Eudaimonia and the economics of happiness (part 1)

In this paper I discuss the major approaches to happiness in the economics of happiness: hedonism
And life-satisfaction approaches. It is possible to identify a tension between two important principles
In this literature: 1) individuals are the best judges of their own happiness, and 2) the purpose of
Economics should be the direct endorsement of happiness. I argue that hedonism conflicts with the
First principle. In the case of life-satisfaction theories, the restricted approach conflicts with both
Principles while the unrestricted approach only with the second. I also argue that the field presents
Difficulties establishing happiness as a consistent normative concept. In order to show this, I return
To the theories of Aristotle and Seneca because: 1) both the ancients and these economists consider
Happiness as the overarching good; 2) even though these economists recognize the importance of
Eudaimonistic theories, their interpretation and use has not been satisfactory; 3) the debate between
Aristotle and Seneca has implications both on the quantitative character of happiness and on the
Role of public policy regarding its promotion. The main lesson of the ancients is methodological:
What made the discussion so rich among them was their awareness that happiness was principally a
Normative concept whose content had to adjust in order to meet its normative demands; a point
Contemporary literature seems to have missed.


The most prominent empirical observation that motivated the enquiry about happiness among
Economists is the Easterlin Paradox, which consists in the lack of a direct correlation between
Average self-reported life-satisfaction to per-capita income in several countries. Self-reported life
Satisfaction is basically measured by questionnaires in which people are asked how happy or

they are with their lives. The paradox registers that, contrary to what economic theory
Would lead us to expect, the large increase in income over the second half of the 20th
century was
Not accompanied by an increase in life satisfaction, which remained mostly unchanged over the
. Although rich people report higher satisfaction than poor people in one country at a given
Moment of time, wealth does not seem to explain differences in self-reported life satisfaction across
Countries, or even the evolution of life satisfaction in one country through time. Some economists,
Motivated by these empirical observations, started questioning the importance of material welfare
And growth, because according to them they are significant only if they contribute to improving the
Human lot, which is equivalent in their view to increasing happiness. Questioning the link between
Happiness and material welfare was the first step for the emergence of the economics of happiness.

Happiness becomes the central object of enquiry for these economists
because they consider its
Promotion to be the real objective of economics. On these lines, Frey (2008, p. 3) says that
“[e]conomics is – or should be – about individual happiness”. Notice that saying that economics
Should be about happiness is a normative
statement that requires justification and implies a
Departure from other positions in economics that argue that material growth or prosperity is the aim

Frey (2008, p. 39) reports that per-capita income rose in Japan by a factor of 6 between 1958 and 1990, while average

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Eudaimonia and the economics of happiness (part 1)