Beyond Needs Gratification:

Happiness Economics as

Human FlourishingJovi C. Dacanay

School of EconomicsUniversity of Asia and the Pacific

14th Young Economists' Convention8th International Conference

March 6-7, 2015 De La Salle University Henry Sy Sr. Building

1. Beyond Needs Gratification: Nature of Economics

2. Foundations of Economic Thought

3. Happiness as Objective and Subjective Well-Being

4. Economics towards human flourishing

Outline

What is the nature of economics?According to Mankiw (2011). Economics is the study

of how society manages its scarce resources.

What is the nature of economics?According to Robbins (1952). It is the science which studies human behavior as a relationship between ends and scarce means that have alternative uses.

What is the nature of economics?According to Samuelson (1967). It is the study of how men

and society choose, with or without the use of money

The discoveries of economics lead to the formulation of

economic policy.

A high level of theoretical conceptualization with methodical rigor but a failure to operationalize the

maximization problem into the actual achievement of happiness.

Why? Emphasis on the satisfaction of wants as the main goal of economics. Sidestep wealth creation. “wealth is

a fundamental concept in economics indeed, perhaps the conceptual starting, no consensus on what is

wealth.” (Heilbroner 1987)

A Richer concept of Wealth Creation (Georges Enderle 2010)

“Making money” can be destroying wealth while creatingwealth can be losing money.

A thorough understanding of wealth creation enables us tosharpen our economic critique of fashionable and short-sightedmanagement recipes and to bring the power of ethics to bear

where it matters most. (Enderle 2010)

St. Thomas Treatise on Justice influenced

more than 6 centuries of authors

on economics, including

British economists such as Hutcheson,

Adam Smith, Austrian Economists such as Menger and

Böhm-Bawerk.

Source: Chafuen (2003)

Source: Chafuen (2003)

The personal desire to achieve

happiness has become an impetus

for economists, sociologists and psychologists to determine the

attributes explaining happiness.

Happiness as Objective and

Subjective Well-Being

Necessary conditions for human flourishing:1st. Basic material goods to thrive and survive in existence2nd. Participate as an intelligent and free agent in the market economy

Table 1. Four Qualities of Life  Outer Qualities Inner Qualities

Life-chances

Livability of environment. Refers to good living conditions.

Synonymous to welfare and well-

being.

Life-ability of the person. How well people are equipped to cope with the problems of life, fitness

or health.

Life-results

Utility of Life. A good life must be good for something more than

itself, some higher value such as

ecological preservation or cultural

development.

Satisfaction. Inner outcomes of life. It refers to the quality-of-life

in the eye of the beholder. Subjective appreciation of life.

This is commonly referred to by terms such as 'subjective

wellbeing', 'life-satisfaction' and 'happiness' in a limited sense of

the word. Source: Veenhoven (2000, 2010)

Table 2. Four Kinds of Satisfaction

Passing Enduring

Part of Life Pleasure Part-Satisfaction

Life-as-a-whole

Peak Experience

Life-Satisfaction (Happiness)

Source: Veenhoven (1984, 2000, 2010)

Table 3. Comparison of Selected Countries 

Life Satisfaction

as Contentment

Over-All Happiness

Real Gross National

Income per Capita (2008)

In US$

Human Development

Index 2010

Non-Income Human

Development Index 2010

Gini Coefficient 2000-2010

Economic Freedom

Index 2006-2010

Norway 8.1 7.53 58,810 0.94 0.954 25.8 68.8Australia 7.9 7.36 38,692 0.94 0.989 35.2 81.68Bulgaria 4.4 3.79 11,139 0.74 0.795 29.2 63.48Brazil 7.6 6.41 10,607 0.70 0.728 55.0 57.12Thailand 6.3 5.88 8,001 0.65 0.683 42.5 63.24Philippines 5.5 4.67 4,002 0.64 0.726 44.0 56.28Indonesia 5.7 4.89 3,957 0.60 0.663 37.6 53.44India 5.5 5.54 3,337 0.52 0.549 36.8 53.68Zimbabwe 2.8 3.48 176 0.14 0.472 50.1 27.82Source: Human Development Report 2010, World Values Survey, Gallop World Poll

Figure 1. Happiness and its Components

Source: Veenhoven (2009)

Global Assessment

Sub-Totals

Information Basis

OVER-ALL HAPPINESS Satisfaction with one’s life-as-a-whole

Hedonic Level of Affect Balance of pleasant and

unpleasant affect

Contentment Perceived realization

of wants

Affective Experience Cognitive Comparison

Table 4. Explanation of Over-all Happiness and its ComponentsConcept Definition Empirical Consequences

Over-all Happiness

The degree and attitude to which an individual judges the overall quality of his life-as-a-whole, drawing on different sources of information, called ‘components’ of happiness.

How well we live up to standards of the good life, how well we feel affectively.

Hedonic level of Affect

Feelings, emotions, moods, with its different dimensions: active–inactive, and, pleasant–unpleasant (‘hedonic tone’).

Assessment is in terms of pleasantness in feelings, emotions, moods.

Does not presume subjective awareness of an average level.

One can feel good most of the time, without being fully aware of that.

Contentment

Evaluate their life with the use of reason and compare life-as-it-is with notions of how they want life-to-be.

Presupposes that the individual has developed some conscious wants and has formed an idea about their realization

Source: Veenhoven (2009)

Table 7. Variables used in the Regression

Life Satisfaction (LS)Over-all Happiness (Life satisfaction as best-worst averaged from 2006 to 2009) and Life satisfaction (contentment, averaged from 2006 to 2009). These indicators were obtained from the World Values Survey

Non-Income HDI (NINCHDI)

Non-Income Human Development Index (HDI) for 2010. This variable captures the effect of the gratification of basic needs to life satisfaction.

Real Gross National Income per Capita (INCOME) and the Inequality of Income

Logarithm of gross national income per capita for 2010, obtained from the UNDP Human Development Report for 2010. The Inequality of Income Variable used is the GINI Coefficient averaged from 2000 to 2010.

Economic Freedom Index (EFI)

Economic Freedom Index averaged from 2006 to 2010. The compounded growth rate of the economic freedom index from 1995 to 2010 shall also be to included to incorporate the effect of sustained levels of economic freedom for some countries, obtained from the 2011 Economic Freedom Index published by the Heritage Foundation, Inc.

Subjective Well-Being (SWB)

Subjective well-being indicators, obtained from the Gallup World Poll and used in the UNDP Human Development Report for 2010, which include the following: percentage of respondents who perceive that there is respect of persons in society, have social support networks and have a purpose in life; standard of living, job, personal health satisfaction and negative experience. Income aspiration variable, hedonic adaptation variable (uses the compounded growth rate of the economic freedom index from 1998 to 2010, and, the life aspiration variables) all which are expected to be positive and significant for high HDI countries

Hypothesis 1. Life satisfaction (contentment) and over-all

happiness can be explained by the gratification of basic needs.

1.00.80.60.40.2

8

6

4

2

12.010.59.07.56.0

8

6

4

Con

tent

men

t

Log(Real GNI per capita)

Ove

r-A

ll H

appi

ness

Non-Income Human Development Index

Matrix Plot of Life Satisfaction (Contentment) and Over-all Happinessversus Log(Real Gross National Income per Capita) and the Non-Income HDI

Hypothesis 2. Life satisfaction (contentment) and over-all happiness increase when other variables

which incorporate affective experience, adjustment of standards, and, the inclusion of another basic

need such as economic freedom, all of which characterize human flourishing, are included.

Table 10. Coefficients of the Regressions on Over-All Happiness and Contentment using all indicators of Human Flourishing

Variable Expected Sign

Happiness as Contentment Over-All Happiness

All Nations

High HDI

Medium to Low

HDI

All Nations

High HDI

Medium to Low

HDI C +/- 0.12ns -2.72ns 2.59ns -3.64*** -6.14*** 0.72ns

Gratification of Basic Needs Log (Real Gross National Income per Capita) + 0.31*** 0.35** -0.04ns 0.35*** 0.27* 0.21**

Non-Income HDI + 1.04** 1.78* 1.58** 0.40ns 0.61ns 1.10** Economic Freedom (2006-2010) +/- -0.003ns -0.018** 0.027* 0.004ns -0.007ns 0.007ns

Growth in Economic Freedom (1998-2010) +/- -0.04ns 0.04ns -0.016ns -0.03ns 0.04ns 0.02ns

Social Construction Gini Coefficient (2000-2010) +/- -0.001ns 0.014* 0.005ns -0.003ns 0.009* 0.002ns

Comparison Income Aspiration +/- -2.03*** -1.50* -3.01*** 1.89*** 3.69*** 0.24ns

Reflected Appraisal Having a Purpose in Life + 0.015** 0.019** 0.003ns 0.01* 0.017*** -0.001ns Presence of Social Support Networks + 0.010** 0.021*** -0.001ns 0.01** 0.016** -0.002ns

Affective Experience Personal Health Satisfaction + -0.002ns -0.01ns 0.012ns 0.007* -0.009ns 0.03***

Job Satisfaction + 0.012** 0.03** 0.002ns 0.005* 0.027** 0.001ns Standard of Living Satisfaction + 0.03*** 0.028*** 0.03** 0.02*** 0.028*** 0.002ns

Negative Experience - -0.004ns -0.018* 0.015ns -0.007ns -0.01* 0.005ns

R2 adjusted

0.85 0.88 0.65 0.86 0.84 0.77 Standard Error of the Regression 0.43 0.34 0.38 0.53 0.42 0.57

Summary of Results

The ability of chosen categories to explain happiness as contentment, that is, more than mere pleasure shows that the desire for happiness is

consistent, follows a logical pattern, and is stable over time, when analyzed from a cross-section of about 80 countries.

Enrichment of Economic Concepts by Going Back to its Roots

• Qualitative variables such as happiness can be explained by economics, using its tools for analysis

• Reason: it has stable qualities because the agents move about life with a life-enduring goal.

• This is nothing more than a need to return to the influence of natural law, via late scholastic thought on the reality of the behavior of the economic agents

Beyond Needs Gratification:

Happiness Economics as

Human FlourishingMain References:

• Barrera, Albino (2001) Modern Catholic Social Documents and Political Economy, Washington DC: Georgetown University Press

• Bruni, Luigino, Pier Luigi Porta, editors (2007) Handbook on the Economics of Happiness Edward Elgar: Cheltenham, UK

• Chafuen, Alejandro (2003) Faith and Liberty: The Economic thought of the Late Scholastics, Lexington Books, USA: Acton Institute

• Enderle, Georges (2010) “A Rich Concept of Wealth Creation Beyond Profit Maximization and Adding Value, chapter 2, Fairness in International Trade, Geoff Moore, Editor, Durham, UK: Springer, pp. 9-26

• Gregg, Samuel (2001). Economic Thinking for the Theologically Minded. Maryland, USA: University Press of America

• Hausman, Daniel M. and Michael S. McPherson (1993). “Taking Ethics Seriously: Economics and Contemporary Moral Philosophy.” Journal of Economic Literature. Volume XXXI (June 1993). pp. 671-731

• Heilbroner, R. L. (1987), ‘Wealth’, in J. Eatwell, M. Milgate and P. Newman (eds.) The New Palgrave: A Dictionary of Economics, Vol. 4 (Macmillan, London), pp. 880–883.• Minkler, Lanse (1999).“The Problem with Utility: Towards a Non-Consequentialist / Utility Theory Synthesis.”

Review of Social Economy. Vol. 57. pp. 4–24• Peil, Jan and Irene van Staveren (2009) Handbook of Economics and Ethics, Cheltenhan, UK: Edward Elgar• Pontifical Council for Justice and Peace (2011) Social and Ethical Aspects of Economics. A Colloquium in the

Vatican. 2nd Edition. Vatican City• Yeungert, Andrew (2003). Boundaries of Technique, Acton Institute, Grand Rapids, Michigan.

Beyond Needs Gratification:Happiness Economics as

Human Flourishing

Jovi C. DacanaySchool of Economics

University of Asia and the Pacific