An Economist’s Thoughts on Happiness

Yale’s business school just published an interesting interview with Betsey Stevenson-my favorite economist. And yes, the usual disclosure applies: this is partly because she’s an interesting coauthor and colleague, but also because she’s my partner. She makes an interesting point about the interplay between happiness research and behavioral economics:

For a very long time, we believed the best thing to do was just look at what people do and infer their preferences from their behavior. But we’ve started to learn that there are some domains where that is hard to do… I think one of the richest potential areas for happiness data is in the area of behavioral economics – in situations where the way people behave may not actually reflect their true, underlying preferences.

But she also warns economists not to get too carried away:

There is a real question of whether happiness is the same thing as utility. Gary Becker has argued quite forcefully that they are not the same thing, that they should not be used interchangeably, that instead we should think of happiness as being one component of utility. I agree with his point that there is probably more to life than even life satisfaction. I know that sounds almost oxymoronic, but perhaps we’re missing a sense of greater purpose or fulfillment.

The interview is interesting throughout, providing a provocative account of the state of knowledge on economics and happiness. Read the full interview, here.

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  1. Midge McBride says:

    I thoroughly enjoyed your book, “Superfreakonomics”. what a breath of fresh air for a “crazy” like me. (I’m not alone!)Re –page 8 & 9— In Vancouver, B.C.,when I was a kid, the milkman and breadman came in horse-drawn carts leaving the manure on our paved street but my Dad saw thee opportunity and to the dismay of my “proper” English Mom scooped it up —dug it into our garden and produced the best vegetables in the block. (Besides feeding 13 kids) Re-Page 177– Hooray for the Intellectual Ventures! Wonderful! Re- page 186 “Dark leaves absorb more incoming sunlight than —” So when there was all that talk about the melting arctic ice I sent an e-mail to CBC News Network suggesting that all the WHITE styrofoam packing that protects most of the things we buy and that my recycling company won’t accept should be dropped into the DARK arctic ocean to float around and reflect the heat of the sun! I heard their laughter all the way across Canad. I also suggested that rather than waiting till a child or soldier or ?? steps on a landmine the place (Princess Di walked across a field) should be bombed with ice chunks! Okay—stones! Okay a machine gun! Maybe they didn’t like me asking if this would put the makers of prosthetic limbs or the funeral homes out of business.!!! —page 204 As a retired nurse I certainly have to agree with the report “To Err is Human” and the fact that doctors don’t wash their hands often enough and not that well. Nurses are also at fault to a lesser degree but at we were often tested using red dye before hand washing with a “light” inspection showing up our good or bad technique. A reminder that sometime ego gets in the way of an innocent patient’s health or life! So “To Err is Human” is a poor excuse! Just call me courageous but doctors hand washing should be tested and their handwriting tested to qualify to write out orders!!! Just call me crazy —-get in line!!! Can’t wait for your next book!

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  2. Aaron says:

    It’s interesting that Betsey implicitly equates “life satisfaction” with “happiness” in her second statement quoted here. I’m not sure I agree with that equivalence.

    In my classes when covering altruism and economics, I’ve always been careful to describe utility as satisfaction, distinct from happiness. I can be satisfied with something that doesn’t necessarily make me happy. (Ex. The price of gas, passing grades, and a quick lunch, all can generate satisfaction without necessarily creating happiness or unhappiness.)

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  3. levi says:

    She made the claim that there is more to utility than just happiness.
    Then, ignoring her own lesson, she assummed life satisfaction=happiness and substituted the word happiness for life satisfaction. Then stated “There is more to life than just life satisfaction.”

    But, since happiness is not equal to utility, she should have said “There is more to life than just happiness.”

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  4. SebastianCMS says:

    I agree with Betsy Stevenson and Gary Becker that although sometimes we make choices or take actions, that might not reflect on our preferences or tastes. Economists must take in account when collecting behavioral economics data that many times in life people may choose a good or service, that may not maximize their utility but they choose according to their willingness and ableness, because you cannot always get what you want as they say. Nevertheless, Becker argues that happiness is not utility, it is merely a component of it. Perhaps this is why many people who are satisfied with their life, are not totally happy, this might bring into question if there is a balance between utility and the choices we make.

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  5. Jeffrey says:

    Isn’t utility one component of happiness, not the other way around?

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  6. Robyn G says:

    I just had a conversation with a woman who is a sales person at a local store that I frequent. We have had many interesting conversations over the years. So- I told her a bit about what I was up to and she then began describing herself as unfulfilled in what she does. I said that I was a sales person for years at multiple ny stores. so don’t knock it. She then proceeded to tell me that she sells jewelry on the side and will tell me more about her sideline of work that seems to be giving her a sense of greater meaning and self importance next time we visit. So Jeffrey- I think that you have a good point. People need a sense of purpose, but one that makes them feel useful. She has a Shitzu like my two.. Showed me pictures- treats the dog like her child. No children and unmarried. Perhaps then utility on many fronts.

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  7. Robyn G says:

    I must add, the woman is well off. Made good money in her 20’s she tells me and clearly is doing ok now. The day job keeps her busy and is a source of some income. So money does not seem to be her trouble. No immediate family and some form of yearning to be acknowledged and for real sense of self-worth may well be. Her sibling ignores her. But she admits to having good friends.

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  8. Matt says:

    How do you determine what someone’s underlying preference is? I don’t think you can simply ask someone what their preference is because they have incentives to tell you what they think they should want, not what they really want (compare the person people say they want to date with the people they actually do).

    I can’t think of a better way to find out what makes someone happy or at least satisfied than what they actually choose to do. Perhaps True Happiness is unavailable to them because their choices are limited, but if you try to find what someone wants that is unavailable you might as well ask them if they want a unicorn.

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