Assignment IIntroductionMost of us, I think it is safe to say, everyone of us wants to be happy.In this technological era, how many of us are truly happy from the heartregardless of developing countries or developed countries. Hence, the economicof happiness is an approach for the economists to measure the happiness of the communitytechnically those more commonly used by psychologists (Graham, Carol and SandipSukhtankar, 2004). In my opinion, happiness of every single varied accordinglyto their own interests. Some of them are materialistic kind, money-orientedpeople, capitalistic people, they are the same kind, money is the king.
Butthey are some community in this world, they can’t feel any happier than livingin their ranch or small houses. However, the Asia’s Switzerland, Bhutan hasbeen named the world’s happiest country with only the size of Indiana andpopulation of Alaska. It is impressive that a small kingdom like this would bethe happiest country in the world. Nevertheless, Bhutan has one of the fastestgrowing gross domestic product (GDP) in the world (Lukas Canan, 2010). As such,one simply survey can be carried out in which you might ask a respondent”Generally, how happy do you think you are – very happy, pretty happy, or notso happy?”. Or the other way around, “How satisfied are you with your life as awhole – very satisfying, not-so satisfying, not at all?” (Richard A. Easterlin,2006) Happiness depends on three sets of factors, one of the factors iseconomic factors such as unemployment, income, and inflation. In fact, thesefactors are linked with the basic economics theory, the economics of demand andsupply.
For instance, when there is demand there will be supply, hence, theemployment rate will be improved. And when the demand is higher than thesupply, there will be an increased in price of goods, therefore income will beimproved (Bruno Frey & Alois Stutzer, 2001). Literature reviewAs many of you have heard the theory of demand and supply in economicstudies. The supply and demand analysis are the bread and butter of economicstudies.
It can also be said as the law of demand and supply is the mostfundamental concepts of economics. Therefore, regardless of your job andpersonality, the basic presupposition of demand and supply is still imploded intothe daily actions of our society. Now, let’s discuss about the demand and priceof good in the market. In science term, the price of goods is inverselyproportional to the demand. On the other hand, we can look at the relationshipbetween price of goods and the demand visually in Figure 1. Figure 1: Priceand DemandAdditionally, the price versus demand graph is portrayed out from theperspective of the consumer. And this is also why the demand is the lowest whenthe price of goods reached its’ maximum.
Yet, how does demand relates to thehappiness? This can be explained as we assume that the product is an Iphone, ifthe phone is now selling at $500 then there will would be many people buyingIphone. In contrast, when the unit price of an Iphone is $50,000 and by thattime Iphone will be a rare consumer product which only can be bought by thewealthy people (Arthur, 2011). Whereas, the relationship between the price of goods and availablesupply of an item from the perspective of the producer is directlyproportional. The available supply increasing significantly when the price ofgoods is increasing. This relationship can be seen in Figure 2.Figure 2: Priceand SupplyAs mentioned earlier, the curve is drawn based on the point of view forsupplier. The supplier is willing to produce more of the product if the priceof that product is high, so the supplier is willing to manufacture more of thegood in order to realize greater profits.
In addition to that, the fallingprices will affect the availability of that product in the market as thesupplier may not be able to cover the input costs upon selling the goods. Now,if the input cost to produce an Iphone is at $50 including the variable cost,fixed cost and labour cost. The selling price of an Iphone must be higher than$50 to break even or we could say if the selling price of Iphone is below $50,the production is highly unprofitable (Arthur, 2011). According to the IMF, mostof the people will feel happy when they have money. Some of them said they willbe happier if they can live in a bungalow.
While some of them want a luxury carand branded stuff. So we can say that money will affect the demand and supplyin the market and end up affects the happiness of a nation. Theory/ FrameworkEconomic of happiness is a quantitative measurement of happiness byreferring to the index of positive and negative effect, well-being, quality oflife, life satisfaction, health and other concepts such as psychology andsociology. Demand and supply theories are the part of the economic of happinessand that is the basic (Carol, 2008). There are also a few determinants to measurehappiness. Most commonly used theory to measure happiness is gross domesticproduct (GDP) and gross national product (GNP), both are used as nationalfinancial measures.
GDP and GNP have been used as a measure of successfulpolicy in most countries, among them the happiest country in 2017 is Norway,second is Denmark and followed by other countries (Katia, 2017). The secondtheory is individual income, the economists had announced that the well-beingis a simply function of income. Nevertheless, according to researchers, the effectivenessof well-being is substantially diminished once the wealth of one has reached asubsistence level. Besides, there’s another factor to make people happierrather than increasing income, which is psychological therapy (Boyce, C.
J Wood,2009). Next theory is social security,this perspective focuses on the role of the welfare that improves quality oflife. By improving quality of life not only the basic needs are met, the societyshould have greater degree of freedom. This freedom argument is suggested bythe U.S. political scientist, Benjamin Radcliff, who presented this argument inhis journals, which also stated that by providing a generous welfare, a higherlevel of life satisfaction can be achieved (Radcliff, 2001). The forth theoryis employment, as for employment, for the well-being of those who are employedis significantly higher than those who are unemployed because employment providesincome that can support a family, philanthropy and education (Stam, 2016).
Furthermore,there are a few theories such as freedom and control, religious diversity andhappiness and leisure. Analysis:In this 21st century, the satisfaction of human being is verysubjective as everyone may have different dreams and needs in their life. Infact, the law of demand and supply may have impact on happiness on the societybut as mentioned earlier, the demand and supply theories can only havesatisfied the materialistic mindset of one but not the mentality.
The mentalityof one is much important to achieve the happiest country in the world, thepre-requisite measurements are important such as GDP & GNH, individualincome, social security, employment, relationships & children, freedom &control, religious diversity and happiness & leisure. Since demand andsupply cannot be used as the only tool to measure the happiness of a nation, wewill now discuss about gross national happiness (GNH). In fact, the term gross national happiness is born in the tiny countryof Bhutan for shining a light on happiness.
The phrase ‘gross nationalhappiness’ is actually created by the forth King of Bhutan, King Jigme SingyeWangchuck in the year of 1972. At the same time when he declared this phrase,he also mentioned that “Gross National Happiness is more important than GrossDomestic Product” (Dorji, 2012). Additionally, the Bhutan’s economic and socialpolicy have both been improved after the idea of GNH was proposed.
Since the implementationof GNH has captured the imagination of others, the “Gross National HappinessIndex” has became a tool that can be used for creates policy incentives for thenon-government organization and government sector. In depth, the GNH index hadincluded both traditional areas of socio-economic concern and less traditionalareas of socio-economic concern. First, the traditional areas of socio-economicconcern include the health of society, education standards and the livingstandards of society. As for less traditional, it includes the aspects ofculture and psychological well-being. Moreover, there are total nine domainsthat constructed the GNH index such as psychological well-being, health,education, time use, cultural diversity and resilience, good governance, communityvitality, ecological diversity and resilience and living standards (Dorji,2012). According to World Happiness Report 2017, Norway has gained the firstplace among Denmark and the other countries and became the world happiestcountry despite the worldwide oil prices declining (John, 2017). Obviously,this has not only demonstrated what the countries can do with their money, yet,not just to increase in finance matters.
The Norway governance not only chooseto move on in oil and gas industry deliberately, they also investing in the societysuch as educations and other welfares for the future generations (Katia, 2017).This is how the Norway protected itself and gained the first place, emphasis onthe future than the present to gain high levels of mutual trust among theirnation, shared purpose, generosity and good governance. The employment rate in the Norway is surprisingly hits approximately 74%of people whom age in between 15 to 64 years old have a paid job (OECD). Accordingto the OECD, the average employment rate is 67%, in fact, Norway’s employmentrate is one of the highest in OECD’s list.
Furthermore, the working hour mayvary from different organisation and field, this is totally subjective andpersonal. When the amount of time spent in working and one’s preference doesnot match, this will diminish in subjective well-being in both men and womenwho are working (Angrave, 2015). Other than that, there will be negative impactin social’s happiness when one is over-employed or under-employed. Over-employedis mean that the employee’s working hour is longer than his/ her preferencewhile under-employed is referring to the employee’s working hour is shorterthan his/ her preference.
Both over-employed and under-employed may bedetrimental to the happiness. According to research, employment can have detrimentaleffects on relationship as well, when the husband is unemployed or not lookingfor any job which will affect the subjective well-being and quality of life (Kim,2013). The satisfaction is partner’s life is reciprocally to the working hoursof their partner who is underemployed. For instance, the life satisfaction of menis greatly reduced than women when both the men and women are underemployed (Wunder,2013). Yet, just being in a relationship greatly reduces the impactunemployment has on the subjective salubrity of an individual (Meer, 2014). Inlong term wise, the higher the rates of unemployment, the greater the negativityeffect on subjective well-being of the employed. According to (Binder, 2013), for those who had left their present joband became self-employed has a greater life satisfaction in their life, as thisis like an achievement in a lifetime and can increase subjective well-being. Onthe other hand, those who became self-employed after left their job reported agreater life satisfaction than those who are working for others or those whobecame self-employed because of unemployment.
Besides, employment, self-employedand unemployment may influence happiness, yet, retirement is also one of thereason of happiness. The effects of retirement are very subjective as well, assomeone who voluntarily retired can remain stable subjective well-being thanthose who involuntarily retired. Greater life satisfaction may increase thehappiness of one. So, we can say employment rate is also one of the measurementtools to estimate the happiness of the society. Another determinant that can affect the economic ofhappiness is individual income, as mentioned in this working paper earlier,generally, for people who are high earners are the people who are satisfiedwith their life.
In short, individual income is also one of the happinessmeasurement index in economic happiness. According to Rozanne’s journal, peoplewho are high earners, perhaps, might not be a happier person, it depends on howthey spend their money, whether did they spent their money right. In Rozanne’sjournal, there are eight recommendations which can influence the way ofspending money and improve happiness.
The first recommendation is spendingmoney on “experiences” rather than goods (Rozanne, 2011). For example, peoplecan spend money on travels, adventures or even go for course rather thanspending on branded stuff. Or they can even spend on a short-term course of psychologicaltherapy. According to Ryan Howes, a licensed clinical psychologist based in California,he stated that people who had attended a psychological therapy course is 32times more cost effective at increasing their happiness than those who didn’tattend (Ryan, 2009). The second recommendation is donating money to others.
People can be happier by donating money to the charities, old folks home or orphanage.Additionally, Rozanne’s journal advice people to adjust their mindset to “paynow, consume later” instead of “consume now, pay later” (Rozanne, 2011). Thisis one of the reason why many teenagers in Malaysia who announced bankruptcy becauseof credit cards and car loans.
In my point of view, spending with credit cardsare for those who have strong financial requirement as they able to payback thedebts to their bank after instead of paying the interests. Another determinant in gross national happiness indexis freedom and control. There is a study that was conducted at the Universityof Zurich, they suggested that democracy and federalism help in briningwell-being to society (Bruno, 2000). The first reason is that citizens involvein a more active role for monitoring of professional politicians. And thesecond reason is the freedom and ability to get involved in the political processincluded election for new governance.
Both two reasons can be found in Norway,the happiest country in year 2017, what makes Norway the happiest country is thetrust in government for a better future and well-being. In the most recentelection in Norway, the total voter turnout was 78% of those who had registeredas a voter (OECD). So, the freedom and control of society is an essential toolto measure happiness as well.
The last determinant to discuss is happiness andleisure. According to research, happiness and leisure relies on subjectivewell-being as an adequate measurement tool of happiness. Actively taking partin leisure activities may result in greatest levels of subjective happiness. Bytaking part in leisure activities such as sports, entertainment and vacationmay help in release the tension in work. Taking a break in this stressful worldand adjust the physically and mentality to the fullest.
Moreover, spending freetime for leisure activities is subjective to well-being as well. Time spent onleisure must be wisely because research shows that people spending time forshopping, reading books, attending cultural events, getting together withrelatives and family, listening to music and attending sporting events are muchappropriate than spending time on the internet or watching TV programme. Peoplewho spent their leisure time wisely are the people who achieve great lifesatisfaction and are happier than those who didn’t spent wisely (Newman, 2014). ConclusionHappiness isn’t just about the money, it is just part of the happiness. Indemand and supply theories discussed earlier, both theories are related tomoney and quantity. Yet, they can’t measure happiness of a nation properly. Accordingto IMF, economists in almost every country measure a country’s success bymeasuring its GDP but not GDP couldn’t measure the well-being of a nationaccurately.
Theoretically, when a country meets higher GDP is a success country,but the truth is that even high per capita income doesn’t mean that the nationis living happily, reported by the economist, Richard Easterlin, in the 1970s(IMF, 2017). As a conclusion, IMF measuring the well-being and happiness of acountry with GDP and this has proved that it is not reliable as there may beother factors that may influence the happiness of human-being. As mentioned inearlier part, most of the economists measure the happiness of a country withGross National Happiness index in which the measurement includes psychologicalwell-being, health of society, health of economy, education for future generation,cultural diversity & resilience, good and trustable governance, communityvitality, ecological diversity & resilience and the living standards. Inshort, we can say that to achieve happiness in population, there are socialaspects and personal aspects. As for social aspects, it included the welfare givento the community, freedom and happiness.
For instance, the tax paid to thegovernment can provide benefits to the community, building school for kids,hospitality, medical check-ups and so on and so forth. While, as statedearlier, freedom and happiness, this is included the freedom for the society tovote during election and monitoring the action by politicians. On the otherhand, as for personal aspects, it included the employment, individual incomeand leisure. Employment rate plays an important role to measure the happiness,as employment and individual income are both internally related. Individualincome comes from employment/ self-employed.
Then, individual income can allowsomeone to spend money on their leisure time. Hence, Gross National Happiness indexand the determinants discussed in analysis earlier are the major tools that cancalculate happiness of a nation accurately.