How dismal is economics?

Published in Insights, The New Zealand Initiative’s newsletter, 29 August 2014

Allegedly economics is the ‘dismal science’. Indeed, if you believe the wife of one of the economists in our team, you should avoid the company of economists like the plague. She complains (quite correctly) that every conversation quickly turns into a lament about silly regulation, bad monetary policy and the sorry state of the world. Economists like nothing more than a good whinge – and there is plenty for them to whinge about.

So it came as a bit of a surprise when I discovered a new paper written by two, well, economists claiming that economics makes you happy. To add to my sense of astonishment, the economists were German and the objects of their study were young German economists.

Justus Haucap and Ulrich Heimeshoff’s paper ‘The Happiness of Economists: Estimating the Causal Effect of Studying Economics on Subjective Well-Being’ should be required reading for anyone looking for a happy life. Its conclusion is simple: If you seek true happiness, you should study economics.

The paper starts with a conundrum. Previous research revealed that economists are quite different from other people. They tend to be more selfish than non-economists, even though it is not clear why. Do selfish people flock to economics classes or does studying economics make you selfish? Regardless whether it is nurture or nature, does it then follow that economists are at least less happy than others? After all, psychological research suggests that selfishness reduces individual well-being.

The survey comparing economics students and students of other social sciences found no such link. Quite on the contrary, “studying economics positively affects self-reported life-satisfaction while studying other social sciences appears to have negative effects on individual life satisfaction when compared to economics”.

This of course raises the question, what makes economists happy? Well, it turns out it is a very rational form of happiness. Economists were expecting their dismal studies to gain them better incomes in the future:

“In spite of the findings of modern behavioural economics that well-being (obviously) depends on more than material wealth, income levels are still an important factor for individual life satisfaction, at least for low income levels. We have also found that happiness is positively affected by positive career perspectives, which may be interpreted as a proxy for future income”.

And finally, there was another surprising factor that made these economists happy: being religious. Christian students were significantly happier than those with no stated religion.

Obviously, this is good news for German, Catholic economists. It may be a little selfish but these findings certainly made me very happy.

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