Studies of what makes people happy have found that employment and low inflation are two key factors, but until now there has been no research on the effect of democracy. In the first systematic empirical analysis of the effect of different political systems on happiness, Professors Bruno Frey and Alois Stutzer show that the more extensive the political participation rights of citizens, the more satisfied they are with their lives. Their research, published in the latest issue of the Economic Journal, uses data from 6,000 residents of Switzerland to show that people are happier the greater the local level of democracy. What is more, this increased happiness stems more from
actual participation in the democratic process than from the outcome of the process itself.
Because constitutional arrangements are fairly stable over time, analyses of the effect of political institutions on happiness have to be carried out on different constitutions at one moment in time. The problem of comparing across countries is that numerous other factors vary and it is difficult to isolate the sole effect that political systems play. The researchers overcome this problem through a cross-regional comparison that uses survey data from the 26 different regions of Switzerland. Due to the federal structure of Switzerland, the different regions control major areas of decisionmaking (e.g. changing state laws, referenda to prevent new expenditure, etc.) and the degree of control varies greatly between the regions. In some, citizens have many opportunities of directly participating in the democratic process via referenda and initiatives; while in others, these possibilities are severely restricted.
The study is based on a survey of more than 6,000 people carried out between 1992-4. The degree of happiness attributed to these people is based on their answers to the following question: How satisfied are you with your life as a whole these days? The respondents could choose from a 10- point scale of predetermined answers that ranged from ''completely satisfied'' to ''completely dissatisfied''. According to psychologists, the responses to such questions correspond well to reallife manifestations of personal well-being such as frequent smiling and successful social interactions.
The answers to these questions are compared against standard economic and demographic data and against the degree of possible democratic participation. The results highlight the usual determinants of individual well being, such as being employed, married, etc. And as with other studies, the effect a higher income has on happiness is relatively small and statistically weak.
But the effect direct democratic participation has on happiness is large. For example, the results indicate that the happiness of a citizen who moves from Geneva (the region with the lowest participation possibilities) to Basel Land (the region with the highest participation possibilities) is considerably increased. In monetary terms, happiness is raised by as much as if this person moved from a monthly income of less than £770 to one of more than £2,310.
Frey and Stutzer conclude, ''Happiness not only depends on economic factors but also on how well developed democracy is. The study''s main finding establishes political participation as an important determinant of citizens'' well-being.''
There are two possible reasons why a higher degree of direct democracy may raise individuals' sense of well-being. First, due to the more active role of citizens, politicians are better monitored and controlled, and government decisions are subsequently closer to the wishes of the people. Second, the institutions of direct democracy extend the opportunities to get involved in the political process. Experimental evidence suggests that people value this procedural effect in addition to the actual outcome of the activity.
To discover which of these two reasons is responsible for the happiness that democracy seems to bring, the researchers note that political participation in referenda is restricted to Swiss nationals and therefore only they can reap the benefits from the participation effect. Foreigners have no political participation rights but they cannot be excluded from the favourable outcome of direct democracy.
A direct comparison of the impact of democracy on foreigners and nationals, after other factors have been removed, shows that the benefits for nationals are approximately three times the size as the benefits for foreigners. This suggests that around two thirds of the benefits of democracy stem from simply being involved in the process of political decision-making. Indeed, Frey and Stutzer conclude, ''Democracy should not only be favoured because it forces politicians to obey citizens'' wishes, but also because people value the possibility of engaging in the political process.''
''Happiness, Economy and Institutions'' by Bruno Frey and Alois Stutzer is published in the October 2000 issue of the Economic Journal. Frey and Stutzer are at the Institute for Empirical Research in Economics at the University of Zurich, Bluemlisalpstr 10, CH-8006 Zurich, Switzerland.