Richard Layard, Baron Layard

Layard became active in the study of what has since come to be known as happiness economics. This branch of economic analysis starts from the argument that income is a bad approximation for happiness. Based on modern happiness research, he cites three factors that economists fail to take into consideration:

• Social comparisons: In contrast to what traditional economics predicts, happiness is derived from relative income as well as from absolute income. That is, if everyone gains purchasing power, some may still turn out unhappier if their position compared to others is worse. This effect may not turn economic growth into a zero-sum game entirely, but it will likely diminish the benefits people draw from their hard work. In an economy where not only companies, but individuals are constantly forced to compete with each other, life and work are experienced as a rat race.
• Adaptation: As people get used to higher income levels, their idea of a sufficient income grows with their income. If they fail to anticipate that effect, they will invest more time for work than is good for their happiness.
• Changing tastes: Economists assume that individual preferences are constant, when in fact such preferences are not fixed but increasingly mutable, shifting constantly according to the latest trends and cultural norms. In turn, the relative values of one's accumulated possessions are subject to depreciation, ultimately having a negative effect on happiness.

From these observations, Layard concludes that taxes serve another purpose besides paying for public services (usually for public goods) and redistributing income. The third purpose is to counteract the cognitive bias that causes people to work more than is good for their happiness. That is, taxes should help citizens preserve a healthy work-life balance.

In 2005 Layard published the book Happiness: Lessons from a New Science, in which he emphasised the importance of non-income variables on aggregate happiness. His book summarises the prior empirical findings produced by economists such as Richard Easterlin, David G Blanchflower, Andrew E Clark, Rafael Di Tella, Robert MacCulloch, and Andrew Oswald. In particular he stressed the role of mental health and argued that psychological treatments ought to be much more widely available.

Subsequent books have included Happiness: Lessons from a New Science (2011),[2] The Origins of Happiness (2018),[3] and Can We Be Happier?: Evidence and Ethics (2020).[4]

In 2012 he co-edited, with Jeffrey Sachs and John Helliwell, the World Happiness Report, and has been involved in subsequent years.[1]

Layard co-founded Action for Happiness in 2010, and continues on the board.

Layard's mental health[5] work[6] resulted in the development of Improving Access to Psychological Therapies (IAPT), an initiative to improve access to psychological therapies in the United Kingdom.[7]

In 2014, with the clinical psychologist David M Clark, he published the book Thrive: The Power of Evidence-Based Psychological Therapies, in which the authors demonstrate the potential value of the wider availability of modern talking therapies, and include a chapter on mental illness prevention.[8]

Layard has shown that mental illness[5] is the main cause of unhappiness.[9]

In 2015, he was co-author of the report that launched the Global Apollo Programme, which calls for developed nations to commit to spending 0.02% of their GDP for 10 years, to fund co-ordinated research to make carbon-free baseload electricity less costly than electricity from coal by the year 2025.[10]

Recent research on happiness questioning part of Baron Layard's thesis and suggesting that people do obtain happiness from increased income[11] forms part of ongoing investigations into the Easterlin Paradox.[12]