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The economics of happiness

WASHINGTON — Ben Bernanke wants to know if you're happy.

The Federal Reserve chairman said Monday that gauging happiness can be as important for measuring economic progress as determining whether inflation is low or unemployment is high. Economics isn't just about money and material benefits, Bernanke said. It is also about understanding and promoting "the enhancement of well-being."

Bernanke and Fed policymakers rely on reports on hiring, consumer spending and other economic data when making high-stakes decisions about the $15 trillion U.S. economy. The Fed's dual mandate is to maintain low inflation and full employment.

"We should seek better and more-direct measurements of economic well-being," Bernanke said Monday in a videotaped speech shown to a conference of economists and statisticians in Cambridge, Mass. After all, promoting well-being is "the ultimate objective of our policy decisions."

Bernanke acknowledged that many people aren't too happy right now. Unemployment rose in July to 8.3 percent, and economic growth has slowed sharply from the start of the year. He called the recovery "frustratingly slow" when he testified to Congress on July 17.

Aggregate statistics can mask important information about how individual Americans are faring, Bernanke said.

His speech Monday was the latest foray into a relatively new specialty in economics known as "happiness studies." Bernanke attracted widespread notice when he spoke about the economics of happiness in a May 2010 commencement address at the University of South Carolina.

In that speech, he said research has found that once basic material needs are met, more wealth doesn't necessarily make people happier.

So far, most efforts have involved surveys in which people are asked about whether they are happy and what contributes to their happiness.

Those surveys have found some consistent answers: physical and mental health, the strength of family and community ties, a sense of control over one's life, and opportunities for leisure activity.

The Kingdom of Bhutan has been tracking happiness for four decades. The tiny Himalayan nation stopped tracking gross national product in 1972 and instead switched to measuring Gross National Happiness.

Bernanke on Monday sketched out a few other questions he would like to know: How secure do Americans feel in their jobs? How confident are Americans in their future job prospects? How prepared are families for financial shocks?

These indicators "could be useful in measuring economic progress or setbacks, as well as in explaining economic decisionmaking," Bernanke said.

It's safe to say that Bernanke wouldn't expect a great deal of optimism if those questions were asked now.

Bernanke's own definition of happiness might baffle some. He called it a "short-term state of awareness that depends on a person's perceptions of one's immediate reality, as well as on immediate external circumstances and outcomes."

It's not exactly how the classic comic strip Peanuts described it when it said, "Happiness is a warm puppy." But perhaps Bernanke's version can be measured more easily in surveys.

The economics of happiness 08/06/12 [Last modified: Monday, August 6, 2012 8:59pm]
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