01 Feb 2002

When a Rainy Day Comes: The Economics of Happiness


A study by HBS assistant professor Rafael Di Tella (with Andrew Oswald of the University of Warwick in Coventry, England, and Robert MacCulloch of the London School of Economics) finds that when a country is in a recession, the number of people describing themselves as “very happy” declines by about 10 percent. The general happiness of the population suffers, too, even among people who do not personally experience job loss or reduction in income.

For behavioral economists and politicians, among others, these findings raise the question of whether governments should become more proactive in attempting to mitigate or stave off recessions. In addition to enjoying a more satisfying life, which presumably is every government’s goal for its people, a “happy” population is likely to be more productive than a disgruntled one — also an advantage for government.

The study is based on poll results involving some 300,000 individuals in Europe and the United States over the last 25 years. Participants were asked to describe their state of mind by selecting one of three answers: “very happy,” “fairly happy,” and “not too happy.” The authors found that the populations that were happiest (or least unhappy) during recessions were in countries that paid the highest unemployment benefits.


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