Dr. Kaushik Sridhar

Objective vs. Subjective Reasons for Happiness

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Happiness is a foundation stone of economic science. People make economic choices – what salary to accept, what product to buy, whether to invest – in order to become happy. The pursuit of happiness clearly matters in economics, even though economists usually speak of it in jargon, substituting such words as “utility” for “happiness.” The problem for economics as for philosophy is not only how to define happiness, but – more centrally – how to measure it. Most economists today define happiness as utility and attempt to measure it merely by observing the choices people make. In this “objectivist” view, all the sources of utility are tangible, and people’s choices reveal their preferences.

This view disregards the sort of subjective data obtained from surveys in which people answer questions about their happiness. By contrast, objectivists assume that people’s choices reveal all the information necessary to judge their relative happiness in the face of various outcomes.

Scholars have found reasons to doubt the validity of the objectivist position. As many economists have begun to contend, emotions such as regret, self-esteem and a sense of one’s status are not directly measurable and cannot be inferred from tangible choices. Objectivist economists do not allow for interdependence among various factors of utility, which comes in different forms. In fact, objectivists must ignore some real kinds of utility that are not revealed by people’s choices. Some of these different kinds of happiness include predicted utility (for example, how happy you expect to be when you get that new car), remembered utility (how happy you recall being when you had that great job), instant utility and others. Perhaps most controversially, the objectivist view in economics assumes that people are rational. Yet behavioural economics, which is informed by psychology, calls rationality into doubt and gives more prominence to the role of emotions.

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