The Economic Characteristics which Determine the Happiness of the Society - Example

Determinants of Happiness Student’s Name Number Course Lecturer Date Determinants of Happiness Introduction Marcus Antonius, the historical philosopher made a conclusion after considerable reflection on the idea of happiness that, little is required for the society to be happy. Such an insight seems invalid in the current materialistic society at its basic conception. This gives rise to two questions. First, as individuals constantly walk on the path to richness in search of happiness, does their final destination become the one which they intended? The other and more important question is, do increased national richness and more positive economic conditions make the nation in general attain greater happiness? Even though public opinion as well as intuition proposes that, a bigger percentage of people always prefer more income to less, a considerable debate has been taking place regarding this matter when lifted up to the state level. A number of scholars have of late started to disagree with the supposed relation between economic conditions and personal wellbeing and the degree to which economic conditions matter (Easterlin 2004, p.26). This essay will discuss the economic characteristics which determine the happiness of the society and how the relative significance of such characteristics change with increased societal richness overtime. Determinants of Happiness Income growth From a general perspective, happiness is directly proportional to the income of an individual and inversely proportional to the income of other people. Increasing the income of every individual does not lead to increased happiness of everybody. This is because; the favourable impact of income growth on subjective happiness is counteracted by the negative impact of increased living norms which result from an overall incomes’ growth. Formally, this happiness-income model correspond to interdependent preferences’ model whereby the subjective well-being or utility of every individual varies directly with their personal income and contrariwise with others’ average income. At any given time, happiness is directly proportional to individual income. However, with time, a general rise in the income of individuals results in an increase in societal average. Therefore, the greater happiness that people may expect from increase in personal incomes is replaced with a decline in happiness because of an increase in the aggregate, thus yielding no net increase in well-being (Easterlin R. 1995, p.36). Easterlin R. (1995, p.36) further maintains that, although the model produces time series and paradoxical cross-sectional relationships between the income type observed and happiness, a more practical model would additionally put into consideration habit formation, where the utility that a person attaches to his or her present level of income, also depends on his or her past income. A bigger percentage of people with higher levels of income have high income family backgrounds and the opposite for low income people. The dissimilarity in the level of living experience shown by income history’s difference might be anticipated to bring about comparable differences in norms of living level that is, lesser norms for poor people and high norms for rich people. In fact, if habit pattern only shaped norms, it might be arrived at norms’ dispersion in direct ratio to income’s dispersion, and no considerable income-happiness correlation in the cross-section. On the contrary, with a more practical assumption along with interdependent preferences, the norms’ dispersion is less compared to that of income, since norms at all levels of income are pulled in the direction of income average. The outcome is a favourable happiness-income link in the cross-section, which is weaker than the link that would exist without habit formation. On the other hand, evidence from surveys on a number of countries shows no relationship between income growth and happiness. A small survey on Detroit wives shows a lack of change in satisfaction distribution with high standards of living despite constant dollar income went up by 40 percent. In addition, life satisfaction trends in nine countries in Europe between 1973 and 1989 are similar to those recorded in the U.S. Satisfaction moves upwards in a number of countries, and moves downwards in other countries. The general pattern is however, clearly one with slight or no movement in a time when the income per capita of these nations rises from 25 percent to an average of 50 percent. Certain researchers on subjective well-being claim that, the relationship between income and subjective well-being is curvilinear. This implies that, it can be zero in affluent nations, but positive in poor nations, even though no time sequential proof has been provided to that effect. In addition, there is proof regarding norms which support the idea that, income growth does not result in greater happiness since material ambitions increase with the income of the society (Easterlin R. 1995, p.41). Equity Social and income inequalities between the rich and the poor keeps on increasing as the affluent people continue to become richer while the poor people’s condition gets worse. The degree of equity in the society in areas such as income distribution, property ownership, decision-making and policy formulation highly determines the level of happiness. The government plays a key role in ensuring equal distribution of income through the use of progressive taxes whereby individuals pay taxes according to their income levels. This implies that, the rich pay higher amounts of taxes, while the poor pay lower amounts. By doing so, the government ensures that, every citizen has a certain amount of disposable income to cater for his or her needs. Equity through taxes increase the happiness of the society especially the poor from a non-material perspective. The use of progressive taxes brings about a feeling of equality in the sense that, the poor have a sense of worthiness to the economy as much as the rich (Bok 2010, p.11). Bok (2010, p.13) further asserts that, equity in ownership of property is achieved when everybody has a right to own and sell property like houses, land, equipment and vehicles. In such a case, the feelings of some people being masters while others are servants are avoided, which enhances harmony throughout the society. Increased harmony especially in executing community based initiatives leads to overall development which in turn improves the well-being of the community members. Moreover, equity through involvement of all society members in the making of decisions on societal matters and formulating policies leads to increased happiness. This is because; it ensures effective representation of all the parts of the society and individuals’ needs resulting. Property ownership According to Hanna (2007), when an individual possesses property, apart from the established possible access to finance and equity benefits, there is a strong influence of living the American dream, that is, the notion that, by working hard and being determined, one can buy a home, and attain certain level of security, happiness and success. However, this vision changes in certain areas in the world whose property rights are intimidated by ineffective law enforcement, crime, corruption as well as subjective government policy. This may form a better ground from explaining and comprehending why capitalism continues to be detested in most parts of the globe especially where rights to property ownership do not exist or are very weak. As much as the members of the society may become happy when they own a home, a car or any other property, the level of happiness highly depends on a number of factors. To start with, most home owners acquire their homes through mortgages which have to be repaid with an interest. Mortgage repayment takes quite some time to be completed and thus a certain amount of money has to be deducted from the owners’ salary every month towards such repayment. In this case, property ownership does not bring about happiness, but rather a sort of obligation to home owners which they should adhere to. Moreover, it is only after the mortgage amount has been deducted that a person can budget for his or her income. Therefore, property ownership from this perspective limits people’s freedom to budget and spend their income (Hanna 2007). Easterlin (2004, p.27) argues that, in less developed countries, property ownership rarely results in greater happiness as compared to developed countries. This is due to factors such as corruption which creates an unfavourable setting for capitalism. In most cases, genuine and ordinary property owners lose their property to grabbers and greedy political leaders who always make policies in their favour. Cases of forged title deeds are very common and due to weak property rights and policies, poor members of the society always end up losing to rich and renowned people in the society. High corruption levels are present within court premises and through giving bribes; people are acquitted in property ownership cases. In such cases, property ownership does not guarantee happiness in the society since the owners are not certain about for how long they going to own the property or when they are likely to lose it to corruption or other evils in the society. On the other hand, property ownership can be said to bring about happiness among the society members from different perspectives. In the first place, when a person owns a house, his or her comfort increases since he or she does not have to bother about rent expenses. In addition, property owners have a high degree of freedom and are at liberty to do what they please with their car or home. Unlike when an individual is using a rented car or is staying in a rented home, whereby he or she has to abide by the set rules regarding the occupation and use of the property. Freedom and leading a stress free life are sources of happiness for most society members Easterlin (2004, p.29). Organisation Drawing from Kacapyr (2008, p.402), organisations provide the members of the society with employment. Employment has a direct relation with the well-being of people since through it; people can earn some money for catering for their needs such as food, housing, health services and education. However, the degree of happiness that people derive from working for a certain organisation depends on other employment factors. The first factor is job satisfaction. Job satisfaction among employees is derived from a good and safe working environment, reasonable salaries and warm workmates among other things. An individual can only enjoy working for a given organization, if he or she is satisfied. Job satisfaction improves the morale of employees in discharging their duties which leads to increased production and happiness. In addition, employee empowerment determines employee well-being. When employees are given freedom to make decisions regarding their work enhances their welfare since it gives them a feeling of recognition and responsibility. Thus, employees consider themselves as important to the organisation. Moreover, employee motivation through bonuses and other types of rewards raises their happiness. Where monetary rewards are given, employees have more disposable income to spend which can be used to improve their standards of livings as well as those of their families. Non-monetary rewards such as promotions and career development opportunities bring about a feeling of appreciation, recognition and achievement. Organisations also enhance the well-being of the society in general through corporate social responsibility. This is whereby they sponsor community initiatives that deal with social amenities such as health facilities and schools (Kacapyr 2008, p.405). Governance The involvement of the government in the control of economy, normally gauged by the portion of the expenditure of government in national production, may affect subjective happiness of the society through numerous channels in various directions. To start with, since government spending if partly financed by the taxes charged to citizens, it can be argued that variations in government spending have a direct effect on life satisfaction’s changes. Members of the public prefer less tax so as for their disposable income to increase, which enhances their level of happiness. This suggests an unfavourable connection between government spending level and happiness. On the contrary, individuals are ready to bear high tax burdens since they consider particular public services and goods that the government provide, substantially improve their standards of living and eventually their happiness. In such a case, the happiness of people may be increased through the shifting of resources from the highly competitive private sector to items that are used by the public (Perovic & Golem 2004, p.9). The classical perspective considers the government a generous actor trying to correct market failures. As at now, the most widespread explanation of government existence in economic literature relates to the non-existence and incompleteness of markets. These shortfalls can be owed to innate and monopoly situations, asymmetry or imperfectness of information. They can also be due to the features of the products that are manufactured by public sectors. From this perspective, intervention of the government is beneficial. This is because; government ensure institutional framework, national defence and judicial structures that guard private property as well as individual rights. Accordingly, the government provide a structure for dynamic and efficiency-enhancing market rivalry. Moreover, governments encourage socio-economic growth through capital investments and productivity-enhancing public goods. Lastly, governments ensure income equality and social justice through redistribution of national revenue (Hjerppe 2003, p.322). It is acknowledged that, literature on public choice’s explanations for extreme expansion of the size of government may result in subjective life discontent. Nevertheless, it is not clear why the negative impact of the excess expansion of government would surpass the positive impact of public services and goods, transfers and investments that the government provides. It can thus be concluded that, government expenditure positively affects happiness only to a given level, after which its effect is negative. For further clarification on the matter, it can be said that, the negative impact of government spending on happiness only arises from the wasteful or excess sum of government spending. There are actually no grounds for assuming that, the helpful levels of government spending also have negative impacts on happiness (Perovic & Golem 2004, p.10). Drawing from Frey & Stutzer (2000, p.921), a higher level of express political participation opportunities or direct democracy’s stoutly developed institutions especially through popular initiatives and referenda raise the subjective well-being of citizens due to two reasons. In the first place, because of the more dynamic role of citizens, politicians are controlled and monitored in a better way. Government activity and other numerous government decisions near the desires of citizenry. Consequently, contentment with the output of government is shown in an increased extent of general well-being. Additionally, direct democracy’s institutions increase the chances of the citizens of being part of the political procedure. The procedural impact is autonomous of the political activity’s outcome. Type of goods produced and consumed Hsee, et al. (2009, p.398) maintain that, different consumers have different tastes and preferences for goods as well as services. Consumption experience can be defined as the feeling of a consumer when consuming a certain item. In this case, it can be argued that, different goods or services present consumers with different consumption experiences. Consumer satisfaction is not guaranteed during their acquisition of a good or service, it is only after using the good or service when a consumer can say whether it is satisfactory or not. Normally, there are several manufacturers of products and providers of services which sometimes act as substitute goods to serve the different preferences of consumers. The happiness of a consumer resulting from the purchase and consumption of a certain good or service can only be measured by the level of satisfaction that is derived from consuming the good or using the service. Acquisition experience denotes a consumer’s feeling when purchasing a product. Intuition may propose that, a consumer’s acquisition experience ought to match his or her consumption experience simply because the reason for acquiring a certain item is habitually for consumption. However, in reality, acquisition experience readily dissociates with consumption experience. Just like when a person receives money, he or she concentrates on the face value of the received amount, when purchasing an item people look at its face details such as number, size, price, quantity among others. Most people have a tendency of overlooking the ultimate consumption experience of the item even when they can predict it. Thus, when purchasing a good or a service, people use its external details to ascertain their happiness. Moreover, when consuming the same good, people depend on their inner sense to tell them about the likely happiness from the consumption of the good. It can thus be concluded that, the happiness that is derived from the acquisition and consumption of a good, is highly dependent on the good’s absolute desirability (Hsee, et al. 2009, p.399). In the production of goods, it is important that firms carry out an analysis of the consumer market in order to e in a position to produce goods that match the needs of the consumers. High customer satisfaction is achieved when the consumption of a certain product caters for all the needs of a consumer. On the contrary, although happiness is directly proportional to the type of goods produced, a consumer’s income level acts as a limiting factor in determining the level of happiness. This is because; the type of goods that a consumer will purchase will depend on his or her income level. A poor consumer may not be able to purchase the desired product due to non affordability. In such a case, it is obvious that the affordable product purchased by the consumer will not satisfy his or her needs leading to a lower level of happiness (Johnson & Krueger 2006, p.680). Conclusion Many scholars are now opposing the supposed connection between economic conditions and well-being of individuals. Income growth leads to increased happiness up to a certain level after which it is offset by an increase in societal income average. Equity in income distribution and decision-making among other improves societal well-being. Property has both positive and negative effects on happiness. Organisations benefit its employees as well as the general society through corporate social responsibility. Governance affects happiness through the level of government spending on public services and goods and also through a higher level of express political participation opportunities or direct democracy’s stoutly developed institutions. The kind of goods produced and consumer lead to increased happiness by ensuring high customer satisfaction. References Bok, DC 2010, The politics of happiness: what government can learn from the new research on well-being, Princeton, Princeton University Press. Easterlin, R 1995, Will raising the incomes of all increase the happiness of all? Journal of Economic Behaviour and Organization, 27(1), pp. 35-47. Easterlin, RA 2004, The economics of happiness, Daedalus, 133(2), pp. 26-33. Frey, BS & Stutzer, A 2000, Happiness, Economy and Institutions, The Economic Journal, 110(2), pp. 918-938. Hanna, J 2007, How Property Ownership Changes Your World View, Harvard Business School Newsletter, 28 May. Hjerppe, R 2003, Uncovering the Dimensions of the Common Good – Problems of Measurement of the Public Sector, Helsinki, Government Institute for Economic Research, p. 322. Hsee, CK, Yang, Y, LI, N & Shen, L 2009, Wealth, Warmth, and Well-Being: Whether Happiness Is Relative or Absolute Depends on Whether It Is About Money, Acquisition, or Consumption, Journal of Marketing Research, 46(6), p. 396–409. Johnson, W & Krueger, RF 2006, How Money Buys Happiness: Genetic and Environmental Processes Linking Finances and Life Satisfaction, Journal of Personality and Social Psychology, 90(4), p. 680–91. Kacapyr, E 2008, Cross-country Determinants of Life Satisfaction with Life, International Journal of Social Economics, 35(6), pp. 400-416. Perovic, LM & Golem, S 2004, Investigating Macroeconomic Determinants of Happiness in Transition Countries: How Important is Government Expenditure? 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