The Federal Reserve chairman said Monday that gauging happiness can be as important for measuring economic progress as determining whether inflation is low or unemployment high. Economics isn't just about money and material benefits, Bernanke said. It is also about understanding and promoting "the enhancement of well-being."
Bernanke and Fed policymakers rely on reports on hiring, consumer spending and other economic data when making high-stakes decisions about the $15 trillion U.S. economy. The Fed's dual mandate is to maintain low inflation and full employment.
"We should seek better and more-direct measurements of economic well-being," Bernanke said Monday in a video-taped speech shown to a conference of economists and statisticians in Cambridge, Mass. After all, promoting well-being is "the ultimate objective of our policy decisions."
Bernanke acknowledged that many people aren't too happy right now. Unemployment rose in July to 8.3 percent, and economic growth has slowed sharply from the start of the year. He called the recovery "frustratingly slow" when he testified to Congress on July 17.
Aggregate statistics can mask important information about how individual Americans are faring, Bernanke says.
His speech Monday was the latest foray into a relatively new specialty in economics known as "happiness studies." Bernanke attracted widespread notice when he spoke about the economics of happiness in a May 2010 commencement address at the University of South Carolina.
In that speech, he said research has found that once basic material needs are met, more wealth doesn't necessarily make people happier.
"Or, as your parents always said, money doesn't buy happiness," Bernanke said then. "Well, an economist might reply, at least not by itself."
In his remarks Monday, Bernanke turned to the more practical - and difficult - task of measuring a subjective emotion. So far, most efforts have involved surveys in which people are asked about whether they are happy and what contributes to their happiness.
Those surveys have found some consistent answers: physical and mental health, the strength of family and community ties, a sense of control over one's life, and opportunities for leisure activity.
The Kingdom of Bhutan has been tracking happiness for four decades. The tiny Himalayan nation stopped tracking gross national product in 1972 and instead switched to measuring Gross National Happiness.
Bernanke on Monday sketched out a few other questions he would like to know: How secure do Americans feel in their jobs? How confident are Americans in their future job prospects? How prepared are families for financial shocks?
These indicators "could be useful in measuring economic progress or setbacks as well as in explaining economic decision-making," Bernanke said.
It's safe to say that Bernanke wouldn't expect a great deal of optimism if those questions were asked now.
The Fed has said it plans to keep its key short-term interest rate near zero until late 2014, an indication that it expects the economy to stay weak for another two and a half years. And Fed policymakers appeared to signal after its two-day meeting last week a growing inclination to take further steps to lift the economy out of its slump.
Bernanke's own definition of happiness might baffle some. He called it a "short-term state of awareness that depends on a person's perceptions of one's immediate reality, as well as on immediate external circumstances and outcomes."
It's not exactly how the classic comic strip Peanuts described it when it said, "Happiness is a warm puppy." But perhaps Bernanke's version can be measured more easily in surveys.