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rs[2] However, many happiness economists believe they have solved this comparison problem. Cross-sections of large data samples across nations and time demonstrate consistent patterns in the determinants of happiness.[2]
Happiness is typically measured using subjective measures - e.g. surveys - and/or objective measures. One concern has always been the accuracy and reliability of people’s responses to happiness surveys.[3] Objective measures such as lifespan, income and education, are often used as well as or instead of subjectively reported happiness, though this assumes that they generally produce happiness, which while plausible may not necessarily be the case. The terms quality of life or well-being are often used to encompass these more objective measures.
Some scientists claim that happiness can be measured both subjectively and objectively by observing the joy center of the brain lit up with advanced imaging,[3] although this raises philosophical issues, for example about whether this can be treated as more reliable than reported subjective happiness.
Micro-econometric happiness equations have the standard form: .[2] In this equation W is the reported well-being of individual i at time t, and x is a vector of known variables, which include socio-demographic and socioeconomic characteristics.[2]
Abraham Maslow theorized that human happiness is the outcome of meeting a set of needs. He listed these in order of priority, leading to a pyramid called Maslow's hierarchy of needs. The set of needs includes physiological, safety, love/belonging, esteem, and self-actualization needs. These needs can be used as a basis for evaluating the overall happiness level of individuals.[citation needed]that is for a person to have happiness her or his needs have to be satified first (N Gurts).
Typically national financial measures, such as GDP and GNP, have been used as a measure of successful policy. Although on average richer nations tend to be happier than poorer nations, some studies have indicated that beyond an average GDP per capita of about $15,000 (most of the world's nations have less than this), the average income in a nation makes little difference to the average self-reported happiness.[4][5] Other economists have disputed the accuracy of these studies, finding a logarithmic correlation between GDP per capita and self-reported happiness.[6]
However, a free market think tank Cato Institute points out that since life expectancy has continued to increase in nations wealthier than this, often partly attributed to economic growth, Happy Life Years have continued to increase.[5][7]
Historically, economists have said that well-being is a simple function of income. However, it has been found that once wealth reaches a subsistence level, its effectiveness as a generator of well-being is greatly diminished.[8] This paradox has been referred to as the Easterlin paradox[2] and may result from a "hedonic treadmill."[8] This means that aspirations increase with income; after basic needs are met, relative rather than absolute income levels influence well-being.[2] Happiness economists hope to change the way governments view well-being and how to most effectively govern and allocate resources given this paradox.[9] However, other research suggests that no paradox exists, and happiness is linearly related to the logarithm of absolute (real, PPP-adjusted) income, with little or no relative income component[citation needed].
Money correlates with happiness, but the rate diminishes with more money.[2][3][10] In 2010, Daniel Kahneman and Angus Deaton found that higher earners generally reported better life satisfaction, but people's day-to-day emotional well-being only rose with earnings until a threshold annual income of $75,000.[11]
Gregg Easterbrook claims that even though wealth, or economic surplus, is more common today than in 1950, people are still as happy (or unhappy) as they were 60 years ago.[citation needed] In polls taken by the National Opinion Research Center, about 1/3 Americans said they were really happy in 1950, since then the polls have been taken periodically, and the results have stayed about the same since then. Wealth has not been making people happier. This is because after the basics for survival are taken care of, money cannot bring people any more happiness than they would experience without it.[12]
Other factors have been suggested as making people happier than money.[3] A short term course of psychological therapy is 32 times more cost effective at increasing happiness than simply increasing income.[13][14] One study, when corrected for social status, showed no correlation between income and happiness.
Professor Ruut Veenhoven showed that social security payments do not seem to add to happiness. This may be due to the fact that non-self-earned income (e.g., from a lottery) does not add to happiness in general either. Happiness may be the minds reward to a useful action. However, Johan Norberg of CIS, a free enterprise economy think tank, presents a hypothesis that as people who think that they themselves control their lives are more happy, paternalist institutions may decrease happiness.[15][16]
An alternative perspective focuses on the role of the welfare state as an institution that improves quality of life not only by increasing the extent to which basic human needs are met, but also by promoting greater control of one's life by limiting the degree to which individuals find themselves at the mercy of impersonal market forces that are indifferent to the fate of individuals. This is the argument suggested by the U.S. political scientist Benjamin Radcliff, who has presented a series of papers in peer reviewed scholarly journals demonstrating that a more generous welfare state contributes to higher levels of life satisfaction, and does so to rich and poor alike.[17][18][19]