The Economics of Happiness

Insights on globalization from a novel approach

• Author(s): Carol Graham • Published: September 2005
• Pages in paper: 16


The economics of happiness is an approach to assessing welfare that combines economists’ techniques with those of psychologists, and relies on more expansive notions of utility than does conventional economics. Research based on this approach highlights the factors—in addition to income—that affect well-being. It is well suited to informing questions in areas where revealed preferences provide limited information, such as the welfare effects of inequality and of macroeconomic policies such as inflation and unemployment. One such question is the gap between economists’ assessments of the aggregate benefits of the globalization process and the more pessimistic assessments that are typical of the general public. The paper summarizes research on some of these questions, and in particular on those relevant to globalization, poverty, and inequality.

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Well-being and Public Attitudes in Afghanistan

Afghanistan is a context where individuals have to cope with the most adverse of circumstances. Our study of happiness finds that Afghans conform to a remarkably consistent worldwide pattern in the determinants of happiness across individuals within countries of all different development levels. Average happiness scores in Afghanistan, meanwhile, are higher than the world average and on a par with those from Latin America. In contrast, scores on a ‘best possible life’ question are much lower. This suggests that Afghans may be naturally cheerful and/or have adapted their expectations downward in the face of adversity, yet are more realistic when thinking about their situation in relative terms. Also suggestive of adaptation is that Afghans in general do not report to be unhappy when victims of crime and corruption, most likely because these phenomena have become the norm. In contrast, respondents in some Taliban-influenced regions, where crime and corruption are less common, do report unhappiness with corruption victimisation. More generally, resilient preferences for political freedom coexist with tolerance of crime and corruption and low levels of trust in public institutions.

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