The role of markets in the construction of wellbeing: The need for a Polanyian perspective

Recent research on subjective wellbeing (SWB) has demonstrated the prime importance of social factors such as relationships with family and friends alongside income and work. While it has offered a new route to measuring utility for economists, SWB has revealed “puzzles and paradoxes” in relating it to income. Wellbeing is an holistic concept which seeks to engage with understanding people’s lives as they are lived in society. But the analytical boundaries between the social sciences thwart such an enquiry. After reviewing key findings on work and income for their connection to social dimensions, this paper reviews writings of key contributors to the SWB literature – Layard and Sen – and traces the problem to the use of the analytical concept of the self-regulating market. Polanyi’s The Great Transformation argues that the idea of the market as a self-regulating mechanism itself drove the promotion of a laissez-faire economy, so becoming detached from society. Polanyi contends that the concept of the market has itself to be re-embedded in wider society if we are to understand the means through which provisioning of needs takes place. Polanyi’s concept of the institutedness of the economy through reciprocity and redistribution as well as exchange provides a useful starting point for this investigation.