The Undercover Economist

The Not-So-Dismal Science

How economists measure whether you’re happy.

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All things considered, are you happy with your life as a whole these days? Yes? Good. But are you sure?

Happiness is a big question both for researchers and for policy wonks these days, so it is slightly discomfiting to reflect that people may not even know the answer to the simple question, “Are you happy?”

This happiness business is a difficult one for economists. Alan Krueger, an economist who is also one of the leading happiness researchers, prefers to talk of “subjective well-being,” partly because he thinks “happiness sounds a bit frivolous.”

The reluctance of most economists to get involved is not because of an overly miserable disposition—please ignore that phrase “the dismal science”—nor because economists only care about money. It is because since the 1930s, economic theory has proclaimed that the only standard of what makes people happy is what they do. You chose to eat another Twinkie? We, the economists, can only presume that this was the choice that maximized your happiness.

But Krueger is one of a growing army of economists and psychologists who have been discovering counterexamples. For instance, although you choose your spouse but not your parents, people seem to enjoy spending time with their parents more than they enjoy spending time with their spouses. Maybe Oedipus had the right idea after all.

On the other hand, married people claim to be happier than single people do. What explains the discrepancy? The difference rests on an unexpected distinction: How satisfied you are with your life is not at all the same thing as how you feel while you are living it.

The difference shows up in the two main approaches to happiness research. Researchers can ask some variant of the question with which I began this article in an attempt to measure overall satisfaction with life. Or, they can use the “day reconstruction method,” which is championed by Krueger and psychologist Daniel Kahneman, who despite claiming to know little about economics has been awarded the Nobel Prize in the subject.

This method tries to measure the flow of emotion by asking people to think back over a recent day and reconstruct what they did—had breakfast, got the kids ready for school, drove to work, sat in a meeting, and so on—and how they felt while they did it.

Collecting such data is expensive, but it has some advantages over the simple question about how satisfied people are with their lives. For one thing, psychologist Norbert Schwarz has shown that when you ask people how happy they are, the answer you get will depend on whether the sun is shining or whether they have just found a dime on the floor. (Schwarz used to plant coins where people would find them.)

That just shows how vulnerable people’s views of their own satisfaction with life are. Kahneman argues that measures of life satisfaction are based on heavily edited memories of actual experiences. People recall the peaks, gloss over the troughs, and are influenced by recent events, including sunshine and serendipitous dimes. The kind of person who says she is happy with her life, then, is the kind of person who is experiencing lots of intense, positive emotion, even if there is a lot of anxiety thrown in there, too. High-powered city types remember the excitement of the deal but forget the misery of the long commute.

The new happiness research is starting to show up in policy proposals—for example, British economist Lord Richard Layard is campaigning for more government funding for cognitive behavioral therapists. But Kahneman and Krueger are proposing something low-key but potentially rather subversive: national time-use accounts, which would attempt to measure how a nation’s citizens typically spend their time and how they feel while they are doing it. It remains to be seen whether their findings will put a smile on anyone’s face.