The use of happiness research for public policy

Research on happiness tends to follow a "benevolent dictator" approach where politicians pursue people's happiness. This paper takes an antithetic approach based on the insights of public choice theory. First, we inquire how the results of happiness research may be used to improve the choice of institutions. Second, we show that the policy approach matters for the choice of research questions and the kind of knowledge happiness research aims to provide. Third, we emphasize that there is no shortcut to an optimal policy maximizing some happiness indicator or social welfare function since governments have an incentive to manipulate this indicator

Happiness economics

There is enough evidence to be confident that individuals are able and willing to provide a meaningful answer when asked to value on a finite scale their satisfaction with their own lives, a question that psychologists have long and often posed to respondents of large questionnaires. Without taking its limitations and criticisms too lightly, some economists have been using thismeasure of self-reported satisfaction as a proxy for utility so as to contribute to a better understanding of individuals' tastes and hopefully behavior. By means of satisfaction questions we can elicit information on individual likes and dislikes over a large set of relevant issues, such as income, working status and job amenities, the risk of becoming unemployed, inflation, and health status. This information can be used to evaluate existing ideas from a new perspective, understand individual behavior, evaluate and design public policies, study poverty and inequality, and develop a preference based valuation method. In this article I first critically assess the pros and cons of using satisfaction variables, and then discuss its main applications

Worthy to Lose Some Money for Better Air Quality: Applications of Bayesian Networks on the Causal Effect of Income and Air Pollution on Life Satisfaction in Switzerland

One important determinant of well-being is the environmental quality. Many countries apply environmental regulations, reforms and policies for its improvement. However, the question is how the people value the environment, including the air quality. This study examines the association between air pollution and life satisfaction using the Swiss Household Panel survey over the years 2000–2013. We follow a Bayesian network (BN) strategy to estimate the causal effect of the income and air pollution on life satisfaction. We look at five main air pollutants: the ground-level ozone (O3), sulphur dioxide (SO2), nitrogen dioxide (NO2), carbon monoxide (CO) and particulate matter of 10 micrometres (PM10). Then, we calculate the individuals’ marginal willingness to pay (MWTP) of reducing air pollution that aims to improve their life satisfaction. Beside the BN model, we take advantage of the panel structure of our data and we follow two approaches as robustness check. This includes the adapted probit fixed effects and the generalised methods of moments system. Our findings show that O3 and PM10 present the highest MWTP values ranging between $8000 and$12,000, followed by the remained air pollutants with MWTP extending between $2000 and$6500. Applying the BNs, we find that the causal effect of income on life satisfaction is substantially increased. We also show the causal effects of air pollutants remain almost the same, leading to lower values of willingness to pay