If we do not live in a happy society, why not? Do markets, indeed, make happy societies? The thesis of this chapter is twofold: First, the one source of happiness that is within the power of markets to give, money, is losing its power to make people happy. And second, the principal sources of happiness and unhappiness are market externalities, things that markets may casually ignore, make better, or make worse without endogenous correction. If markets facilitate choices, why, within our means, do we not choose the things that make us happy? The reason is that markets control the very values that inform these choices; markets create a market culture that guides (I would say misguides) the pursuit of happiness. What made people happy in earlier periods of scarcity, no longer does so.

In this chapter I will first give a portrait of a decline in happiness, marital satisfaction, work satisfaction, financial satisfaction, and satisfaction with one's place of residence in the United States for a quarter or a half century. These infelicitous trends are supported by an account of the rising tide of clinical depression in the United States and in most other advanced and rapidly advancing economies. After giving a brief analysis of what it is that makes people depressed and happy or unhappy, I will turn to the first thesis: the waning power of income to yield utility.