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a blog from young economists at Nova SBE

The intersection between happiness and microeconomics, what are the commonalities?

When we think about happiness sometimes we just forget that even happiness been a feeling, there are is a face of it that is measurable in economics terms, and there is a huge variety of papers that discuss what the determinants for happiness are. Using an academic approach, we can say that happiness is a measure of utility or welfare, in other words, everything that brings you more utility will make you happier.

There are several surveys produced around the globe that can be used as research subject to measure happiness among countries (some examples are the World Value Survey, Latino Barômetro, Values Survey EVS), by taking these surveys and applying some econometric methods, it is possible to unveil some reasons why people in some countries are happier than people from other countries.

By analyzing the chart below, we can anecdotally come to the conclusion that developed countries have a tendency to be happier, but what is exactly behind this that is resulting in increased happiness?

Happiness Map
Resource: Map of Happiness By Jaime Díez Medrano [Director of the WVS Archive and ASEP/JDS]


The popular saying mentions that “Money doesn’t buy happiness”, but on the other hand does the activity of being able to buy things can make someone happy?” Skandia International in 2012 (1) found out that the average income that makes people happy is about $ 161,000 and recent researches from the University of Michigan (2) shows that different than previously imagined, there is no evidence of the existence of a satiation point when we analyze the ability of “money to bring happiness”.

Another relevant point that is conflicting to the microeconomic’s theory is related to taxation and happiness. Theoretically, higher taxation would negatively impact utility given that it imposes budget constraints, but among the top 10 happiest nations (Iceland, New Zealand, Norway, Sweden, Ireland, Canada, Singapore, Malaysia, Puerto Rico and The Netherlands) we’ll find 5 that have the higher taxation rates, that is, although individuals have higher budget constraints, this money is used by these governments with things that bring utility to people, generating a compensatory balance/effect.

A study on happiness would not be complete by simply analyzing topics that are directly related to economic factors, this is a much broader subject and there are other faces of it to explore. By evaluating its socials aspect, we’ll find studies attesting that women tend to be happier than men (3), others conclude that married people tend to be happier than singles (4), or that healthier people are happier than people in not so fit or vigorous conditions(5). The landscape for exploration is enormous and can be explored as long as humans exist.

Components of well being 

Resource: Deutsche Bank Research – European Tribune Article from Sep 20th, 2006.


The state of happiness is a topic that can still be thoroughly explored from an economic scope or even from a social sphere, and if well explored and understood can help to leverage the development and implementation of fresher and better public policies that can result in improved living conditions for the societies and consequently an increase on the different nations happiness levels.

Student 769


Author: studentnovasbe

Master student in Nova Sbe

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