Welfare, Policy, and Future Paths

Nettle (2005) discussed the definition of happiness in three different ways: (i) emotional happiness brought about by the mood stemming from positive emotions such as joy, gratitude, or pleasure, (ii) satisfaction with life in general or life satisfaction, and (iii) eudaimonia, which expresses the quality of life that people achieve by developing their potential.

Eudaimonia: This concept, introduced by Aristotle, means “living well” and “having good conduct”. It is necessary to live according to the virtues to achieve eudaimonia.

The Psychological Self-Determination Theory states that three needs related to intrinsic motivation must be met to be happy. These are competence, autonomy, and personal relationships.

Subjective well-being, also known as self-reported well-being. This concept, which is often used as an indicator of happiness and individual health, refers to how people evaluate different aspects of their lives.

Liveability of the environment • Ecological (e.g., moderate climate, clean air, spacious housing) • Social (e.g., freedom, equality, brotherhood) • Economic (e.g., wealthy nation, generous social benefits, smooth economic development) • Cultural (e.g., flourishing of arts and sciences, mass education) A comparable concept in economics is the market.

Objective utility of life • External utility (e.g., in intimate relationships: rearing children, caring for friends; e.g., for society: being a good citizen; e.g., for mankind: leaving behind an invention) • Moral perfection (e.g., authenticity, compassion, originality) A comparable concept in economics would be public goods.

Life-ability of the person • Physical health (negative: free of disease; positive: energetic, resilient) • Mental health (negative: free of mental defects; positive: autonomous, creative) • Knowledge (e.g., literacy, schooling) Skills (e.g., intelligence, manners) • Art of living (e.g., varied lifestyle, differentiated taste) A comparable concept in economics is capital.

Subjective appreciation of life • Appraisal of life aspects (e.g., satisfaction with job, satisfaction with variety) • Prevailing moods (e.g., depression, ennui; enthusiasm) • Overall appraisals (affective: general mood level; cognitive: contentment with life) A comparable concept in economics is private profit.

In happiness studies, the determinants of individuals’ well-being are investigated through data on individuals’ subjective life satisfaction. The multiple regression models established for this provide evidence for possible determinants of happiness. Factors such as an individual’s genetic endowment, economic status, socio-demographic conditions, culture, religion, and also political conditions can be counted among the determinants of happiness that are frequently the subject of happiness research.

Veenhoven (2000) expressed the four qualities of life, which is another concept related to happiness. This distinction mainly concerns the life chances and life results of individuals. Life chances refer to the opportunities that can be used to lead a good life. Life results refer to the way these opportunities are used. A second distinction concerns inner and outer qualities. Inner qualities refer to individuals’ own characteristics, and outer qualities refer to their living conditions.

Choice architecture: This concept, introduced by Thaler and Sunstein (2008), refers to influencing individuals’ choices by organizing their decisions.

Framing effect can be defined as individuals being affected by the way information is presented. For example, the way a piece of news, a form, or a savings plan is presented to individuals can affect individuals’ decision-making progress.

Default effect: Since individuals are prone to inertia, they prefer to behave most effortlessly. Therefore, they are affected by the default options. Individuals can be directly involved in a savings plan with default options.

Anchoring effect: Individuals are affected by the starting point anchors offered to them. For example, determining what the maximum savings rate might be for an individual who wants to save and presenting it as a target can be effective.

Delphi Technique is the name of the technique in which the opinions of individuals who are experts in the field are taken to solve the problems, no one is affected by anyone, and the decision-makers are made to decide on the subject in line with the expert opinions.

A policy process using the Delphi Technique can be listed as follows (Turoff, 2002): 1. Describing problems 2. Identification of relevant policy instruments 3. Disclosure of expert opinions on problems 4. Discussing the causes of disagreements 5. Evaluating underlying causes 6. Reevaluating options

Libertarian Paternalism gathers the opposite concepts of libertarian, which expresses a libertarian attitude on the one hand, and paternalism, which expresses interventionism, on the other. This concept refers to a soft intervention for the benefit of the public and the individuals in a way that does not constrict the freedom of individuals’ choices.

The concept of a nudge was developed by Richard Thaler and Cass Sunstein in their 2008 book, Nudge: Improving Decisions About Health, Wealth, and Happiness. The choice architecture that predictably changes elections, with little intervention in economic incentives and without touching the free will of individuals, is called a nudge.

Behavioral development economics examines developmental issues using psychological and realistic models of people’s decision-making and choice processes.

Behavioral development economists, who added a new dimension to traditional development economics with the cognitive biases of individuals, summarize behavioral development economics as follows:

• Behavioral development economics does not reject the rules and economic policies of traditional development economics.

• Behavioral development economics aims to strengthen existing development economic theories.

• Behavioral development economics rejects a single rational model, designing experiments to more precisely describe and test specific mechanisms of behavior.

• According to behavioral development economists, the behavior of the poor is not the only cause of poverty. Also, because the poor are not free to choose, they feel that their cognitive biases do not deserve to be blamed.

• A scientific understanding of the role of behavioral factors does not necessarily translate into a policy. Also, misunderstanding human behavior can lead to undesirable consequences.

• Current research in behavioral development economics does not yet yield overwhelming and conclusive evidence.

Cognitive tax can be defined as a constraint on an individual’s ability to make effective choices and use opportunities to achieve a better life. Cognitive tax, indeed, is a metaphor that expresses the cost for poor people caused by their lack of knowledge, thought, understanding, etc.

Richard Thaler (2015) offered some of the lessons that his dealing with behavioral economics provided him as advice to future researchers. These are:

• Observe: The starting point of behavioral economics is observations. Observe the environment and people. See the world as it is, not as others want it to be.

• Collect data: A lot of data is needed to avoid false predictions and ensure effective designs.

• Speak up: Dealing with behavioral economics requires defending the unreality of rational models against leading economists. Although this is a risky path, it is sometimes necessary to increase the number of new ideas and reduce the risk of possible errors.