Happiness and public policy

In recent years many scholars are studying “happiness” seriously. Economics, long known as the dismal science, has a well established “utility theory” but utility should not be treated synonymously as happiness. This paper questions some premises of the Benthamite theory that presumes utility is the same as happiness and proposes a theory that there are three kinds of happiness: a forward looking or “prospective happiness,” a “happiness in process,” and a backward looking or “retrospective happiness.” It suggests that perceptions and value formation, which are normally outside the purview of economics, are important determinants of happiness. It further argues that nurturing mutually compatible goals among people will enhance efficiency and bring about more optimal use of scarce resources than if mutually incompatible goals are identified. *I thank Yew Kwang Ng and Peter Baehr for their valuable comments.