Chapter 2from 0 to 10. This reflects a major purpose of this book— to
encourage people to think of well- being as a concrete en-
tity, with units that every policy maker can recognize and
can therefore try to maximize. We are confident that, with
sufficient exposure, this will become standard practice in
policy making. In the seventeenth century there was no clear
concept of temperature, but today we all know what 75°F
is like and how it differs from 32°F. Indeed most car own-
ers know the difference between temperature levels that are
quite close to each other. The same will become true of life-
satisfaction.
So what causes it? We begin with income, not because
it is the most important determinant of well- being, but
because so many people have for so long thought it was.
Indeed some economists have taken “full income” as equiv-
alent to well- being.^1
Of course it would be so if everyone were the same
and everything that mattered to their well- being could be
bought with money. Neither is true. We are born different.
And, as we shall see, many key things that matter for us just
happen to us— we do not choose them. They are, in the lan-
guage of economists, “external effects.” These include how
other people behave, how they influence our tastes, and the
myriad of nonchoice factors affecting our mental and phys-
ical health. And, even in many areas where choice operates,
there are problems of “asymmetric information” and imper-
fect foresight, where the happiness resulting from a choice
is different from what the person expected. In all these areas
we can learn what causes happiness only by studying it
directly.^2
So happiness is not the same as income. But income does
affect happiness. By how much?