Happiness Economics and Psychology: An Historical and Methodological Approach
Job satisfaction and life satisfaction research or happiness economics is an established and booming research field. However, until the late 1970’s, the study of the impact of economic variables on subjective well-being was considered to be outside the domain of economics. The main reason was the methodological hostility of orthodox economists towards incorporating “subjective” and “psychological” variables. The legacy of economics as a positive social science that dealt with observed or revealed behavior only, was a major obstacle for economists to study subjective well-being. The main exception was the pioneering work of Richard Easterlin in 1974, who attempted to account for the discrepancy between income increases and overall life satisfaction. Opening up the communication of economists with psychologists in happiness research, Easterlin relied on references from psychology and especially from social psychology in order to construct his arguments. Influenced by Easterlin, references to theoretical and empirical work in psychology became more apparent when happiness economics attracted more interest by the end of the 20th century. The seminal paper by Clark and Oswald (1996) in which they drew from Adams’ equity theory and also from Runciman and Homans in social psychology literature, is an indicative example. In more recent works, the appeal to psychological theories and the use of their insights is much more prominent and explicitly stated. Indicate examples are the references to social comparison theory, reference group theory, relative deprivation theory, adaptation-level theory, dissonance theory, and equity theory. Further, the connection to other social sciences and especially to psychology, is a conscious methodological stance by most leading researchers in the area (e.g. Blanchflower and Easterlin 2004, Oswald 2004; Mujcic and Oswald 2018; Clark 2018). The core idea of the paper is to examine the historical relationship of happiness economics research with psychology. After showing its rich historical past of interaction with psychology, it argues that this trend was contrary to the established mainstream economic methodology which was characterized by anti-psychology bias. Due to the influence of modern behavioral economics, this stance has started to soften. Still, most economists engaging in this area of research are uncomfortable to follow the established mainstream economics methodological stance and increasingly call for its reformation. There is also a discussion concerning the methodological tension between the two fields and of its possible repercussions.
Area: Eshet Conference
Keywords: Happiness Economics; Psychology and Economics; History of Economics and Methodology.
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