Happiness economics

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The economics of happiness or happiness economics is the quantitative and theoretical study of happiness, positive and negative affect, well-being, quality of life, life satisfaction and related concepts, typically combining economics with other fields such as psychology, health and sociology. It typically treats such happiness-related measures, rather than wealth, income or profit, as something to be maximized. The field has grown substantially since the late 20th century, for example by the development of methods, surveys and indices to measure happiness and related concepts. Its findings have been described as a challenge to the economics profession.

Subject classifications

The subject may be categorized in various ways, depending on specificity, intersection, and cross-classification. For example, within the Journal of Economic Literature classification codes, it has been categorized under:

• Welfare economics at JEL: D63 – Equity, Justice, Inequality, and Other Normative Criteria and Measurement;
• Health, education, and welfare at JEL: I31 – General Welfare; Basic needs; Living standards; Quality of life; Happiness;
• Demographic economics at JEL:J18 – Public Policy.

Metrology

Given its very nature, reported happiness is subjective. It is difficult to compare one person's happiness with another's. It can be especially difficult to compare happiness across cultures. However, many happiness economists believe they have solved this comparison problem. Cross-sections of large data samples across nations and time demonstrate consistent patterns in the determinants of happiness.

Happiness is typically measured using subjective measures – e.g. self-reported surveys – and/or objective measures. One concern has always been the accuracy and reliability of people's responses to happiness surveys. Objective measures such as lifespan, income, and education are often used as well as or instead of subjectively reported happiness, though this assumes that they generally produce happiness, which while plausible may not necessarily be the case. The terms quality of life or well-being are often used to encompass these more objective measures.

Some scientists claim that happiness can be measured both subjectively and objectively by observing the joy center of the brain lit up with advanced imaging, although this raises philosophical issues, for example about whether this can be treated as more reliable than reported subjective happiness.

Micro-econometric happiness equations have the standard form: ${\displaystyle W_{it}=\alpha +\beta {x_{it}}+\epsilon _{it}}$. In this equation ${\displaystyle W}$ is the reported well-being of individual ${\displaystyle i}$ at time ${\displaystyle t}$, and ${\displaystyle x}$ is a vector of known variables, which include socio-demographic and socioeconomic characteristics.

Happiness, well-being, or satisfaction with life, was seen as unmeasurable in classical and neo-classical economics. Van Praag was the first person who organized large surveys in order to explicitly measure welfare derived from income. He did this with the Income Evaluation Question (IEQ). This approach is called the Leyden School. It is named after the Dutch university where this approach was developed. Other Researchers included Arie Kapteyn and Aldi Hagenaars.

Determinants

GDP and GNP

Typically national financial measures, such as gross domestic product (GDP) and gross national product (GNP), have been used as a measure of successful policy. There is a significant association between GDP and happiness, with citizens in wealthier nations being happier than those in poorer nations. It has been argued that this relationship extends only to an average GDP per capita of about $15,000. In the 2000s, several studies have obtained the opposite result, so this Easterlin paradox is controversial.

Individual income

Historically, economists have said that well-being is a simple function of income. However, it has been found that once wealth reaches a subsistence level, its effectiveness as a generator of well-being is greatly diminished. Happiness economists hope to change the way governments view well-being and how to most effectively govern and allocate resources given this paradox.

In 2010, Daniel Kahneman and Angus Deaton found that higher earners generally reported better life satisfaction, but people's day-to-day emotional well-being only rose with earnings until a threshold annual income of $75,000.

Other factors have been suggested as making people happier than money. A short term course of psychological therapy is 32 times more cost effective at increasing happiness than simply increasing income.

Scholars at the University of Virginia, University of British Columbia and Harvard University released a study in 2011 after examining numerous academic paper in response to an apparent contradiction: "When asked to take stock of their lives, people with more money report being a good deal more satisfied. But when asked how happy they are at the moment, people with more money are barely different than those with less." Published in the Journal of Consumer Psychology, the study is entitled "If Money Doesn't Make You Happy, Then You Probably Aren't Spending It Right" and included the following eight general recommendations:

1. Spend money on "experiences" rather than goods;
2. Donate money to others, including charities, rather than spending it solely on oneself;
3. Spend small amounts of money on many small, temporary pleasures rather than less often on larger ones;
4. Don't spend money on "extended warranties and other forms of overpriced insurance";
5. Adjust one's mindset to "pay now, consume later," instead of "consume now, pay later";
6. Exercise circumspection about the day-to-day consequences of a purchase beforehand;
7. Rather than buying products that provide the "best deal," make purchases based on what will facilitate well-being;
8. Seek out the opinions of other people who have prior experience of a product before purchasing it.

In their "Unhappy Cities" paper, Edward Glaeser, Joshua Gottlieb and Oren Ziv examined the self-reported subjective well-being of people living in American metropolitan areas, particularly in relation to the notion that "individuals make trade-offs among competing objectives, including but not limited to happiness." The researchers findings revealed that people living in metropolitan areas where lower levels of happiness are reported are receiving higher real wages, and they suggest in their conclusion that "humans are quite understandably willing to sacrifice both happiness and life satisfaction if the price is right."

Social security

Ruut Veenhoven claimed that social security payments do not seem to add to happiness. This may be due to the fact that non-self-earned income (e.g., from a lottery) does not add to happiness in general either. Happiness may be the mind's reward to a useful action. However, Johan Norberg of CIS, a free enterprise economy think tank, presents a hypothesis that as people who think that they themselves control their lives are more happy, paternalist institutions may decrease happiness.

An alternative perspective focuses on the role of the welfare state as an institution that improves quality of life not only by increasing the extent to which basic human needs are met, but also by promoting greater control of one's life by limiting the degree to which individuals find themselves at the mercy of impersonal market forces that are indifferent to the fate of individuals. This is the argument suggested by the U.S. political scientist Benjamin Radcliff, who has presented a series of papers in peer reviewed scholarly journals demonstrating that a more generous welfare state contributes to higher levels of life satisfaction, and does so to rich and poor alike.

Employment

Generally, the well-being of those who are employed is higher than those who are unemployed. Employment itself may not increase subjective well-being, but facilitates activities that do (such as supporting a family, philanthropy, and education). While work does increase well-being through providing income, income level is not as indicative of subjective well-being as other benefits related to employment. Feelings of autonomy and mastery, found in higher levels in the employed than unemployed, are stronger predictors of subjective well-being than wealth.

When personal preference and the amount of time spent working do not align, both men and women experience a decrease in subjective well-being. The negative effect of working more or working less than preferred has been found across multiple studies, most finding that working more than preferred (over-employed) is more detrimental, but some found that working less (under-employed) is more detrimental. Most individuals' levels of subjective well-being returned to "normal" (level previous to time mismatch) within one year. Levels remained lower only when individuals worked more hours than preferred for a period of two years or more, which may indicate that it is more detrimental to be over-employed than under-employed in the long-term.

Employment status effects are not confined to the individual. Being unemployed can have detrimental effects on a spouse's subjective well-being, compared to being employed or not working (and not looking for work). Partner life satisfaction is inversely related to the number of hours their partner is underemployed. When both partners are underemployed, the life-satisfaction of men is more greatly diminished than women. However, just being in a relationship reduces the impact unemployment has on the subjective well-being of an individual. On a broad scale, high rates of unemployment negatively affect the subjective well-being of the employed.

Becoming self-employed can increase subjective well-being, given the right conditions. Those who leave work to become self-employed report greater life satisfaction than those who work for others or become self-employed after unemployment; this effect increases over time. Those who are self-employed and have employees of their own report higher life-satisfaction than those who are self-employed without employees, and women who are self-employed without employees report a higher life satisfaction than men in the same condition.

The effects of retirement on subjective well-being vary depending on personal and cultural factors. Subjective well-being can remain stable for those who retire from work voluntarily, but declines for those who are involuntarily retired. In countries with an average social norm to work, the well-being of men increases after retirement, and the well-being of retired women is at the same level as women who are homemakers or work outside the home. In countries with a strong social norm to work, retirement negatively impacts the well-being of men and women.

Relationships and children

Relative declines in female happiness have eroded a gender gap in happiness in which women in the 1970s typically reported higher subjective well-being than did men.

In rich societies, where a rise in income doesn't equate to an increase in levels of subjective well-being, personal relationships are the determining factors of happiness.

Glaeser, Gottlieb and Ziv suggest in their conclusion that the happiness trade-offs that individuals seem willing to make aligns with the tendency of parents to report less happiness, as they sacrifice their personal well-being for the "price" of having children.

Freedom and control

There is a significant correlation between feeling in control of one's own life and happiness levels.
A study conducted at the University of Zurich suggested that democracy and federalism bring well-being to individuals. It concluded that the more direct political participation possibilities available to citizens raises their subjective well-being. Two reasons were given for this finding. First, a more active role for citizens enables better monitoring of professional politicians by citizens, which leads to greater satisfaction with government output. Second, the ability for citizens to get involved in and have control over the political process, independently increases well-being.

American psychologist Barry Schwartz argues in his book The Paradox of Choice that too many consumer and lifestyle choices can produce anxiety and unhappiness due to analysis paralysis and raised expectations of satisfaction.

Religious diversity

National cross-sectional data suggest an inverse relationship between religious diversity and happiness, possibly by facilitating more bonding (and less bridging) social capital.

Happiness and leisure

Much of the research regarding happiness and leisure relies on subjective well-being (SWB) as an appropriate measure of happiness. Research has demonstrated a wide variety of contributing and resulting factors in the relationship between leisure and happiness. These include psychological mechanisms, and the types and characteristics of leisure activities that result in the greatest levels of subjective happiness. Specifically, leisure may trigger five core psychological mechanisms including detachment-recovery from work, autonomy in leisure, mastery of leisure activities, meaning-making in leisure activities, and social affiliation in leisure (DRAMMA). Leisure activities that are physical, relational, and performed outdoors are correlated with greater feelings of satisfaction with free time. Research across 33 different countries shows that individuals who feel they strengthen social relationships and work on personal development during leisure time are happier than others. Furthermore, shopping, reading books, attending cultural events, getting together with relatives, listening to music and attending sporting events is associated with higher levels of happiness. Spending time on the internet or watching TV is not associated with higher levels of happiness as compared to these other activities.

Research has shown that culture influences how we measure happiness and leisure. While SWB is a commonly used measure of happiness in North America and Europe, this may not be the case internationally. Quality of life (QOL) may be a better measure of happiness and leisure in Asian countries, especially Korea. Countries such as China and Japan may require a different measurement of happiness, as societal differences may influence the concept of happiness (i.e. economic variables, cultural practices, and social networks) beyond what QOL is able to measure. There seem to be some differences in leisure preference cross-culturally. Within the Croatian culture, family related leisure activities may enhance SWB across a large spectrum of ages ranging from adolescent to older adults, in both women and men. Active socializing and visiting cultural events are also associated with high levels of SWB across varying age and gender. Italians seem to prefer social conceptions of leisure as opposed to individualistic conceptions. Although different groups of individuals may prefer varying types and amount of leisure activity, this variability is likely due to the differing motivations and goals that an individual intends to fulfill with their leisure time.

Research suggests that specific leisure interventions enhance feelings of SWB. This is both a top-down and bottom-up effect, in that leisure satisfaction causally affects SWB, and SWB causally affects leisure satisfaction. This bi-directional effect is stronger in retired individuals than in working individuals. Furthermore, it appears that satisfaction with our leisure at least partially explains the relationship between our engagement in leisure and our SWB. Broadly speaking, researchers classify leisure into active (e.g. volunteering, socializing, sports and fitness) and passive leisure (e.g. watching television and listening to the radio). Among older adults, passive leisure activities and personal leisure activities (e.g. sleeping, eating, and bathing) correlate with higher levels of SWB and feelings of relaxation than active leisure activities. Thus, although significant evidence has demonstrated that active leisure is associated with higher levels of SWB, or happiness, this may not be the case with older populations.

Both regular and irregular involvement in sports leisure can result in heightened SWB. Serious, or systematic involvement in certain leisure activities, such as taekwondo, correlates with personal growth and a sense of happiness. Additionally, more irregular (e.g. seasonal) sports activities, such as skiing, are also correlated with high SWB. Furthermore, the relationship between pleasure and skiing is thought to be caused in part by a sense of flow and involvement with the activity. Leisure activities, such as meeting with friends, participating in sports, and going on vacation trips, positively correlate with life satisfaction. It may also be true that going on a vacation makes our lives seem better, but does not necessarily make us happier in the long term. Research regarding vacationing or taking a holiday trip is mixed. Although the reported effects are mostly small, some evidence points to higher levels of SWB, or happiness, after taking a holiday.

Economic security

Poverty alleviation are associated with happier populations. According to the latest systematic review of the economic literature on life satisfaction: Volatile or high inflation is bad for a population's well-being, particularly those with a right-wing political orientation. That suggests the impact of disruptions to economic security are in part mediated or modified by beliefs about economic security.

Political stability

The Voxeu analysis of the economic determinants of happiness found that life satisfaction explains the largest share of an existing government's vote share, followed by economic growth, which itself explains six times as much as employment and twice as much as inflation.

Economic freedom

Individualistic societies have happier populations. Institutes of economic freedom are associated with increases wealth inequality but does not necessarily contribute to decreases in aggregate well-being or subjective well-being at the population level. In fact, income inequality enhances global well-being. There is some debate over whether living in poor neighbours make one happier. And, living among rich neighbours can dull the happiness that comes from wealth. This is purported to work by way of an upward or downward comparison effect (Keeping up with the Joneses). The balance of evidence is trending in favour of the hypothesis that living in poor neighbourhoods makes one less happy, and living in rich neighbourhoods actually makes one happier, in the United States. While social status matters, a balance of factors like amenities, safe areas, well maintained housing, turn the tide in favour of the argument that richer neighbours are happier neighbours.

Democracy

"The right to participate in the political process, measured by the extent of direct democratic rights across regions, is strongly correlated with subjective well-being (Frey and Stutzer, 2002) ... a potential mechanism that explains this relationship is the perception of procedural fairness and social mobility." Institutions and well-being, democracy and federalism are associated with a happier population. Correspondingly, political engagement and activism have associated health benefits. On the other hand, some non democratic countries such as China and Saudi Arabia top the Ipsos list of countries where the citizenry is most happy with their government's direction. That suggests that voting preferences may not translate well into overall satisfaction with the government's direction. In any case, both of these factors revealed preference and domain specific satisfaction rather than overall subjective well being.

Economic development

Historically, economists thought economic growth was unrelated to population level well-being, a phenomenon labelled the Easterlin paradox. More robust research has identified that there is a link between economic development and the wellbeing of the population. A < 2017 meta-analysis shows that the impact of infrastructure expenditure on economic growth varies considerable. So, one cannot assume an infrastructure project will yield welfare benefits. The paper doesn't investigate or elaborate on any modifiable variables that might predict the value of a project. However, government spending on roads and primary industries is the best value target for transport spending, according to a 2013 meta-analysis. 7%+/−3% per annum discount rates are typically applied as the discount rate on public infrastructure projects in Australia. Smaller real discount rates are used internationally to calculate the social return on investment by governments.

Alternative approach: economic consequences of happiness

While the mainstream happiness economics has focused on identifying the determinants of happiness, an alternative approach in the discipline examines instead what are the economic consequences of happiness. Happiness may act as a determinant of economic outcomes: it increases productivity, predicts one's future income and affects labour market performance. There is a growing number of studies justifying the so-called "happy-productive worker" thesis. The positive and causal impact of happiness on an individual's productivity has been established in experimental studies.

Happiness economics and indices timeline

The idea that happiness is important to a society is not new. Many other prominent intellectuals, philosophers and political leaders throughout history, including Aristotle, Confucius, and Plato, incorporated happiness into their work.

Thomas Jefferson put the "pursuit of happiness" on the same level as life and liberty in the United States' Declaration of Independence. Jeremy Bentham believed that public policy should attempt to maximize happiness, and he even attempted to estimate a "hedonic calculus". However, the American ruling philosophy protects the right of individuals to seek their own happiness, but does not place an equal responsibility for the citizens' happiness on the government. In the United States, there is no explicit policy that requires the rulers to develop the physical and mental well-being of the citizens or hold the government agencies accountable for their performance against specific measures or metrics of well-being. Until the 1972 there was no formal government policy, anywhere in the world, that placed happiness and well-being as a main criterion for public policy decision making.

The following is a chronological list of happiness economics and well-being indices:

"Gross National Happiness is more important than Gross National Product" by Jigme Singye Wangchuck, King of Bhutan. Slogan on a wall in Thimphu's School of Traditional Arts

1972 – Bhutan's former king, Jigme Singye Wangchuck, introduced the Gross National Happiness (GNH) philosophy and its four development pillars at an international conference.

2005 – Med Jones of the International Institute of Management introduced the first GNH Index and Global GNH Index Survey. The GNH Index, also known as Gross National Well-being (GNW) Index framework served as the first integrated objective (economic) and subjective (happiness) socioeconomic development framework. Prior the GNH Index, there were few development indices that improved upon the gross domestic product (GDP), but did not measure happiness. For example, the Genuine Progress Indicator was focused on the environmental cost of economic development, then later (in 2006) it was updated to include similar measures to the GNH Index. Another development index is the Human Development Index (HDI) that originally focused on literacy and education but also did not measure happiness. The HDI now measures three basic dimensions of human development, health (as measured by life expectancy at birth), overall knowledge level (as measured by the literacy rate), and standard of living (as measured by GDP per capita for a given year). Among the criticisms of the HDI is the complaint that it is a mixture of stock measures (life expectancy at birth and literacy rate) and a flow measure (GDP per capita for a given year). To overcome this criticism, Hou, Walsh, and Zhang (2015) proposed a new index called HDIF (Human Development Index Flow), in which they replaced life expectancy at birth by the under-five mortality rate (for a given year), and they also replaced the literacy rate by the gross primary school enrollment ratio for a given year). They calculated both the HDI and the HDIF for many countries and found that "the HDIF and the HDI tend to converge for wealthy countries and diverge for poor countries, especially those with low HDI rankings". The development performance of poor countries improved using the HDIF while the performance of the wealthy countries declined.

2006 – The Genuine Progress Indicator was updated from a green measurement system to a broader concept that included quantitative measurement of well-being and happiness. The new measure is motivated by the philosophy of the GNH and the same notion of that subjective measures like well-being are more relevant and important than more objective measures like consumption. It is not measured directly, but only by means of the factors which are believed to lead to it.

2007 – Thailand releases Green and Happiness Index (GHI).

2008 – French President Nicolas Sarkozy launched a Happiness Initiative similar to GNH, calling for the inclusion of happiness and well-being among the criteria for national governance policies. He commissioned three prominent economists, Joseph Stiglitz (USA), Amartya Sen (India), Jean-Paul Fitoussi (France), to publish a report calling for a global "statistical system which goes beyond commercial activity to measure personal well-being." Later it was described as gross domestic happiness (GDH). The GDH Index is similar to the GNH Index of 2005.

2009 – In the United States, the Gallup poll system launched the happiness survey collecting data on national scale. The Gallup Well-Being Index was modeled after the GNH Index framework of 2005. The Well-Being Index score is an average of six sub-indexes which measure life evaluation, emotional health, work environment, physical health, healthy behaviors, and access to basic necessities. In October 2009, the US scored 66.1/100.

2010 – The concept was taken seriously, as the Centre for Bhutan Studies, under the leadership of Karma Ura, developed a sophisticated survey instrument to measure the population's general level of well-being. Two Canadians, Michael and Martha Pennock played a major role in developing the Bhutanese survey, which took a six- to seven-hour interview to complete. They developed a shorter international version of the survey which has been used in their home region of Victoria BC as well as in Brazil. The Pennocks also collaborated with Ura in the production of a policy lens which is used by the Bhutanese GNH Commission for anticipating the impact of policy initiatives upon the levels of GNH in Bhutan.

2010 – The Center for Bhutan Studies further defined the original four pillars with greater specificity into eight general contributors to happiness—physical, mental and spiritual health; time-balance; social and community vitality; cultural vitality; education; living standards; good governance; and ecological vitality. The Bhutan GNH Index.

2010 – The Oxford Poverty and Human Development Initiative OPHI at the University of Oxford in UK, launched the Multidimensional Poverty Index (MPI) for the United Nations Development Programme, (UNDP). Similar to the GNH Index of 2005, OPHI promotes collection and analysis of data on five dimensions including Quality of work, Empowerment, Physical safety, Ability to go about without shame, Psychological wellbeing.

2011 – UN General Assembly Resolution 65/309, titled "Happiness: towards a holistic approach to development."

2011 – The Organisation for Economic Co-operation and Development (OECD) launched "Better Life Index" (BLI).

2011 – The United Nations released the World Happiness Report.
 
2011 – Canadian Index of Wellbeing Network (CIW Network) released The Canadian Index of Wellbeing (CIW).

2011 – The Israeli newspaper Haaretz published an article suggesting that western GDP economics is an incomplete development model and called for the adoption of Bhutan's GNH philosophy and Jones' GNH Index in Israel.

2011 – Chuluun Togtokh criticized the HDI in an article published in Nature, calling for a revised HDI, writing that "The revised index should include each nation's per capita carbon emissions, and so become a Human Sustainable Development Index (HSDI)." Bravo (2014) provided details of how the HSDI was computed and proposed an amended HSDI by including the proportion of forested area in each country. He argued that this proposed indicator "represents an important measure of the capacity of natural system to provide fundamental ecological services."

2012 – In a report prepared for the US Congressman Hansen Clarke, R, researchers Ben Beachy and Juston Zorn, at John F. Kennedy School of Government in Harvard University, recommended that "the Congress should prescribe the broad parameters of new, carefully designed supplemental national indicators; it should launch a bipartisan commission of experts to address unresolved methodological issues, and include alternative indicators." They proposed that the government can use the survey results to see which well-being dimensions are least satisfied and which districts and demographic groups are most deficient, so as to allocate resources accordingly. The report list the Gross National Happiness Index and its seven measurement area as one of the main frameworks to consider.

2012 – Professor Peter T. Coleman, a director of the International Center for Cooperation and Conflict Resolution at Columbia University, suggested that Jones' GNH Index initiative could inform the Global Peace Index Initiative GPI.

2012 – South Korea launched Happiness Index citing the GNH Index framework.

2012 – The government of Goa, India, published a strategy for socioeconomic development citing the GNH Index as a model for measuring happiness.

2012 – The city of Seattle in Washington, launched its own happiness index initiative, emphasizing measures similar to the GNH Index.

2013 – The Social Progress Index SPI was launched by Michael Porter.

2013 – The president of Singapore, Tony Tan, proposed that in addition to building up substantial financial reserves, Singapore needed to focus on building up its "social reserves", a concept that appears to have parallels to GNH.

2013 – Economist Karol Jan Borowiecki motivates that well-being indices can be obtained from the way people communicate, as is established in psychology, and compiles the first well-being indices covering the life-time of a person.

2013 – A joint commission led by the Conseil économique et social, the Conseil supérieur pour un développement durable and the Observatoire de la Compétitivité introduces a set of indicators measuring the quality of life in Luxembourg. The conclusions of the commission are summarised in a document titled "Projet PIBien-être", which identifies 64 indicators belonging to 11 different domains to assess quality of life in Luxembourg.

2014 – The government of Dubai launched its localized Happiness Index to measure the public's contentment and satisfaction with different government services.

2014 – The United Kingdom launched its own well-being and happiness statistics.

2015 – Within the "Projet PIBien-être" launched in 2013, STATEC (National Institute of Statistics and Economic Studies of the Grand Duchy of Luxembourg) presents a preliminary analysis of the "Luxembourgish Index of Well-being" (LIW), a first proposal of synthetic indicator measuring the quality of life in Luxembourg. The presentation entitled "Preliminary Assessment of Quality of Life in Luxembourg" was delivered by Marcin Piekałkiewicz on 16 December 2015.

2017 – The Minderoo Foundation launched the Global Slavery Index, providing a map of the estimated prevalence of modern slavery. The information allows an objective comparison and assessment of both the problem and adequacy of the response in 167 countries.

Related studies

The Satisfaction with Life Index. Blue through red represent most to least happy respectively; grey areas have no reliable data available

The Satisfaction with Life Index is an attempt to show the average self-reported happiness in different nations. This is an example of a recent trend to use direct measures of happiness, such as surveys asking people how happy they are, as an alternative to traditional measures of policy success such as GDP or GNP. Some studies suggest that happiness can be measured effectively. The Inter-American Development Bank (IDB), published in November 2008 a major study on happiness economics in Latin America and the Caribbean.

In 2013, John Helliwell, Richard Layard and Jeffery Sachs compiled a treatise under the title "World Happiness report 2013" to elaborate on the measurement of popular happiness in different countries thereby adding to the wealth of happiness data available while specifically discussing the issues of measurement, explanation and policy. Global and Regional Happiness Levels are explained in terms of 10 regional groupings of countries based on happiness data available for the year 2010-2012. The happiness level is explained as a function of GDP per capita, social support, and healthy life expectancy, freedom to make life choices, generosity and perceptions of corruption.

There are also several examples of measures that includes self-reported happiness as one variable. Happy Life Years, a concept brought by Dutch sociologist Ruut Veenhoven, combines self-reported happiness with life expectancy. The Happy Planet Index combines it with life expectancy and ecological footprint.

Gross National Happiness (GNH) is a concept introduced by the King of Bhutan in 1972 as an alternative to GDP. Several countries have already developed or are in the process of developing such an index. Bhutan's index has led that country to limit the amount of deforestation it will allow and to require that all tourists to its nation must spend US$200. Allegedly, low-budget tourism and deforestation lead to unhappiness.

After the military coup of 2006, Thailand also instituted an index. The stated promise of the new Prime Minister Surayud Chulanont is to make the Thai people not only richer but happier as well. Much like GDP results, Thailand releases monthly GNH data.^[106] The Thai GNH index is based on a 1–10 scale with 10 being the most happy. As of May 13, 2007, the Thai GNH measured 5.1 points. The index uses poll data from the population surveying various satisfaction factors such as, security, public utilities, good governance, trade, social justice, allocation of resources, education and community problems.

Australia, China, France and the United Kingdom are also coming up with indexes to measure national happiness. The UK began to measure national wellbeing in 2012. North Korea also announced an international Happiness Index in 2011 through Korean Central Television. North Korea itself came in second, behind #1 China. Canada released the Canadian Index of Wellbeing (CIW) in 2011 to track changes in wellbeing. The CIW has adopted the following working definition of wellbeing: The presence of the highest possible quality of life in its full breadth of expression focused on but not necessarily exclusive to: good living standards, robust health, a sustainable environment, vital communities, an educated populace, balanced time use, high levels of democratic participation, and access to and participation in leisure and culture.

Ecuador's and Bolivia's new constitutions state the indigenous concept of "good life" ("buen vivir" in Spanish, "sumak kawsay" in Quichua, and "suma qamaña" in Aymara) as the goal of sustainable development.

Neoclassical economics

Neoclassical, as well as classical economics, are not subsumed under the term happiness economics although the original goal was to increase the happiness of the people. Classical and neoclassical economics are stages in the development of welfare economics and are characterized by mathematical modeling. Happiness economics represents a radical break with this tradition. The measurement of subjective happiness respectively life satisfaction by means of survey research across nations and time (in addition to objective measures like lifespan, wealth, security etc.) marks the beginning of happiness economics.

Criticism

Some have suggested that establishing happiness as a metric is only meant to serve political goals. Recently there has been concern that happiness research could be used to advance authoritarian aims. As a result, some participants at a happiness conference in Rome have suggested that happiness research should not be used as a matter of public policy but rather used to inform individuals.

Even on the individual level there is discussion on how much effect external forces can have on happiness. Less than 3% of an individual's level of happiness comes from external sources such as employment, education level, marital status, and socioeconomic status. To go along with this, four of the Big Five Personality Traits are substantially associated with life satisfaction, openness to experience is not associated. Having high levels of internal locus of control lead to higher reported levels of happiness.

Even when happiness can be affected by external sources, it has high hedonic adaptation, some specific events such as an increase in income, disability, unemployment, and loss (bereavement) only have short-term (about a year) effects on a person's overall happiness and after a while happiness may return to levels similar to unaffected peers.

What has the most influence over happiness are internal factors such as genetics, personality traits, and internal locus of control. It is theorized that 50% of the variation in happiness levels is from genetic sources and is known as the genetic set point. The genetic set point is assumed to be stable over time, fixed, and immune to influence or control. This goes along with findings that well-being surveys have a naturally positive baseline.

With such strong internal forces on happiness it is hard to have an effect on a person's happiness externally. This in turn lends itself back to the idea that establishing a happiness metric is only for political gain and has little other use. To support this even further it is believed that a country aggregate level of SWB can account for more variance in government vote share than standard macroeconomic variables, such as income and employment.

Technical criticism

According to Bond and Lang (2018) the results are skewed due to the fact that the respondents have to "round" their true happiness to the scale of, e.g., 3 or 7 alternatives (e.g., very happy, pretty happy, not too happy). This "rounding error" may cause a less happy group seem more happy, in the average. This would not be the case if the happiness of both groups would be normally distributed with the same variance, but that is usually not the case, based on their results. For some not-implausible log-normal assumptions on the scale, typical results can be reversed to the opposite results.

They also show that the "reporting function" seems to be different for different groups and even for the same individual at different times. For example, when a person becomes disabled, they soon start to lower their threshold for a given answer (e.g., "pretty happy"). That is, they give a higher answer than they would have given at the same happiness state before becoming disabled.

Positive psychology

From Wikipedia, the free encyclopedia

Positive psychology is "the scientific study of what makes life most worth living", or "the scientific study of positive human functioning and flourishing on multiple levels that include the biological, personal, relational, institutional, cultural, and global dimensions of life". Positive psychology is concerned with eudaimonia, "the good life", reflection about what holds the greatest value in life – the factors that contribute the most to a well-lived and fulfilling life.

Positive psychology began as a new domain of psychology in 1998 when Martin Seligman chose it as the theme for his term as president of the American Psychological Association. Mihaly Csikszentmihalyi, Christopher Peterson and Barbara Fredrickson are regarded as co-initiators of this development. It is a reaction against psycho-analysis and behaviorism, which have focused on "mental illness", meanwhile emphasising maladaptive behavior and negative thinking. It builds further on the humanistic movement, which encouraged an emphasis on happiness, well-being, and positivity, thus creating the foundation for what is now known as positive psychology.

Positive psychologists have suggested a number of ways in which individual happiness may be fostered. Social ties with a spouse, family, friends and wider networks through work, clubs or social organisations are of particular importance, while physical exercise and the practice of meditation may also contribute to happiness. Happiness may rise with increasing financial income, though it may plateau or even fall when no further gains are made.

Definition and basic assumptions

Definition

Seligman and Csikszentmihalyi define positive psychology as "... the scientific study of positive human functioning and flourishing on multiple levels that include the biological, personal, relational, institutional, cultural, and global dimensions of life." Christopher Peterson defines positive psychology as "... the scientific study of what makes life most worth living".

Basic concepts

Positive psychology is concerned with eudaimonia, "the good life" or flourishing, living according to what holds the greatest value in life – the factors that contribute the most to a well-lived and fulfilling life. While not attempting a strict definition of the good life, positive psychologists agree that one must live a happy, engaged, and meaningful life in order to experience "the good life". Martin Seligman referred to "the good life" as "using your signature strengths every day to produce authentic happiness and abundant gratification". According to Christopher Peterson, "eudaimonia trumps hedonism".

Positive psychology complements, without intending to replace or ignore, the traditional areas of psychology. By emphasizing the study of positive human development this field helps to balance other approaches that focus on disorder, and which may produce only limited understanding. Positive psychology has also placed a significant emphasis on fostering positive self-esteem and self-image, though positive psychologists with a less humanist bent are less likely to focus as intently on the matter.

The basic premise of positive psychology is that human beings are often drawn by the future more than they are driven by the past. A change in our orientation to time can dramatically affect how we think about the nature of happiness. Seligman identified other possible goals: families and schools that allow children to grow, workplaces that aim for satisfaction and high productivity, and teaching others about positive psychology.

Those who practice positive psychology attempt psychological interventions that foster positive attitudes toward one's subjective experiences, individual traits, and life events. The goal is to minimize pathological thoughts that may arise in a hopeless mindset, and to, instead, develop a sense of optimism toward life. Positive psychologists seek to encourage acceptance of one's past, excitement and optimism about one's future experiences, and a sense of contentment and well-being in the present.

Related concepts are happiness, well-being, quality of life, contentment, and meaningful life.

Research topics

According to Seligman and Peterson, positive psychology is concerned with three issues: positive emotions, positive individual traits, and positive institutions. Positive emotions are concerned with being content with one's past, being happy in the present and having hope for the future. Positive individual traits focus on one's strengths and virtues. Finally, positive institutions are based on strengths to better a community of people.

According to Peterson, positive psychologists are concerned with four topics: (1) positive experiences, (2) enduring psychological traits, (3) positive relationships, and (4) positive institutions. According to Peterson, topics of interest to researchers in the field are: states of pleasure or flow, values, strengths, virtues, talents, as well as the ways that these can be promoted by social systems and institutions.

History

To Martin Seligman, psychology (particularly its positive branch) can investigate and promote realistic ways of fostering more well-being in individuals and communities.

Origin

The term positive psychology dates back at least to 1954, when Maslow's first edition of Motivation and personality  was published with a final chapter titled "Toward a Positive Psychology." In the second edition (1970), he removed that chapter, saying in the preface that "a  positive psychology is at least available today though not very widely." There have been indications that psychologists since the 1950s have been increasingly focused on the promotion of mental health rather than merely treating mental illness.

Positive psychology began as a new area of psychology in 1998 when Martin Seligman chose it as the theme for his term as president of the American Psychological Association. In the first sentence of his book Authentic Happiness, Seligman claimed: "for the last half century psychology has been consumed with a single topic only – mental illness", expanding on Maslow's comments. He urged psychologists to continue the earlier missions of psychology of nurturing talent and improving normal life.

Development

The first positive psychology summit took place in 1999. The First International Conference on Positive Psychology took place in 2002. More attention was given by the general public in 2006 when, using the same framework, a course at Harvard University became particularly popular. In June 2009, the First World Congress on Positive Psychology took place at the University of Pennsylvania.

The International Positive Psychology Association (IPPA) is a recently established association that has expanded to thousands of members from 80 different countries. The IPPA's missions include: (1) "further the science of positive psychology across the globe and to ensure that the field continues to rest on this science" (2) "work for the effective and responsible application of positive psychology in diverse areas such as organizational psychology, counselling and clinical psychology, business, health, education, and coaching", (3) "foster education and training in the field".

The field of positive psychology today is most advanced in the United States and Western Europe. Even though positive psychology offers a new approach to the study of positive emotions and behavior, the ideas, theories, research, and motivation to study the positive side of human behavior is as old as humanity.

Influences

Several humanistic psychologists, most notably Abraham Maslow, Carl Rogers, and Erich Fromm, developed theories and practices pertaining to human happiness and flourishing. More recently, positive psychologists have found empirical support for the humanistic theories of flourishing. In addition, positive psychology has moved ahead in a variety of new directions.

In 1984, Diener published his tripartite model of subjective well-being, positing "three distinct but often related components of wellbeing: frequent positive affect, infrequent negative affect, and cognitive evaluations such as life satisfaction". In this model, cognitive, affective and contextual factors contribute to subjective well-being. According to Diener and Suh, subjective well-being is "...based on the idea that how each person thinks and feels about his or her life is important".

Carol Ryff's Six-factor Model of Psychological Well-being was initially published in 1989, and additional testing of its factors was published in 1995. It postulates six factors which are key for well-being, namely self-acceptance, personal growth, purpose in life, environmental mastery, autonomy, and positive relations with others.

According to Corey Keyes, who collaborated with Carol Ryff and uses the term flourishing as a central concept, mental well-being has three components, namely hedonic (c.q. subjective or emotional), psychological, and social well-being. Hedonic well-being concerns emotional aspects of well-being, whereas psychological and social well-being, c.q eudaimonic well-being, concerns skills, abilities, and optimal functioning. This tripartite model of mental well-being has received extensive empirical support across cultures.

Theory and methods

There is no accepted "gold standard" theory in positive psychology, however the work of Seligman is regularly quoted. So too the work of Csikszentmihalyi and older models of well-being, such as Carol Ryff's Six-factor Model of Psychological Well-being and Diener's tripartite model of subjective well-being.

Initial theory: three paths to happiness

In Authentic Happiness (2002) Seligman proposed three kinds of a happy life which can be investigated:

1. Pleasant life: research into the Pleasant Life, or the "life of enjoyment", examines how people optimally experience, forecast, and savor the positive feelings and emotions that are part of normal and healthy living (e.g., relationships, hobbies, interests, entertainment, etc.). Despite the attention given, Martin Seligman says this most transient element of happiness may be the least important.
2. Good Life: investigation of the beneficial effects of immersion, absorption, and flow, felt by individuals when optimally engaged with their primary activities, is the study of the Good Life, or the "life of engagement". Flow is experienced when there is a positive match between a person's strength and their current task, i.e., when one feels confident of accomplishing a chosen or assigned task.
3. Meaningful Life: inquiry into the Meaningful Life, or "life of affiliation", questions how individuals derive a positive sense of well-being, belonging, meaning, and purpose from being part of and contributing back to something larger and more permanent than themselves (e.g., nature, social groups, organizations, movements, traditions, belief systems).

PERMA

In Flourish (2011) Seligman argued that the last category of his proposed three kinds of a happy life, "meaningful life", can be considered as 3 different categories. The resulting acronym is PERMA: Positive Emotions, Engagement, Relationships, Meaning and purpose, and Accomplishments. It is a mnemonic for the five elements of Martin Seligman's well-being theory:

1. Positive emotions include a wide range of feelings, not just happiness and joy. Included are emotions like excitement, satisfaction, pride and awe, amongst others. These emotions are frequently seen as connected to positive outcomes, such as longer life and healthier social relationships;
2. Engagement refers to involvement in activities that draws and builds upon one's interests. Mihaly Csikszentmihalyi explains true engagement as flow, a state of deep effortless involvement, feeling of intensity that leads to a sense of ecstasy and clarity. The task being done needs to call upon higher skill and be a bit difficult and challenging yet still possible. Engagement involves passion for and concentration on the task at hand and is assessed subjectively as to whether the person engaged was completely absorbed, losing self-consciousness;
3. Relationships are essential in fueling positive emotions, whether they are work-related, familial, romantic, or platonic. As Christopher Peterson puts it simply, "Other people matter." Humans receive, share, and spread positivity to others through relationships. They are important not only in bad times, but good times as well. In fact, relationships can be strengthened by reacting to one another positively. It is typical that most positive things take place in the presence of other people;
4. Meaning is also known as purpose, and prompts the question of "why". Discovering and figuring out a clear "why" puts everything into context from work to relationships to other parts of life. Finding meaning is learning that there is something greater than one's self. Despite potential challenges, working with meaning drives people to continue striving for a desirable goal;
5. Accomplishments are the pursuit of success and mastery. Unlike the other parts of PERMA, they are sometimes pursued even when accomplishments do not result in positive emotions, meaning, or relationships. That being noted, accomplishments can activate the other elements of PERMA, such as pride, under positive emotion. Accomplishments can be individual or community-based, fun- or work-based.

Each of the five PERMA elements was selected according to three criteria:

1. It contributes to well-being;
2. It is pursued for its own sake;
3. It is defined and measured independently of the other elements.

Character Strengths and Virtues

The development of the Character Strengths and Virtues (CSV) handbook (2004) represented the first attempt by Seligman and Peterson to identify and classify positive psychological traits of human beings. Much like the Diagnostic and Statistical Manual of Mental Disorders (DSM) of general psychology, the CSV provided a theoretical framework to assist in understanding strengths and virtues and for developing practical applications for positive psychology. This manual identified 6 classes of virtues (i.e., "core virtues"), underlying 24 measurable character strengths.

The CSV suggested these 6 virtues have a historical basis in the vast majority of cultures; in addition, these virtues and strengths can lead to increased happiness when built upon. Notwithstanding numerous cautions and caveats, this suggestion of universality hints threefold: 1. The study of positive human qualities broadens the scope of psychological research to include mental wellness, 2. the leaders of the positive psychology movement are challenging moral relativism, suggesting people are "evolutionarily predisposed" toward certain virtues, and 3. virtue has a biological basis.

The organization of the 6 virtues and 24 strengths is as follows:

1. Wisdom and knowledge: creativity, curiosity, open-mindedness, love of learning, perspective, innovation;
2. Courage: bravery, persistence, integrity, vitality, zest;
3. Humanity: love, kindness, social intelligence;
4. Justice: citizenship, fairness, leadership;
5. Temperance: forgiveness and mercy, humility, prudence, self control;
6. Transcendence: appreciation of beauty and excellence, gratitude, hope, humor, spirituality.

Recent research challenged the need for 6 virtues. Instead, researchers suggested the 24 strengths are more accurately grouped into just 3 or 4 categories: Intellectual Strengths, Interpersonal Strengths, and Temperance Strengths or alternatively, Interpersonal Strengths, Fortitude, Vitality, and Cautiousness These strengths, and their classifications, have emerged independently elsewhere in literature on values. Paul Thagard described examples; these included Jeff Shrager's workshops to discover the habits of highly creative people. Some research indicates that well-being effects that appear to be due to spirituality are actually better described as due to virtue.

Flow

In the 1970s Csikszentmihalyi's began studying flow, a state of absorption where one's abilities are well-matched to the demands at-hand. Flow is characterized by intense concentration, loss of self-awareness, a feeling of being perfectly challenged (neither bored nor overwhelmed), and a sense that "time is flying". Flow is intrinsically rewarding; it can also assist in the achievement of goals (e.g., winning a game) or improving skills (e.g., becoming a better chess player). Anyone can experience flow, in different domains, such as play, creativity, and work. Flow is achieved when the challenge of the situation meets one's personal abilities. A mismatch of challenge for someone of low skills results in a state of anxiety; insufficient challenge for someone highly skilled results in boredom.

Applications and research findings

Research in positive psychology, well-being, eudaimonia and happiness, and the theories of Diener, Ryff, Keyes and Seligman cover a broad range of topics including "the biological, personal, relational, institutional, cultural, and global dimensions of life". A meta-analysis on 49 studies in 2009 showed that Positive Psychology Interventions (PPI) produced improvements in well-being and lower depression levels, the PPIs studied included writing gratitude letters, learning optimistic thinking, replaying positive life experiences and socializing with others. In a later meta-analysis of 39 studies with 6,139 participants in 2012, the outcomes were positive. Three to six months after a PPI the effects for subjective well-being and psychological well-being were still significant. However the positive effect was weaker than in the 2009 meta analysis, the authors concluded that this was because they only used higher quality studies. The PPIs they considered included counting blessings, kindness practices, making personal goals, showing gratitude and focusing on personal strengths.

Ilona Boniwell, in her book Positive Psychology in a Nutshell, provided the following summary of the current research. Wellbeing is related to optimism, extraversion, social connections (i.e. close friendships), being married, having engaging work, religion or spirituality, leisure, good sleep and exercise, social class (through lifestyle differences and better coping methods) and subjective health (what you think about your health). Wellbeing is not related to age, physical attractiveness, money (once basic needs are met), gender (women are more often depressed but also more often joyful), educational level, having children (although they add meaning to life), moving to a sunnier climate, crime prevention, housing and objective health (what doctors say).

Sonja Lyubomirsky, in her book The How Of Happiness, says that to improve happiness individuals should create new habits; they can seek out new emotions, use variety and timing to prevent hedonic adaptation and enlist others to motivate and support during the creation of those new habits. Lyubomirsky gives 12 happiness activities such as savouring life, learning to forgive and living in the present, each of which could become the basis for a new habit.

In Positive Psychology: The Science of Happiness, the authors Compton and Hoffman give the "Top Down Predictors" of wellbeing as high self esteem, optimism, self efficacy, a sense of meaning in life and positive relationships with others. The personality traits most associated with well being are extraversion, agreeability and low levels of neuroticism.

In the Journal of Occupational Rehabilitation, Kreutzer and Mills argue for the principles of positive psychology to be implemented to assist those recovering from traumatic brain injury (TBR). They make the case that TBI rehabilitation practices rely on the betterment of the individual through engaging in everyday practices, a practice significantly related to tenets of positive psychology. Their proposal to connect positive psychology with TBI vocational rehabilitation (VR) also looks at happiness and its correlation with improvements in mental health, including increased confidence and productivity, as well as others. While the authors point out that empirical evidence for positive psychology is limited, they clarify that positive psychology's focus on small successes, optimism and prosocial behaviour is promising for improvements in the social and emotional well-being of TBI patients.

Criticism

According to Kirk Schneider, positive psychology fails to explain past heinous behaviors such as those perpetrated by the Nazi party, Stalinist marches and Klan gatherings, to identify but a few. Furthermore, Schneider pointed to a body of research showing high positivity correlates with positive illusion, which effectively distorts reality. The extent of the downfall of high positivity (also known as flourishing) is one could become incapable of psychological growth, unable to self-reflect, and tend to hold racial biases. By contrast, negativity, sometimes evidenced in mild to moderate depression, is correlated with less distortion of reality. Therefore, negativity might play an important role within the dynamics of human flourishing. To illustrate, conflict engagement and acknowledgement of appropriate negativity, including certain negative emotions like guilt, might better promote flourishing. Overall, Schneider provided perspective: "perhaps genuine happiness is not something you aim at, but is a by-product of a life well lived – and a life well lived does not settle on the programmed or neatly calibrated." Seligman has acknowledged in his work the point about positive illusion, and is also a critic of merely feeling good about oneself apart from reality and recognises the importance of negativity / dysphoria.

Ian Sample, writing for The Guardian, noted that, "Positive psychologists also stand accused of burying their heads in the sand and ignoring that depressed, even merely unhappy people, have real problems that need dealing with." Sample also quoted Steven Wolin, a clinical psychiatrist at George Washington University, as saying that the study of positive psychology is just a reiteration of older ways of thinking, and that there is not much scientific research to support the efficacy of this method. Gable responds to criticism on their pollyanna view on the world by saying that they are just bringing a balance to a side of psychology that is glaringly understudied. To defend his point, Gable points to the imbalances favouring research into negative psychological wellbeing in cognitive psychology, health psychology, and social psychology.

Barbara S. Held argued that while positive psychology makes contributions to the field of psychology, it has its faults. She offered insight into topics including the negative side effects of positive psychology, negativity within the positive psychology movement, and the current division in the field of psychology caused by differing opinions of psychologists on positive psychology. In addition, she noted the movement's lack of consistency regarding the role of negativity. She also raised issues with the simplistic approach taken by some psychologists in the application of positive psychology. A "one size fits all" approach is arguably not beneficial to the advancement of the field of positive psychology; she suggested a need for individual differences to be incorporated into its application.

Martin Jack has also maintained that positive psychology is not unique in its optimistic approach to looking at optimal emotional wellbeing, stating that other forms of psychology, such as counselling and educational psychology, are also interested in positive human fulfillment. He goes on to mention that, while positive psychology has pushed for schools to be more student-centred and able to foster positive self-images in children, he worries that a lack of focus on self-control may prevent children from making full contributions to society. 

Transformational leadership

From Wikipedia, the free encyclopedia

Transformational leadership is a theory of leadership where a leader works with teams to identify needed change, creating a vision to guide the change through inspiration, and executing the change in tandem with committed members of a group; it is an integral part of the Full Range Leadership Model. Transformational leadership serves to enhance the motivation, morale, and job performance of followers through a variety of mechanisms; these include connecting the follower's sense of identity and self to a project and to the collective identity of the organization; being a role model for followers in order to inspire them and to raise their interest in the project; challenging followers to take greater ownership for their work, and understanding the strengths and weaknesses of followers, allowing the leader to align followers with tasks that enhance their performance.

Former US President Franklin Roosevelt was regarded as a transformational leader

Origins

The concept of transformational leadership was initially introduced by James V. Downton, the first to coin the term "Transformational leadership", a concept further developed by leadership expert and presidential biographer James MacGregor Burns. According to Burns, transformational leadership can be seen when "leaders and followers make each other advance to a higher level of morality and motivation." Through the strength of their vision and personality, transformational leaders are able to inspire followers to change expectations, perceptions, and motivations to work towards common goals. Unlike in the transactional approach, it is not based on a "give and take" relationship, but on the leader's personality, traits and ability to make a change through example, articulation of an energizing vision and challenging goals. Transforming leaders are idealized in the sense that they are a moral exemplar of working towards the benefit of the team, organization and/or community. Burns theorized that transforming and transactional leadership were mutually exclusive styles. Later, researcher Bernard M. Bass expanded upon Burns' original ideas to develop what is today referred to as Bass’ Transformational Leadership Theory. According to Bass, transformational leadership can be defined based on the impact that it has on followers. Transformational leaders, Bass suggested, garner trust, respect, and admiration from their followers.

Bernard M. Bass (1985), extended the work of Burns (1978) by explaining the psychological mechanisms that underlie transforming and transactional leadership. Bass introduced the term "transformational" in place of "transforming." Bass added to the initial concepts of Burns (1978) to help explain how transformational leadership could be measured, as well as how it impacts follower motivation and performance. The extent to which a leader is transformational, is measured first, in terms of his influence on the followers. The followers of such a leader feel trust, admiration, loyalty and respect for the leader and because of the qualities of the transformational leader are willing to work harder than originally expected. These outcomes occur because the transformational leader offers followers something more than just working for self-gain; they provide followers with an inspiring mission and vision and give them an identity. The leader transforms and motivates followers through his or her idealized influence (earlier referred to as charisma), intellectual stimulation and individual consideration. In addition, this leader encourages followers to come up with new and unique ways to challenge the status quo and to alter the environment to support being successful. Finally, in contrast to Burns, Bass suggested that leadership can simultaneously display both transformational and transactional leadership.

Definitions

Martin Luther King was known for using persuasive appeals based on reason.

According to Bass, transformational leadership encompasses several different aspects, including:

• Emphasizing intrinsic motivation and positive development of followers;
• Raising awareness of moral standards;
• Highlighting important priorities;
• Fostering higher moral maturity in followers;
• Creating an ethical climate (share values, high ethical standards);
• Encouraging followers to look beyond self-interests to the common good;
• Promoting cooperation and harmony;
• Using authentic, consistent means;
• Using persuasive appeals based on reason;
• Providing individual coaching and mentoring for followers;
• Appealing to the ideals of followers;
• Allowing freedom of choice for followers;

Transformational leaders are described to hold positive expectations for followers, believing that they can do their best. As a result, they inspire, empower, and stimulate followers to exceed normal levels of performance. Transformational leaders also focus on and care about followers and their personal needs and development. Transformational leaders fit well in leading and working with complex work groups and organizations, where beyond seeking an inspirational leader to help guide them through an uncertain environment, followers are also challenged and feel empowered; this nurtures them into becoming loyal, high performers.

There are 4 components to transformational leadership, sometimes referred to as the 4 I's:

• Idealized Influence (II) - the leader serves as an ideal role model for followers; the leader "walks the talk," and is admired for this;
• Inspirational Motivation (IM) - Transformational leaders have the ability to inspire and motivate followers. Combined, these first two I's are what constitute the transformational leader's charisma;
• Individualized Consideration (IC) - Transformational leaders demonstrate genuine concern for the needs and feelings of followers. This personal attention to each follower is a key element in bringing out their very best efforts;
• Intellectual Stimulation (IS) - the leader challenges followers to be innovative and creative. A common misunderstanding is that transformational leaders are "soft," but the truth is that they constantly challenge followers to higher levels of performance.

Transformational leadership is said to have occurred when engagement in a group results in leaders and followers raising one another to increased levels of motivation and morality. It is not enough to make the correct choice, but to make the moral choice.

Characteristics

Five major personality traits have been identified as factors contributing to the likelihood of an individual displaying the characteristics of a transformational leader. Different emphasis on different elements of these traits point to inclination in personality to inspirational leadership, transactional leadership, and transformational leadership. These five traits are as follows.

Results of Meta Analysis finding correlation between personality traits and transformational leadership from data gathered by Joyce Bono and Timothy Judge.

Extraversion

The two main characteristics of extraverts are affiliation and agency, which relate to the social and leadership aspects of their personality, respectively. Extraversion is generally seen as an inspirational trait usually exhibited in transformational leadership.

Neuroticism

Neuroticism generally gives an individual an anxiety related to productivity which, in a group setting can be debilitating to a degree where they are unlikely to position themselves in a role of transformational leadership due to lower self-esteem and a tendency to shirk from leadership responsibilities.

Openness to experience

Creative expression and emotional responsiveness have been linked to a general tendency of openness to experience. This trait is also seen as a component of transformational leadership as it relates to the ability to give big-picture visionary leadership for an organization.

Agreeableness

Although not a trait which specifically points to transformational leadership, leaders in general possess an agreeable nature stemming from a natural concern for others and high levels of individual consideration. Charisma and idealized influence is a classic ability of individuals who possess agreeability.

Conscientiousness

Strong sense of direction and the ability to put large amounts of productive work into tasks is the by-product of conscientious leaders. This trait is more linked to a transactional form of leadership given the management-based abilities of such individuals and the detail oriented nature of their personality.

Measurement

One of the ways in which transformational leadership is measured is through use of the Multifactor Leadership Questionnaire (MLQ), a survey which identifies different leadership characteristics based on examples and provides a basis for leadership training. Early development was limited because the knowledge in this area was primitive, and as such, finding good examples for the items in the questionnaire was difficult. Subsequent development on the MLQ led to the current version of the survey, the MLQ5X.

The current version of the MLQ5X includes 36 items that are broken down into 9 scales with 4 items measuring each scale. Subsequent validation work by John Antonakis and his colleagues provided strong evidence supporting the validity and reliability of the MLQ5X. Indeed, Antonakis went on to confirm the viability of the proposed nine-factor MLQ model, using two very large samples. Although other researchers have still been critical of the MLQ model, since 2003 no one has been able to provide dis-confirming evidence of the theorized nine-factor model with such large sample sizes as those published by Antonakis.

In regards to transformational leadership, the first 5 components - Idealized Attributes, Idealized Behaviors, Inspirational Motivation, Intellectual Stimulation, and Individualized Consideration - are considered to be transformational leadership behaviors.

Effectiveness as compared to other leadership styles

Studies have shown that transformational leadership styles are associated with positive outcomes in relation to other leadership styles. According to studies performed by Lowe, Kroeck, and Sivasubramaniam, charisma (or Idealized Influence) was found to be a variable that was most strongly related to leader effectiveness among MLQ scales. Other studies show that transformational leadership is positively associated with employee outcomes including commitment, role clarity, and well-being.

Transactional leadership

In contrast to transformational leadership, transactional leadership styles focus on the use of rewards and punishments in order to achieve compliance from followers. Transformational leaders look towards changing the future to inspire followers and accomplish goals, whereas transactional leaders seek to maintain the status quo, not aiming for progress.

The MLQ does test for some transactional leadership elements - Contingent Reward and Management-by-Exception - and the results for these elements are often compared to those for the transformational elements tested by the MLQ. Studies have shown transformational leadership practices lead to higher satisfaction with leader among followers and greater leader effectiveness, while transactional practices lead to higher follower job satisfaction and leader job performance.

Laissez-faire leadership

In a laissez-faire leadership style, a person may be given a leadership position without providing leadership, which leaves followers to fend for themselves. This leads to subordinates having a free hand in deciding policies and methods.

Studies have shown that while transformational leadership styles are associated with positive outcomes, laissez-faire leadership is associated with negative outcomes, especially in terms of follower satisfaction with leader and leader effectiveness. Also, other studies comparing the leadership styles of men and women have shown that female leaders tend to be more transformational with their leadership styles, whereas laissez-faire leadership is more prevalent in male leaders.

Comparison of Styles among Public and Private Companies

Lowe, Kroeck, and Sivasubramaniam (1996) conducted a meta-analysis combining data from studies in both the private and public sector. The results indicated a hierarchy of leadership styles and related subcomponents. Transformational Leadership characteristics were the most effective; in the following order of effectiveness from most to least: charisma-inspiration, intellectual stimulation, and individual consideration. Transactional Leadership was the next most effective; in the following order of effectiveness from most to least: contingent reward and managing-by-exception. Laissez Faire leadership does not intentionally intervene, and as such, is not measured, and has no effectiveness score.

Table 2.3: Correlations With Effectiveness in Public and Private Organizations

	Sector
Leadership	Public	Private
Transformational
Charisma-inspiration	.74	.69
Intellectual stimulation	.65	.56
Individual consideration	.63	.62
Transactional
Contingent reward	.41	.41
Managing-by-exception	.10	–.02

Results of a meta-analysis of effectiveness of as adapted by Bass (2006) in Transformational Leadership.

Factors affecting use

Phipps suggests that the individual personality of a leader heavily affects his or her leadership style, specifically with regard to the following components of the Five-factor model of personality: openness to experience, conscientiousness, extraversion/introversion, agreeableness, and neuroticism/emotional stability (OCEAN).

Phipps also proposed that all the Big Five dimensions would be positively related to transformational leadership. Openness to experience allows the leader to be more accepting of novel ideas and thus more likely to stimulate the follower intellectually. Conscientious leaders are achievement oriented and thus more likely to motivate their followers to achieve organizational goals. Extraverted and agreeable individuals are more outgoing and pleasant, respectively, and more likely to have successful interpersonal relationships. Thus, they are more likely to influence their followers and to be considerate towards them. Emotionally stable leaders would be better able to influence their followers because their stability would enable them to be better role models to followers and to thoroughly engage them in the goal fulfillment process.

A specific example of cultural background affecting the effectiveness of transformational leadership would be Indian culture, where a nurturant-task style of leadership has been shown to be an effective leadership style. Singh and Bhandarker (1990) demonstrated that effective transformational leaders in India are likes heads of Indian families taking personal interest in the welfare of their followers. Leaders in Indian organizations are therefore more likely to exhibit transformational behaviors if their followers are more self-effacing in approaching the leaders. It is also hypothesized in general that subordinates’ being socialized to be less assertive, self-confident, and independent would enhance superiors’ exhibition of transformational leadership.

There is also evidence to suggest that social demographics do not necessarily affect transformational leadership styles.

However, follower characteristics, combined with their perceptions of the leader and their own situation, did appear to moderate the connection between transformational leadership and subordinates’ willingness to take charge and be good organizational citizens. For instance, if subordinates in a work group perceive their leader to be prototypical of them, then transformational leadership would have less of an impact on their willingness to engage in organizational citizenship behaviors. Likewise, if subordinates are goal oriented and possess a traditional view of the organizational hierarchy, they tend to be less affected by transformational leadership. Self-motivated employees are less likely to need transformational leaders to prod them into action, while “traditionalists” tend to see positive organizational citizenship as something expected given their roles as followers—not something they need to be “inspired” to do.

Evidence suggests that the above sets of factors act, in essence, as both inhibitors of and substitutes for transformational leadership. As inhibitors, the presence of any of these factors—either independently or especially collectively—could make the presence of a transformational leader “redundant” since followers’ positive behavior would instead be sparked by their own motivations or perceptions. On the other hand, when these factors are not present (e.g., employees in a work group do not see their leader as “one of us”), then transformational leadership is likely to have a much greater impact on subordinates. In essence, when such “favorable conditions” are not present, managers—and the organizations they work for—should see a better return on investment from transformational leadership.

It was shown that leader continuity enhanced the effect of transformational leadership on role clarity and commitment, indicating that it takes time before transformational leaders actually have an effect on employees. Furthermore, co-worker support enhanced the effect on commitment, reflecting the role of followers in the transformational leadership process. However, there are also factors that would serve to hinder the exhibition of transformational leadership, including the organizational structure, ongoing change, the leaders’ working conditions, and the leaders' elevated perceptions of personal power.

Outcomes

Bernard Bass in Leadership and Performance Beyond Expectations states some leaders are only able to extract competent effort from their employees, while others inspire extraordinary effort. Transformational leadership is the key (Bass, 1985).

Implementing transformational leadership has many positive outcomes not only in the workplace but in other situations as well. Evidence shows that each of the previously talked about four components of transformational leadership are significantly associated with positive emotions and outcomes in the workplace as well as in team projects performed online. One recent study indicates that these four components are significantly associated with higher job satisfaction and the effectiveness of the employees. Both intellectual stimulation and inspirational motivation are associated with a higher degree of positive emotions in the workplace such as enthusiasm, happiness, and a sense of pride in the follower’s work.

When transformational leadership was used in a nursing environment, researchers found that it led to an increase in organizational commitment. A separate study examined that way that transformational leadership and transactional leadership compare when implemented into an online class. The results of this study indicate that transformational leadership increases cognitive effort while transactional leadership decreases it.

Examples

Nelson Mandela

Nelson Mandela used transformational leadership principles while working to abolish apartheid and enforce change in South Africa. In 1995, he visited Betsie Verwoerd, the widow of the architect of apartheid Hendrik Verwoerd, at her home in Orania. Orania was an Afrikaner homeland and a striking anachronistic symbol of racial separation, and Mandela's recurring emphasis on forgiveness contributed toward the healing the prejudices of South Africa and as vast influence as a leader. In 2000, he was quoted as saying, "For all people who have found themselves in the position of being in jail and trying to transform society, forgiveness is natural because you have no time to be retaliative." This illustrates a common approach in the narratives of transformational leadership, of describing a collective or corporate effort in individualised terms, and pointing to the responsibility or opportunity for individuals to commit to making the effort a success. Such an approach is seen in community organising.

He also set an example for others to follow in terms of sacrifice and philanthropy. Schoemaker describes one such instance:

"One such leader received a call from Mandela's office requesting that he accompany the President to the Eastern Cape. This leader was less than enthusiastic and pleaded that he had an appointment around mid-day clashing with Mandela's request. But there was no denying Mandela, so the leader agreed to go--but first consulted with his financial director to set a reasonable limit on the size of the anticipated donation request. They settled on 500,000 Rand, or about $50,000 in those days...upon landing, about 80,000 black school children--all adorned in crisp white shirts--simultaneously bowed to acknowledge the great man's arrival. As they were climbing down from the helicopter, Mandela planted his hand firmly in his guest's back and said, 'Now, I hope you are not going to disappoint me?' The business leader decided in that instance to double the donation...how could he tell a man who sacrificed as much as Mandela that he couldn't afford to be more generous?"

Other Contexts

Transformational leadership studies have been conducted in a variety of contexts including military, education, higher education teaching, and business.

Future

The evolution of transformational leadership in the digital age is tied to the development of organizational leadership in an academic setting. As organizations move from position-based responsibilities to task-based responsibilities, transformational leadership is redefined to continue to develop individual commitment to organizational goals by aligning these goals with the interests of their leadership community. The academic community is a front-runner in this sense of redefining transformational leadership to suit these changes in job definition.

The future of transformational leadership is also related to political globalization and a more homogenous spectrum of economic systems under which organizations find themselves operating. Cultural and geographical dimensions of transformational leadership become blurred as globalization renders ethnically specific collectivist and individualistic effects of organizational behavior obsolete in a more diversified workplace.

The concept of transformational leadership further needs clarification, especially when a leader is declared as a transformational or transactional leader. While discussing Jinnah's leadership style, Yousaf (2015) argued that it is not the number of followers, but the nature of the change that indicates whether a leader is transformational or transactional.