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Happiness, contentment and other emotions: implications for economic policy
Thursday, 16 July 2009, 12:30pm to 2:00pm
Professor Robert MacCulloch, Imperial College London
Reception Lounge, Auckland Town Hall, 301 Queen St, Auckland
Abstract
If the objectives of economic policy are to reflect the “will of the people”, policy-makers need to know how the population makes trade-offs across different outcomes. A growing body of literature analyses factors that make people happy, or contented, and this information can be used in the design of economic policy. Some of the findings from this literature are summarised in this talk. As an example, data from over 600,000 Europeans shows that their satisfaction with life is negatively correlated with the unemployment rate and the inflation rate. Our preferred interpretation is that this shows that emotions are affected by macroeconomic fluctuations. Contentment is, at a minimum, one of the important emotions that central banks should focus on. More ambitiously, contentment might be considered one of the components of utility. The results may help central banks understand the tradeoffs that the public is willing to accept in terms of unemployment for inflation. An alternative use of these data is to study the particular channels through which macroeconomics affects emotions. Finally, work in economics on the design of monetary policy makes several assumptions that allow us to interpret our results as weights in a social loss function.
Biography
Professor Robert MacCulloch received his first degree in Mathematics from the University of Auckland in New Zealand. Upon graduating, he worked for the Reserve Bank of New Zealand implementing their inflation targeting regime and then travelled to Oxford University where he completed his D.Phil in Economics in 1998. After further pursuing his research interests at the University of Bonn in Germany, London School of Economics and Princeton University in the United States, he joined the Business School at Imperial College in September 2004, where he is Director of the Doctoral Programme. His main research interest is political economy. In particular, he studies the determinants of conflict and the security of property claims, corruption and regulation, and the role of economic and political forces in shaping welfare state institutions. He has also studied happiness and the way it is affected by inequality and macroeconomic fluctuations, as well as the connection between beliefs and economic performance. His latest paper studies the effect of freedom on the taste for revolution across the world.
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