I don't know Gary Becker's stand on happiness research, but he clearly thinks that
his fellow economists overlook the importance of unhappiness:
Economists have underplayed the cost to individuals of mild to
severe recessions in part because they have neglected the cost of the
"fear" generated by bad economic times. In his1932 inaugural address in
the midst of the Great Depression Franklin Delano Roosevelt reassured
he American public that the "Only Thing We Have to Fear Is Fear
Itself". In fact they had a lot more to fear, but Roosevelt recognized
the great importance of fear during depressions. In the present crisis
too, consumers and workers have multiple fears due to various kinds of
uncertainty. Homeowners fear that they may lose their homes after
having used most of their savings as down payments on their homes. The
employed fear that they will be laid off, while the unemployed fear
that its duration will be quite long, and that they eventually will
only get jobs that are much inferior to the ones they had...
I tend to agree, which is why I think that regulations that increase unemployment are
even worse than they seem - and that "humane" Continental labor market policies are
a disaster.
Well, you must decide.
If fear of unemployment is bad, then argument that workers in the socialist states with full employment are not motivated - because they are not afraid of losing their jobs - is wrong.
If fear of unemployment is good, then argument that it causes panic in European welfare states is again wrong.
You cannot have both claims in your pocket and pull one whenever you find it suitable. Maybe you want to say that there is some optimal amount of fear. Maybe it is true. Maybe not. But there is no much sense in ad hoc claims that optimal amount of fear is reached in ideal free market or real US.
It seems to me that trying to deal with emotions is pushing economics into psychiatry or into mere speculation. For example fear can be unpleasant, but also beneficial if it leads to adaptive action.
For example, if fear of unemployment leads to decreasing one's consumption and increasing one's savings, that may be beneficial - as opposed to fear that paralyzes action and results in failure to adapt one's behavior in the face of danger.
It seems to me that we have learned to fear fear itself and have made some pretty bad decisions as a result.
If I understand you correctly, you believe that policies which lead to more people working more provide great benefits, even when they don't lead to a higher economic output. I guess the revised edition of The Myth of the Rational Voter will only be referring to 3 biases instead of 4. ;)