ABSTRACT
The focus on growth by economists may not be easy to understand for those outside the profession. It has been argued, not without justification, that this seemingly narrow focus does not coincide with generally accepted definitions of human well-being, such as those measured by various socio-economic development indicators and, ultimately, with individual happiness. Clearly, well-being does not depend solely upon monetary considerations, and empirical studies of self-reported happiness show that the main determinants of well-being are-in addition to (relative more than absolute) income-health, education, and the quality of relational goods, while adverse aggregate shocks such as inflation and unemployment have a significant negative impact on it (Alesina et al. 2001; Easterlin 2001, 2005; Frey and Stutzer 2000; Di Tella et al. 2001). In spite of the inevitable cultural and interview biases that must be taken into account when dealing with self-reported happiness, medical studies document a strong and significant link between the same variables and personal health, supporting the reliability claims of the studies based on self-reporting (Pavot et al. 1991; Ekman et al. 1990; Shedler et al. 1993; Koivumaa-Honkanen et al. 2000). The empirical happiness literature suggests that economic growth is a fundamental intermediate target, but that the maximization of individual well-being should be pursued by looking at broader goals that include non-monetary variables whose significant and positive relationship with self-reported happiness have been documented. In the last decade, the findings of the happiness literature have gradually been incorporated into political economy. For example, the World Development Report 2003 (World Bank 2003) proposed that the traditional consumption-output channel fuelling individual welfare should be complemented by other channels where the direct enjoyment of human, social, and environmental resources is independent from productive considerations. The happiness literature has contributed to a paradigm shift that has been accelerated by the global financial crisis. In 2008, French President Nicholas Sarkozy appointed a commission of prominent economists to investigate the limitations of GDP as a measure of economic performance and social progress and to elaborate new indicators of wellbeing (Stiglitz et al. 2009). A deeper inspection of the close relationships between these non-immediately productive dimensions of individual well-being and personal income clearly
reveals that economic growth, or the creation of economic value at the aggregate level, provides the resources needed to invest in education, health, leisure, and the preservation of the environment. Hence, economic growth remains a crucial factor for the development of the non-monetary dimensions of individual happiness. This is why research into the drivers of economic growth is one of the important ways that economists can contribute to pursuing the desirable goals of poverty eradication and life satisfaction. This chapter first illustrates recent advances in the growth literature and then outlines some new perspectives that implicitly integrate broader indicators of human well-being.
