Can the economy benefit from our happiness?

What is it about?

We already know what makes us happy, but what are the consequences of happiness? While the mainstream happiness economics has focused on explaining what makes people happy, an alternative approach in the discipline examines instead what are the consequences of happiness. Can the economy benefit from our mental well-being? Over 100 academic works critically surveyed in this paper leave no doubts about that. Happiness acts as a determinant of economic outcomes: it increases productivity, predicts one’s future income and affects labour market performance.

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Why is it important?

There is a growing number of studies justifying the so-called "happy-productive worker" hypothesis. A happier worker is more productive and psychologists have offered various arguments supporting this fact. "Subjective well-being is associated with good success in the work-place. Happy workers are productive, satisfied workers, and their positive affect is associated with good organizational citizenship, good relations with coworkers, and improved conflict resolution" (as quoted from one of the reviewed papers). This quote, however, would immediately make an economist rise two important issues from the viewpoint of policymaking. One, is this relationship causal, i.e. does an increase in happiness lead to an increase in productivity? Two, is this relationship generalizable, i.e. can we make concluding statements based on the results coming from studies on limited number of participants? Recent economic research on happiness surveyed in this paper provides a positive answer to both questions. Several experiments have established the causal link between happiness and productivity, while the analysis conducted on cross-national groups of individuals tackled the issue of non-representative samples – a common feature of most psychological surveys. In the light of the findings outlined in this contribution, we should perceive happiness as an economic variable. Psychological well-being has helped explaining issues typically analysed by economists, such as production efficiency or labour market outcomes. Researchers have already proposed different policies for happiness. It is high time policy makers realized that a happy society is a better performing society, also in economic terms.

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