Happiness and Economic Progress: A Perspective

Abstract This paper uses cross country regression analysis to test the proposition that while the improvement in the standard of living brought about by economic growth and development is favorable to a country's happiness, the process, economic growth and development itself, is negatively related to a country's happiness. Using survey based measures of country happiness, and looking at a sample of sixty five countries, the empirical evidence of this paper tends to lend to support for the hypothesis. Polls of the electorate in country after country show that a large proportion of the populations in different countries are against trade and globalization. Trade and globalization, while ultimately leading to greater economic output and improved standards of living, are unpalatable in and of themselves. Trade and globalization, however, represent just one small facet of the more general process of growth and development. Growth and development require tremendous change, reallocation of resources, undermining of traditional values, and untold social disruption. A complete overall evaluation of the interplay between material well-being and happiness requires a clarification between means and ends so that it will be less subject to politicalization, media distortion, and demagoguery. Some argue that we can have more goods with little additional pain, or with very little inconvenience. The problem with this point of view is that the ends are not separated from the means, or rather the ends are confused with the means, and the distasteful means are not seen, nor are they desired to be seen, as necessary to achieve the ends. The simple perspective put forward here is that we dislike the process of economic growth and development, whether it be in the dominant current form of trade and globalization or by some other auspices, but like the outcome of greater output of goods and service, that is, of a higher standard of living. A major contention of this paper is that when one accounts for the negativity of the process of economic development and growth itself, then one will find a positive relationship between happiness and the standard of living (per capita GDP) when looking at cross country data. The relationship between economic development and happiness can be likened to that between an individual who has a disease and must undergo a terrible operation in order to be cured. The sick patient hates the process (the operation) but loves the results (the cure). In a similar fashion, the process of increasing the standard of living (economic development and growth) causes a lot of unhappiness because of the tremendous disruption and change in society that it entails, but the outcome (the increase in per capita income) is a great source of happiness for the members of society. In sum, we don't like what we have to do to get there, but we sure like it when we get there. To achieve the objective of empirically investigating the relationship between country happiness, growth and development, and the standard of living, the paper is divided into four parts. The first part provides a quick review of the economics of happiness literature. With regard to this study, one of the important findings in the literature is that the business cycle has potential negative psychic effects on happiness. If the business cycle influences happiness, then how much more can one expect the disruptive forces wrought by growth and development to have a substantial effect? The second section discusses the variables and their sources. The third section shows the results of the cross country regressions of happiness on economic growth and income, and, the fourth and final section concludes. Overview of Economics of Happiness Literature A lot has been done on happiness research. A nice overview can be found in Frey and Stutzer's article in the Journal of Economic Literature (Frey and Stutzer 2002). In a recent study, Borooah, using data with respondents from eighty countries, finds that health, job, income, and other factors contribute to individual happiness (Borooah 2006). …