Book review: Measuring Happiness

The field of happiness economics lost two giants of the field last December. First, Ruut Veenhoven passed away on 9 December. Veenhoven is well known among those working on happiness data, as the founding director of the World Database of Happiness, which has collated thousands of studies and datasets measuring happiness across many countries and over time. Second, barely a week later, Richard Easterlin passed away on 16 December. Easterlin is most famous for the Easterlin Paradox, the idea that while life satisfaction is higher among people with more income within a country as well as between countries, as average income increases, average life satisfaction doesn't change. The Easterlin Paradox gave rise to the idea of a hedonic treadmill, that people adapt to higher incomes and so their higher income doesn't make them any more satisfied with life.

So, it was timely for me to read the book Measuring Happiness, by Joachim Weimann, Andreas Knabe, and Ronnie Schöb. The book was published in English in 2015, with an earlier edition in German in 2011, so it had been sitting on my bookshelf for about nine years. The main focus of the book is the Easterlin Paradox, and a survey of the literature on happiness economics (as it stood in 2011).

The book largely concludes that the evidence doesn't support the Easterlin Paradox, and the reasons are primarily methodological, as well as shortcomings in the data, particularly in the sampling (of countries where life satisfaction data are collected, and of the populations within countries that make up the life satisfaction datasets). The World Values Survey comes in for particular criticism by Weimann et al, who point to the Gallup World Poll as a less biased data source. Using Gallup World Poll data, as Weimann et al. do (and as others have done as well, including this very thorough 2008 paper by Betsey Stevenson and Justin Wolfers), the key features of the Easterlin Paradox are absent.

The critiques that Weimann et al present are a precursor to many other more recent (and more technical) critiques (see this post, and the links at the end of that post). Clearly, as you may expect, the literature has moved on, but the conclusion remains that the Easterlin Paradox doesn't fully stand up to scrutiny (although many proponents of the Easterlin Paradox have not been convinced by the critiques).

I say that the Easterlin Paradox doesn't fully stand up, because one of the key implications of the Paradox does appear to hold, that people's life satisfaction depends on their position in the income distribution relative to other people in their community, and that people's life satisfaction depends on their current income relative to their income earlier in their life. Weimann et al are careful in ensuring that this point comes across in their review.

Given that it is now quite dated, this book is probably not worth reading for the review of the literature that it provides. However, there is a hidden gem in the form of the Appendix. The Appendix looks at the place of life satisfaction (and happiness economics) within the broad scope of the history of economic thought. This starts with the idea that the ultimate foal of human activity is the pursuit of happiness, as expressed by Jeremy Bentham and John Stuart Mill in the 19th Century, and concludes with (relatively) recent developments in the measurement of brain activity in neuroeconomics. Along the way, Weimann et al discuss the scientification of economics, with neoclassical economics in particular eschewing subjective measures such as life satisfaction. I very much enjoyed that section of the book, and it is that material that remains relevant, even if the literature review itself is somewhat dated.

If you are interested in happiness economics, and in particular if you are interested in the place of happiness within the broader scope of the history of economic thought, this book is well worth reading.