“ Researchers say I’m not happier for being richer, but do you know how much researchers make?”

SHOULD GOVERNMENTS MAXIMISE HAPPINESS?

RICHARD LAYARD

THE AIM

IMPLIED COST-BENEFIT CRITERION

∆W = ∑ f ' ∆ ui > o

Max W = ∑ f (ui)i

s.t. constraints

(f ' > o, f '' ≤ o)

THREE ISSUES

• WHY HAPPINESS?

THE REDUCTIONIST ARGUMENT

• WHY GOVERNMENT?

THE HAPPINESS POLICE?

NO. FREEDOM GOOD FOR U (e.g. HOURS). REVEALED PREF. HAS A MAJOR ROLE.

• WHAT DIFFERENCE DOES IT MAKE?

WHAT DIFFERENCE DOES IT MAKE?

1) INCOME DISTRIBUTION• ui = α log yi + .. (LMN, J.Pub. Econ. Aug 2008)

2) PERVASIVE EXTERNALITY• SOCIAL COMPARISONS (LMN, Oct 2008)

– TAXATION (L, E.J. 1980)

– GROWTH v STABILITY (LNJ, 1991)

• TRUST (AND THE ROLE OF SCHOOLS)

• PARENTING

• ADVERTISING

3) TASTES ENDOGENOUS• RESILIENCE

• MENTAL HEALTH

4) MISTAKES / FUZZY PREFERENCES• SAVING

5) VALUING PUBLIC GOODS

6) MONITORING

GERMAN SOEP WITH FIXED EFFECTSDep. Var. : Life satisfaction (0-10)

log Y 0.324(0.029)

log Y -0.331(0.169)

log Yt-1 -0.011(0.028)

log Yt-2 0.006(0.028)

log Yt-3 -0.057(0.027)

Rsq 0.594

Regressor (1) (2)Trend 0.002

(0.004)Year

DummiesLog Trend Income 0.201

(0.174)0.180

(0.167)

Log Cyclical Income 3.625(1.014)

1.855(1.406)

Unemployment -0.023(0.006)

-0.033(0.007)

Inflation -0.006(0.002)

-0.010(0.004)

R2 0.930 0.943

WEST. EUROPEAN COUNTRIES 1973-2007 Dep. Var. : Mean life satisfaction (0-10)

HAPPINESS

FAMILY WORK INCOME COMMUNITY HEALTH FREEDOM VALUE

S

POLICY CHANGE

e.g sentencing policy

a1

b1