In my life, I crossed paths with Gary Becker in a significant way twice. Once was the Fall of 1986, when I was on the job market. Gary invited me to come to Chicago to present my paper “Making Sense of Two-Sided Altruism”–a paper Robert Barro arranged to have published in a Carnegie-Rochester volume not long after. At lunch with Gary and other Chicago economists, I was impressed with how seriously they took economics as the key to understanding everything. I am glad I got to see that.
The second time I crossed paths with Gary was as someone who does research on the economics of happiness. In two papers,
- Rayo, Luis, and Gary Becker. 2007. “Evolutionary Efficiency and Happiness,”Journal of Political Economy, 115:2, pp. 302-337
- Becker, Gary S., and Luis Rayo. 2008. “Comment on ‘Economic growth and subjective wellbeing: Reassessing the Easterlin Paradox’ by Betsey Stevenson and Justin Wolfers.” Brookings Papers on Economic Activity, Spring: 88-95
Gary and his coauthor Luis Rayo took a view of happiness very close to my own, in the paper “Utility and Happiness,” coauthored with Bob Willis, and so close in time to Bob Willis’s and my work that it took an uncomfortable, but ultimately gracious email exchange with Gary and Luis to come to agreement on Bob’s and my priority. The two key ideas for the economics of happiness that Gary and Luis and Bob and I agree on are
- The Price Theory of Happiness: Felt happiness, as measured in surveys, is only one of the many things that people care about. There are many other arguments in the utility function. Thus, the happiness studied in the economic of happiness is not the same thing as utility. In particular, people will trade off happiness for other things they want.
- The Elation Theory of Happiness: Here there are differences in detail between the two theories. Bob Willis’s and mine emphasizes that on top of longer lasting and routine influences on happiness, there is an impulse response of happiness to good news and bad news, where by “news” we mean a rational expectations innovation to lifetime utility.
A large share of my research effort in the last few years has been working with coauthors–of whom Dan Benjamin and Ori Heffetz deserve special note–to back up the price theory of happiness and the elation theory of happiness. Below are our papers published so far (all of the ones below are in the American Economic Review). So far, they are all about the price theory of happiness.
- What Do You Think Would Make You Happier? What Do You Think You Would Choose? (Dan Benjamin, Ori Heffetz, Miles Kimball and Alex Rees Jones)
- Can Marginal Rates of Substitution Be Inferred from Happiness Data? Evidence from Residency Choices (Dan Benjamin, Ori Heffetz, Miles Kimball and Alex Rees Jones)
- Beyond Happiness and Satisfaction: Toward Well-Being Indices Based on Stated Preference (Dan Benjamin, Ori Heffetz, Miles Kimball and Nichole Szembrot)
- Aggregating Local Preferences to Guide Marginal Policy Adjustments (Dan Benjamin, Ori Heffetz, Miles Kimball and Nichole Szembrot)
We have been glad to have Gary Becker and Luis Rayo fighting with us for this new view of happiness.