BOOM AND GLOOM.(relation of happiness to the economy)

A few years ago, the Nobel Prize-winning psychologist Daniel Kahneman conducted an odd experiment. He had a group of students eat a bowl of their favorite ice cream while listening to a particular piece of music eight days in a row. After the first day, Kahneman asked them to predict how they'd feel about the whole experience once it was over. Their predictions turned out to be way off base. Some students who thought that they'd hate having to eat the same flavor eight days in a row became addicted to it. Some who thought they'd enjoy the experience were eventually repulsed by it. The upshot: people may know when they're happy, but they often don't know what will make them happy.

That poses a problem for the basic tenets of modern economics: that people act in their own self-interest most of the time, and that they usually know what that self-interest is. "Well-being is actually the central idea of economics," the Princeton economist Alan Krueger said last week. "But we've never really tried to measure it. We've said, If we're richer, and we have more options, we must be better off. But we haven't tried to find out if it's really true."

Now that is changing. In the past few years, a loose collection of economists and psychologists have started to take seriously the question of happiness and its relation to the economy as a whole. Inspired by experiments like Kahneman's, they have decided that if you want to understand the real impact of things like booms and busts you can't just look at what people do. You have to try to understand--using psychological experiments, long-term national surveys, and macroeconomic studies--how they feel. Krueger and Kahneman, a Princeton colleague, are trying to come up with an accurate way of measuring economic well-being--a sort of G.D.P. of mood. In the meantime, economists are using the flawed measures of happiness that we're currently stuck with to tell us some very interesting things, such as why the economic sentiment seems so bleak, even though the American economy is four trillion dollars bigger and vastly more productive than it was a decade ago.

There was, for example, the pleasant experiment devised by an M.I.T. psychologist named Dan Ariely. Ariely had each of forty volunteers put "a selected finger" in a vise. Each volunteer endured a series of trials, in which the pressure was kept constant for the whole trial, increased, or decreased. (There was no ice cream.) After each trial, the volunteers, having removed their fingers from the vise, were asked to rate the pain. On average, they said--not surprisingly--that it hurt a lot. What was notable, however, was that when the volunteers had been subjected to decreasing pressure they reported less pain than when the pressure was maintained or increased, even though Ariely had made sure to apply the same amount of total force in each trial.