Hamish McRae: Political success may not just be about the economy, stupid, but about happiness

Economic Life: One point often made is that US income per head has risen over the past couple of generations but people are not getting any happier as a result

Why have governments suddenly cottoned on to happiness? The cynical might observe that almost the entire developed world has suffered a decline in its wealth so politicians should try to focus on something else. It is a "we can no longer make you richer and probably are going to make you a whole heap poorer, so instead we are going to try to make you happier" proposition.

Here in the UK the shift also reflects the different personalities of the present Prime Minister and his predecessor but that is coincidental. Economists have been becoming more interested in "mental wellbeing" (the posh term for happiness) for at least a couple of decades. But it used to be a pretty unfashionable branch of the subject and it was only following the Stiglitz, Sen and Fitoussi report commissioned by President Sarkozy and published last year, that governments have been nudged into measuring happiness and as a result, are starting to figure out what they might do to promote it. The new project from the Office of National Statistics, launched yesterday, is the first step on this path in the UK.

But what do we already know about happiness? In Britain much of the pioneering work has been done by Professor Andrew Oswald at Warwick University, though more recently Professor Richard Layard of the LSE has also been writing a lot on the subject. Lord Layard is a Labour peer and his views tend to reflect the interventionist tendencies of the previous government, so it is maybe better to start with Prof Oswald's work.

And wonderful stuff it is. I have been looking at his presentation on Emotional Prosperity, given at the British Journal of Industrial Relations' annual lecture at the LSE last year and the graphs come from that. In 1993 he promoted an economics of happiness conference, also at the LSE. Ten people came, including the international speakers who had been asked to give presentations. Since then a lot has happened.

Start with the proposition that happiness is U-shaped, that is to say that children tend to be happier than young adults, while people in their 40s are unhappiest of all. Then things get rapidly better, with older people the happiest of all – as the first graph shows. You can see the same pattern the other way round by looking at depression: in the UK the people most likely to suffer from depression are those born in the 1950s and 1960s. Most people however do rate themselves as happy. Asked to score on a scale of one to seven, most people rank themselves as five or six and very few rank as one or two (see next graph).

If you look at the way particular life events change happiness, there are also some clear patterns. Some work by Andrew Clark looks at how people react to various events. Unsurprisingly a bereavement makes people very unhappy but actually they tend to make people unhappy in the run-up to the event, presumably because the person who dies is ill beforehand, and people subsequently bounce back quite quickly. That is as you might expect. Three more surprising results are shown in the bottom chart. First, having a child makes people less happy, not more, though the impact is not too marked. Getting divorced makes people much happier, and they get progressively more so as the years go by. And becoming unemployed is dismal, not just because of the immediate impact but because people don't seem to recover even several years after the event.

What about the relationship between wealth and happiness? One point often made is that US income per head has risen over the past couple of generations but people are not getting any happier as a result. That does seem to be true there but I am not so sure it applies so much in Europe. There may be special circumstances in the US that are inhibiting happiness that do not apply quite so much in Europe: the very short holidays, for example, or the rising insecurity associated with high personal indebtedness. In any case there is a loose association on a national level between wealth and happiness in that by and large the richer the country the happier its inhabitants.

What I personally find most interesting is that some countries are happier (or rather, report greater "life satisfaction") than they "ought" to be, given their relative wealth, while others are less happy. For example Colombians and Mexicans are among the happiest people in the world but these are only middle-income countries. Japanese and Koreans are less happy than they should be given their high GDP per head. In Africa Zimbabweans are very unhappy, Nigerians extremely cheery. And within Europe, the Danes seem exceptionally happy while the French are more miserable than they should be. And Britons? We are, as usual, middle of the pack – almost exactly where we ought to be, given our relative wealth: pretty happy but not as chipper as the Danes.

How could we become happier? Well, Andrew Oswald very much makes the point that we should be cautious and I think just about every economist would agree with that. But there is lots of detailed work going on and there are things we can learn from that. For example there is some sort of relationship between high blood pressure and happiness and not just among people – among countries too. So countries where this is a particular problem tend to be less happy than those where it is not. I suppose my difficulty with that is to figure out which way round the relationship works: it could be because people are unhappy that they have high blood pressure, not the other way round. But still, interesting.

Heart rates might be another measure of wellbeing, and a group of researchers found that for every extra £40,000 of income people's heartbeat was one beat per minute slower. That seems a rather expensive way of cutting one's heart rate, but there you go. What a heart rate might be, however, is a proxy for mental strain, so that may be a useful thing to look at.

Andrew Oswald's conclusions included the central point that we may need new measures of well-being, that we need to understand the links between physical and mental health and that economists will collaborate more with doctors and epidemiologists. And his hunch was that economists' methods of looking at happiness would become more important in public life.

Well that was last year. I think we have already moved on quite a way since then. I suppose the retort to the idea that policy-makers can increase human wellbeing would be to say that they have not performed brilliantly in their conventional economic management so why on earth should we expect them to be any use at this cutting-edge stuff? Just keep inflation down and balance the budget and leave the rest of us to figure out how to run our lives better. But whatever you think about the policy implications, as a branch of economics it is fascinating indeed, and it deserves a following wind.

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