021: Paul Dolan on the Economics of Happiness
Paul Dolan is an internationally renowned expert on happiness, behaviour and public policy. He is currently a Professor of Behavioural Science in the Department of Social Policy at the London School of Economics and Political Science.
Paul has previously held academic posts at York, Newcastle, Sheffield and Imperial and he has been a visiting scholar at Princeton University, working with Daniel Kahneman.
Professor Dolan has over 100 peer-reviewed publications which cover many topics including behavioural science, subjective wellbeing, equity in health and health valuation.
Paul is currently a Member of the World Economic Forum Panel on Behavioural Science, the Chief Academic Advisor on Economic Appraisal for the UK Government’s Economic Service. He is also a member of National Academy of Sciences Panel on Wellbeing and of the Measuring National Wellbeing Advisory Forum for the Office for National Statistics in the UK.
Paul is the author of ‘Happiness by Design’.
In this interview, Paul mentions and discusses: behavioral economics, happiness, nudging, trade-off, pleasure-purpose principle, production function, utility models, causal relationships, priming effects, System 1, System 2
In this interview, Paul mentions: Daniel Kahneman, Amos Tversky, Irving Fischer and Gregory Mankiw.
“2,500 years of ethical discourse hasn’t resolved the question what is the source of happiness” – Paul Dolan
- how Paul evolved from a health economist to a behavioral economist.
- how many years of your life would you be willing to give up to avoid being anxious or being down.
- if Aristotle and other philosophers are right in saying that happiness can only be defined on a death-bed when reflecting upon your life.
- how to create a pleasure-purpose balance that’s right for you.
- how you can use the production function process to produce happiness.
- what is this production process that makes us happy.
- if money makes you happier.
- how happiness studies influence policy decision-making.
- about the limitations to happiness research and what can be done to make better research.
- what nudging is.
- how nudging by policy-makers can make you happier.
- about the morality of nudging.
- how supermarkets can nudge you into buying their breads and cakes.
- why self-help books are a waste of money as they try to change your mindset.
- why Paul’s book, ‘Happiness By Design’ will help you to change what you do.
- about Paul’s ‘3 Pillars of Happiness’ – Deciding, Designing and Doing.
- how designing your life to make things simple and easy can help you achieve your goals.
- about the essence of mindfulness.
- why people who are easily distracted are more likely to be less happy.
- if your phone can make you unhappy and what you should do about it.
- why Paul is a ‘Happy Hammer’ (West Ham fan) despite never winning the league.
- how the power of ‘hope’ can make you happy by allowing your imagination run freely.
Alongside pleasure sits purpose. Happy lives are ones that have a good balance between experiences that are pleasurable on the one hand and purposeful on the other. You need to find out the right balance between pleasure and purpose that is right for you.
The creation of happiness is like a product function of a firm. A firm uses inputs, puts them through a production process to create outputs. A person can equally use inputs like money, marriage, sex, jobs and watching television that are stimuli and we can convert them into happiness by a production process.
What is that production process? According to Paul this production process is called ‘Attention’. Attention is the ‘glue’ that keeps our lives together in terms of behaviour and happiness. The answer to the question ‘Does money make you happier?’ depends on how much attention you pay it.
“Most of economic modelling is based on looking at what people do, not what people say”
Challenges with Happiness Economics: “A lot of what we think we know comes from making inferences from associations. We need to to do more research and field experiments where we look at the causal impact of interventions on people’s happiness.”
Nudging can sometimes be overt and sometimes covert. It can take the form of financial incentives or below-conscious stimuli such as sounds, tastes and smells. The latter is known as priming effects.
According to Paul Dolan, the definition of a successful nudge is one where people, who are being nudged toward a particular direction with the expectation that they would be better-off, become happier as a result of being nudged.
Policy-makers assume after a nudge that people are better off, but research hasn’t captured the after-effects of these nudges to find out if they are indeed better off. Paul is all for designing nudges that make people happier, not by how he judges how they should be happier but according to what large datasets tell him what affects people’s happiness.
Listen to Paul’s 3 Pillars of Happiness: Deciding, Designing and Doing
The Essence of Mindfulness: “We’re generally happier when we’re paying attention to what we’re doing and who we’re doing it with – living in the moment” – Paul Dolan.
“When you’re switching activities, your brain is using energy and it makes you more tired and less happy” – Paul Dolan.
“Being a football fan is a bit like faith. You can’t really change it once you’ve got it” – Paul Dolan.
- Happiness By Design by Professor Paul Dolan