiness is not identical to utility, but it well reflects people’s satisfaction with life. For many purposes, it can be considered a useful approximation to utility. This allows us to empirically study problems that so far could only be analysed on an abstract theoretical level.

Happiness research adds a considerable number of new insights to well known theoretical propositions. This has been shown with the example of how unemployment, income and inflation affect reported individual wellbeing.

Effects of unemployment

Economists’ views about the costs of unemployment differ. According to the ‘new classical macroeconomics’, unemployment is voluntary. People choose to go out of employment because they find the burden of work and the wage paid unattractive compared to being unemployed and getting unemployment benefits. In contrast, there are a lot of economists who take unemployment to be an unfortunate event, to be avoided as much as possible. To become unemployed is considered to be burdensome and, above all, involuntary. Happiness research is consistent with this latter view and suggests that unemployment strongly reduces subjective wellbeing, both personally experienced and for society as a whole.

Effects of income

Most economists take it as a matter of course that higher income leads to higher happiness. A higher income expands individuals’ and countries’ opportunity set, i.e. more goods and services can be consumed. The few people not interested in more commodities need not consume them; they are free to dispose of any unwanted surplus costlessly. It therefore seems obvious that income and happiness go together.

The empirical research on happiness evidence both supports and contradicts this generally held idea. In line with common thinking, it is found that at a particular point in time, and within a particular country, higher income is associated with higher individual happiness. In contrast, higher per capita income in society seems not to raise reported satisfaction with life in rich western countries. Even at an income level half that of the US, there are only small effects of higher average income on subjective wellbeing. This can be attributed to the rise in aspiration levels going with increases in income.

Date: 2014-12-21; view: 1033