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Happiness, contentment and other emotions: implications for economic policy
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.
Citation
Robert MacCulloch. 2009. "Happiness, contentment and other emotions: implications for economic policy," Auckland Public Policy Seminar, July.
Motu code: APPS0907
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