Happiness Measures as a Guide to Development Policy ? Promise and Potential Pitfalls

The study of happiness was of interest to early economists and philosophers. Centuries later, it has gone from the fringes of economics to the mainstream. Economists are using happiness surveys to study a host of questions, ranging from the happiness effects of health, marriage, and various institutional arrangements, to the unhappiness effects of unemployment, divorce, and commuting time. Because happiness surveys rely on expressed versus revealed preferences, they can be used to explain behaviors that do not reflect optimal choices, but rather norms, addiction, or self control problems, such as poor savings or schooling choices by individuals with limited education and information, and/or public health problems like obesity and smoking. A number of countries are attempting to develop national well being measures that can be used as complements to traditional income and GDP data. These efforts to define well being beyond its income dimensions can surely contribute to our understanding of the development process. But should we be using happiness measures as a guide to development policies? Should the pursuit of happiness be part of the charter of the international financial institutions, as it is in the U.S. Constitution? This paper reviews what we know about the determinants of happiness across and within countries of different development levels. It then raises the challenge that adaptation poses for the use of these measures as comparative indicators, and discusses the potential and the challenges associated with applying them to policy. 1 The author is Senior Fellow and Charles Robinson Chair at the Brookings Institution and College Park Professor at the University of Maryland. She would like to thank an anonymous reviewer as well as participants at the ABCDE conference in Stockholm for very helpful comments on an earlier version of this paper. This paper draws heavily on her recently published book, Happiness around the World: The Paradox of Happy Peasants and Miserable Millionaires (Oxford University Press, 2010).