Crash Course Economics: Happiness and Economics

Introduction to Happiness

• Happiness is often considered elusive despite being pursued globally.
• The self-help industry and life coaches capitalize on this pursuit.

Economic Perspectives on Happiness

• Traditional economic thought: Unlimited desires, more equals better.
• Recent findings challenge this view by showing a disconnect between spending and happiness.

Income and Happiness

• Correlation exists between income and happiness across cultures.
• More money shows diminishing returns for daily happiness beyond $75,000/year (adjusted to $82,000).
• Higher income affects overall satisfaction more than daily happiness.

Economic Choices Impacting Happiness

• Unemployment: Major negative effect on happiness.
  • 5-15% lower life satisfaction for unemployed people.
  • More negative in high-income countries, affects middle-aged more.
• Part-time to full-time transition increases happiness.
• Long work hours, commutes, credit card debt, unpredictable inflation negatively impact happiness.

Relative Income and Happiness

• Reference income hypothesis: Satisfaction depends on income relative to others.
• Easterlin Paradox: Income increase in countries doesn't always link to increased happiness.
  • Explanation: Happiness derived from status, not absolute income.
  • Hedonic treadmill/adaptation: Comforts become needs; losing them impacts happiness more.
  • Paradox may not hold in lower GDP countries; rises in income increase happiness.

Measuring Progress Beyond GDP

• Economic growth focus might ignore issues like income inequality, environmental damage.
• Bhutan's GNH: Gross National Happiness includes social, physical, spiritual, and environmental health.
• UN Resolution (2011): Encourages focusing on happiness for social and economic development.

Historical Context

• Robert Kennedy (1968): Critiqued reliance on economic output as sole measure of progress.
• GNP/GDP measures economic activity but not aspects that make life worthwhile.

Conclusion

• The importance of considering happiness alongside economic growth in policy-making.
• Crash Course Economics aims to spread knowledge and happiness, supported by community contributions on Patreon.