The Economics of Happiness and Optimization

Andrew Marszal writes in a recent Aol News Opinion Piece on the "Economics of Happiness" and reports on research and studies on this topic which, he notes, is "catching on" with the likes of the Nobel laureate Joe Stiglitz (who I might add is an Amherst College grad) and with the French President Nicholas Sarkozy even getting involved.

According to a recent global survey, participants, when asked what is their most important goal in life, ranked "happiness" first, ahead of "'success," "knowledge" or even "material wealth." The
global survey is worth reading since it captures the psychological, economic, and social aspects of well-being in a very thoughtful writeup.

In his Opinion Piece, Marszal writes: Trust is strongly correlated to happiness and varies dramatically among societies. A recent World Values Survey, conducted by an international network of social scientists, found 64 percent of Norwegians responded "Yes, most people can be trusted," compared with just 5 percent of Brazilians. Of Americans, 56 percent held this opinion in the 1960s, but only 33 percent by 1998.

In addition, it is emphasized that family relationships and work are crucial, too.

In economics, as in operations research, the concepts of optimization and utility maximization, under constraints, are fundamental. What is emerging from the above noted studies (and more links to others can be found in the Opinion Piece) is that social networks, whether familial, community-based, or at work do matter and in significant ways. Social networks capture relationships and their evolution can serve as indicators of trust.

In a series of articles, we examined the impact of social networks on different networks, and introduced flows in social networks in the form of relationship levels. When relationship levels are higher, various costs are reduced (not only in a business sense but also, generally, in the form of transaction costs). Our research captured the effects of social networks and relationship levels on supply chain networks as well as on financial networks.

As Dr. Patricia Randall writes in Reflections on Operations Research, It will be interesting to see in the future how Operations Research and analytics can be applied to social networking problems and how these approaches differ from more “traditional” applications.

I strongly believe that much of the breakthroughs will come through the synergies of synthesizing, integrating, and expanding findings and perspectives from different disciplines from the social and behavioral sciences to computer science and operations research and the management sciences, as some of the leaders in social science and social computing are suggesting. As for the potential payoffs, what could be more rewarding than creating societies in which there is a greater level of trust and higher levels of "happiness?!"