How about happiness as a monetary policy tool?

I just came across this refreshing paperon monetary policy titled Should Central Banks Maximize Happiness? The paper is by Rafael Di Tella (Harvard Business School) and Robert MacCulloch (Imperial College, London) and is a wonderful read. The paper was presented in the Boston Fed conference

The Congressional mandate of the Federal Reserve is to pursue both price stability and full employment. But how should trade-offs between volatility in inflation and unemployment be viewed in the light of recent research on the determinants of individuals’ life satisfaction?

The authors use two surveys that measure happiness to evaluate whether the same can be used for monetary policy. They find some positive evidence as well.

A nice perspective. So far the papers I have read on BF/BE have been related to microeconomics- individual behavior, market imperfections etc. This is the first I have seen having a macro application. There is a long way to go but atleast a beginning has been made.  

One Response to “How about happiness as a monetary policy tool?”

  1. Using behavioral economics to improve regulation « Mostly Economics Says:

    […] Using behavioral economics to improve regulation I have pointed out earlier how behavior economic (BE) theories are being applied in macroeconomics and other policy issues (for instance see this on poverty and monetary policy). […]

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