Even with concepts that seem totally non-economic, market forces are crucial. In a new paper, “Beauty Is the Promise of Happiness?”, using data from the U.S., Canada, Germany, and the U.K., my colleague Jason Abrevaya and I show that better-looking people are happier. At least half of the impact arises because better-looking people earn more and obtain spouses who earn more. These are market effects. The total effect of good looks is about the same for men and women; but more of the impact of beauty on happiness among men works through markets, while among women the direct effect — being good-looking per se makes women happier — is more important.
The economics profession seems keen to allow that measures of utility from life satisfaction or happiness studies are valid alternative measures of social welfare (in addition to GDP). I think this is a good idea too, simply because additional measurements that are highly correlated lend confidence to the accuracy of both measures.
What I don't understand is the hesitation to consider contingent valuation or contingent behavior in the same way. It is rare to wander outside the field of environmental economics (and sometimes wandering around within the field) and not have someone questions your methods. The author above did this in an association lecture at the Southern Economic Association meetings a few years ago. Do happiness researchers catch the same grief?
Bruce Johnson, Brad Humphries, Dan Mason and myself are conducting a study of the Vancouver Winter Olympics. We thought it would be neat to compare willingness-to-pay derived from contingent valuation with that derived from life satisfaction questions. We have been disappointed. While the contingent valuation data passes the usual validity and reliability tests the life satisfaction data is a mess. The willingness-to-pay estimates from the life satisfaction data are unrealistic. Needless to say, that comparison paper is DOA and I'm highly skeptical of life satisfaction / happiness studies due to my own experience, not because of a revealed preference mindset.
