There is no doubt that the positive or negative view that we have of our lives is of huge importance to each of us. For this reason economists frequently recommend to include measures of subjective well-being in measures of social progress – and in particular to augment the usual measure of economic
Overall happiness is the degree to which an individual judges the overall quality of his/her own life-as-a-whole favorably. In other words: how much one likes the life one leads.’ This is the definition given by the widely used ‘World Database of Happiness.
The correlation between incomes and life satisfaction is not just high across countries but also within countries. The same Gallup data that Deaton used was analysed by Betsey Stevenson and Justin Wolfers who studied the relationship between life satisfaction and income within each country. The correlation coefficients (this statistical measure is explained in Wikipedia) between life satisfaction and income are shown in the following graph – they are positive in all but one country and indicate that higher incomes go together with higher life satisfaction.,