The measurement of individual happiness challenges the notion that revealed preferences only reliably and empirically reflect individual utility. Reported subjective well-being is a broader concept than traditional decision utility; it also includes concepts like experience and procedural utility. Micro- and macroeconometric happiness functions offer new insights on determinants of life satisfaction. However, one should not leap to the conclusion that happiness should be maximized, as was suggested for social welfare function maximization. In contrast, happiness research strengthens the validity of an institutional approach, such as reflected in the theory of democratic economic policy.