Easterlin paradox

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." [ [http://graphics8.nytimes.com/images/2008/04/16/business/Easterlin1974.pdf Does Economic Growth Improve the Human Lot? Some Empirical Evidence.] ] 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.

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. [http://www2.eur.nl/fsw/research/veenhoven/Pub2000s/2003e-full.pdf WEALTH AND HAPPINESS REVISITED Growing wealth of nations does go with greater happiness] ] In his reply Easterlin maintained his position, pointing that the critics were using inadequate data. [ [http://www-rcf.usc.edu/~easterl/papers/HVcomment.pdf "FEEDING THE ILLUSION OF GROWTH AND HAPPINESS: A REPLY TO HAGERTY AND VEENHOVEN" by Richard A. Easterlin] ]

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 tightly linked to increased self-reported happiness. [ [http://www.nytimes.com/2008/04/16/business/16leonhardt.html Maybe Money Does Buy Happiness After All - New York Times ] ] [ [http://bpp.wharton.upenn.edu/betseys/papers/Happiness.pdf Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox] ]

Notes

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.

External links

* [http://observer.guardian.co.uk/comment/story/0,,2000672,00.html "It's experts that make us miserable"] - Nick Cohen - "The Guardian" - January 28, 2007.

* [http://www.andrewoswald.com/ "Andrew Oswald's Website"] .

* [http://www2.warwick.ac.uk/fac/soc/economics/staff/faculty/oswald/fthappinessjan96.pdf "The Hippies Were Right all Along about Happiness"] - Andrew Oswald - "Financial Times" - January 19, 2006.

* [http://pewglobal.org/commentary/display.php?AnalysisID=1020 "Happiness Is Increasing in Many Countries -- But Why?"] - "Bruce Stokes" - July 24, 2007.