Easterlin paradox

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The Easterlin Paradox is a key concept in happiness economics. It was postulated by economist Richard Easterlin in the 1974 paper "Does Economic Growth Improve the Human Lot? Some Empirical Evidence."^[1] It finds that, contrary to expectation, happiness at a national level does not increase with wealth once basic needs are fulfilled.

This concept has recently been revived by Andrew Oswald of the University of Warwick, driving media interest in the topic. Recent research has utilised many different forms of measuring happiness, including biological measures, showing similar patterns of results. This goes some way to answering the problems of self-rated happiness.

The implication for government policy is that once basic needs are met, policy should focus not on economic growth or GDP, but rather on increasing life satisfaction or GNH.

1 Criticism
2 Notes
3 References
4 External links

[edit] Criticism

Easterlin's original empirical study was a survey in which people were asked how happy they were on a scale from 1 to 10. The problem is that people who reported being very happy (10) could not report growing any happier, regardless of whether their wealth increased or they did in fact become happier than they thought possible on previous surveys. This argument, however, has drawbacks of its own. First, it is likely that someone who reported being 10 could not imagine being any happier and thus, that additional wealth would not have made them happier. Second, if economic growth did make people more happy in general you would expect to find people who had previously responded at other levels (7,8,9 etc.) showing improvements. In short, it would be odd if economic growth only made people who were already extremely happy, happier.

In 2003 Ruut Veenhoven and Michael Hagerty published a new analysis based on including various sources of data, and their conclusion was that there is no paradox and countries get indeed happier with increasing income.^[2] In his reply Easterlin maintained his position, pointing that the critics were using inadequate data.^[3]

Recently, economists Justin Wolfers and Betsey Stevenson, both of the University of Pennsylvania, published a paper where they reassessed the Easterlin paradox using new time-series data. They conclude like Veenhoven at all that, contrary to Easterlin's claim, increases in absolute income are tightly linked to increased self-reported happiness.^[2]^[4]^[5]

[edit] Notes

[edit] References

Easterlin, Richard A. (1974) "Does Economic Growth Improve the Human Lot?" in Paul A. David and Melvin W. Reder, eds., Nations and Households in Economic Growth: Essays in Honor of Moses Abramovitz, New York: Academic Press, Inc.