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The Easterlin Paradox is a key concept in happiness economics. It is named for economist Richard Easterlin who discussed the factors contributing to happiness in the 1974 paper "Does Economic Growth Improve the Human Lot? Some Empirical Evidence."^[1] Easterlin found, as expected by most economists, that, within a given country, people with higher incomes are more likely to report being happy. However, in international comparisons, the average reported level of happiness does not vary much with national income per person, at least for countries with income sufficient to meet basic needs. Similarly, although income per person rose steadily in the United States between 1946 and 1970, average reported happiness showed no long-term trend, and declined between 1960 and 1970.

This concept has recently^[when?] 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.

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]

In 2008, 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 et al that, contrary to Easterlin's claim, increases in absolute income are clearly linked to increased self-reported happiness, for both individual people and whole countries.^[2][4][5][6] The statistical relationship demonstrated is between happiness and the logarithm of absolute income, suggesting that above a certain point, happiness increases more slowly than income, but no "saturation point" is ever reached. The study provides evidence that happiness is determined not only by relative income, but also by absolute income. That is in contrast to an extreme understanding of the hedonic treadmill theory where "keeping up with the Joneses" is the only determinant of behavior.^[6]

[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.

• Oswald, Andrew. (2006) "The Hippies Were Right all Along about Happiness" Financial Times, January 19, 2006.

[edit] External links

• It's experts that make us miserable - Nick Cohen - The Guardian - January 28, 2007.

• Andrew Oswald's Website.

• The Hippies Were Right all Along about Happiness - Andrew Oswald - Financial Times - January 19, 2006.

• Happiness Is Increasing in Many Countries -- But Why? - Bruce Stokes - July 24, 2007.