In the recent past many economists have studied the role of happiness in explaining behavior and evaluating economic outcomes. Happiness is difficult to define, but seems to go beyond the concepts of individual welfare usually employed by traditional economists. It clearly helps to explain many phenomena. For example, the happiness that results from winning a lottery makes people more prone to vote for incumbent politicians, even though their wealth is clearly random and not the result of good policies. Or happiness explains why politicians are so prone to bid for organizing big sport events that are like enormous parties for local citizens. What this illustrates is that happiness is helpful from the point of view of positive economics: explaining why things happen. But it is less useful from the point of view of normative economics: what should happen. For the fact that people are happy with big sports events, for example, does not justify spending enormous amounts of money in something that just creates subjective happiness for a few days and leaves a legacy of high debts and white elephants.
We are all happy when our preferred soccer team wins a game, but this does not justify the numerous more or less implicit public subsidies that soccer clubs receive.
Paul Krugman: Zombies of Voodoo Economics
6 hours ago