UTILS AND SUCH

Bentham thought that pain and pleasure were

the only intrinsic values in the world.
"nature has placed mankind under the
governance of two sovereign masters, pain and
pleasure.
Effect on overall welfare is algebraically additive.
The good is whatever brings the greatest
happiness to the greatest number of people.
Utilitarianism or the Greatest Happiness Principle

CONTINUED PRESENCE IN UCL

MILL AND MARSHALL

MAXING OUR UTILS

EDGEWORTH

EDGEWORTH BOX

EDGEWORTHS OTHER BOX THE

HEDONIMETER
A machine to measure utility,
Edgeworth believed such a measurement device
to be necessary for the application of the science
of economics (positive economics) to the real
world.
hedonism may still be in the state of heat or
electricity before they became exact sciences

WILHELM REICH DISCOVERER OF

THE ORGONE FIELD

AN ORGONE BOX BY WILHELM REICH

IS THAT BERNIE MADOFF?

WHATS IN A PICTURE

THE MODERN ECONOMIST

APPROACH

As economics grew more rigorous and

quantitative, more parsimonious definitions of
welfare took hold.
Utility was taken to depend only on income as
mediated by individual choices or preferences
within a rational individuals monetary budget
constraint.
Objective Approach of economists:

Based on Revealed Preference we get what we want!

Assumes we always know what we want - rational
preferences
Assumes we always know how to get it (rational decision
making and full information)

A Good is a Good and NOT a Bad

A PSYCHOLOGISTS APPROACH
Hedonic

Psychology

the study of what makes experiences and life pleasant or

unpleasant.
It is concerned with feelings of pleasure and pain, of
interest and boredom, of joy and sorrow,
and of satisfaction and dissatisfaction.
It is also concerned with the whole range of circumstances,
from the biological to the societal, that occasion suffering
and enjoyment.

Subjective

Approach:

Self-reporting questionnaire, survey

Physiological

measurement
Is there a machine to do this?

Measuring impulses in the brain or

Measuring seratonin in system

THE SHAPE OF THINGS TO COME?

DANIEL KAHNEMANN

WHAT IS WRONG WITH GDP

MEASURES
PPP versus current X-rates
Non-Market Production

Agriculture
The

washing paradox

Public Production
How

to value public production

User value or Factor prices

The Gray and Black Markets

Barter,

non-reporting etc 22% in Italy, 8% in US

Sustainability
Mineral

depletion oil states

Pollution and Deforestation
Depreciation of Public Facilities

DEFERRED MAINTENANCE

LA VIE DOUCE

Increasing concerns about the adequacy of current

measures of economic performance, in particular those based
on GDP figures.
Broader issues about the relevance of these figures as
measures of societal well-being, as well as measures of
economic, environmental, and social sustainability.
Together these identified the limits of GDP as an indicator of
economic performance and social progress,
Articulated a need to consider additional information
required for the production of a more relevant picture, to
discuss how to present this information in the most
appropriate way.
This is the charge of the Sarkozy Commission on led by
Nobel laureates Stiglitz and Sen with others (Arrow) on the
board.

SARKO KNOWS SOMETHING ABOUT

HAPPINESS

SOCIAL TRANSFERS IN FRANCE

REAL INCOME USA AND FRANCE

IS LIFE BETTER THAN MONEY?

STIGLITZ/SEN REPORT

Individual current well-being has to do with

economic

factors, such as income,

and with non-economic aspects of peoples lives
what they do and what they can do, how they feel,
and the natural environment they live in.

These levels of well-being can be sustained over

time if:
stocks

of capital that matter for our lives (natural,

physical, human, social) are passed onto future
generations.
Ie the notion of sustainability

FROM MEASURING GDP TO ASSESSING

WELLBEING
Unifying theme of the Stiglitz Sen report is:
Now is the time for our measurement system to
shift emphasis from measuring economic
production to measuring peoples well-being.
Changing emphasis does not mean dismissing
GDP and production measures but
supplementing them and
This probably means:
Measurement or survey to establish well-being

SURVEY APPROACH
Happiness surveys are based on questions in
which the individual is asked,
Generally speaking, how happy are you with
your life or
How satisfied are you with your life, with
possible answers on a four-to-seven point scale.
Psychologists have a preference for life
satisfaction questions.
Yet answers to happiness and life satisfaction
questions correlate quite closely.
Lots of problems with surveys mood varies
by time of day, ordering of questions, wording of
questions all affect outcome.

MOOD AND HOUR

SUBJECTIVE WELL BEING

THE EASTERLIN PARADOX

Most happiness studies find that within countries

wealthier/richer people are, on average, happier than poor
ones,
However, studies over time find very little, if any,
relationship between increases in per capita income and
average happiness levels.
Wealthier countries (as a group) are happier than poor
ones (as a group) but there are obvious exceptions
Even among the less happy, poorer countries, there is not a
clear relationship between average income and average
happiness levels, suggesting that many other factors
including cultural traits are at play.

Relative income effect

Treadmill phenomenon

PART OF THE PARADOX

GDP/HEAD AND HAPPINESS 1

GDP/HEAD AND HAPPINESS 2

FACEBOOKS METRIC

SATISFACTION WITH LIFE INDEX

BHUTAN THE PIONEER IN GROSS

NATIONAL HAPPINESS
1. Psychological Well-being
2. Time Use
3. Community Vitality
4. Culture
5. Health
6. Education
7. Environmental Diversity
8. Living Standard
9. Governance

HAPPINESS IN DIFFERENT
ACTIVITIES

HAPPINESS, PARTNERSHIP AND SEX

Oswald and Blanchflower found that to
compensate for the loss in happiness of a major
life event such as being widowed or a marital
separation, it would be necessary to provide the
average individual with $100,000 in extra income a
year, or more than double their incomes.
On average, the amount of happiness bought by
going from sex less than once a month to at least
once a month is roughly equivalent to about
$40,000 of annual income.
Sex brings a lot of happiness, but diminishing
returns from sex does set in after that.

ENVY AND HAPPINESS

Harvard Universitys Erzo Luttmer has shown
that an increase of 10 percent, say, in neighbors
earnings, or a 10percent decrease in ones own
income, have roughly the same negative effect on
wellbeing.
Blanchflower found that my happiness rises if I
get a new BMW but doesnt if my neighbors also
get one. Here, neighborhoodshould be thought of
broadly as any relevant comparator group,
including colleagues and friends.

ENVY OR NOT

HAPPINESS AND INCOME: 1975 AND

1998

CLASS AND HAPPINESS

WHERE ARE WE?

VENEZUELA

After 10 years as president, Hugo Chvez

has polarized Venezuela, but inspired its
poor.

WHOS LAST?

WHY DENMARK

Homogenous population
Solidarity,

Fairly High Income

Globally

common purpose

#37 in GDP PPP/Head

Even Distribution of Income

Relative

Income is Important

Good health care universal, free

Good education system universal free
High on Perceptions of Corruption Index (#2)
Fairly High on Sustainability (#32)

WHY NOT US?

Falling Female Happiness

Too

many challenges

Declining Marriage Rate

Worries About Big Things

Health

payments
Maybe health outcomes
Life expectancies lower in US but not dramatically
Worst Performance is in Infant and Maternal Mortality

Hangover after Greatest Generations

Not

good enough, no challenge

Going Postal

Incompletely Offset by Higher Black Scores

TRENDS IN HAPPINESS BETWEEN

GROUPS

TRENDS IN HAPPINESS BETWEEN

GROUPS 2

DOES MORAL DECAY FACTOR IN

FEMALE HAPPINESS IN THE UNITED

STATES

INCREASING MISTRUST

THE ROLE OF GENETICS

CHANGE IN REAL FAMILY INCOME

SHARE OF RICHEST 1%