Easterlin paradox
Encyclopedia
The Easterlin Paradox is a key concept in happiness economics
. It is named for economist and USC Professor Richard Easterlin
who discussed the factors contributing to happiness in the 1974 paper "Does Economic Growth Improve the Human Lot? Some Empirical Evidence." Easterlin found 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 was revived recently by Andrew Oswald
of the University of Warwick
in 1997, 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 Gross national happiness
(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 did indeed get happier with increasing income. In his reply Easterlin maintained his position, suggesting that his critics were using inadequate data.
In 2008, economists Betsey Stevenson and Justin Wolfers
, 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. 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.
In 2010 Easterlin published as lead author a paper in the Proceedings of the National Academy of Sciences
reaffirming the Easterlin Paradox with data from a sample of 37 countries.
Happiness economics
Happiness economics is the quantitative study of happiness, positive and negative affect, well-being, quality of life, life satisfaction and related concepts, typically combining economics with other fields such as psychology and sociology. It typically treats such happiness-related measures,...
. It is named for economist and USC Professor Richard Easterlin
Richard Easterlin
Richard A. Easterlin is University Professor and Professor of Economics at the University of Southern California. He is a member of the National Academy of Sciences and the American Academy of Arts and Sciences...
who discussed the factors contributing to happiness in the 1974 paper "Does Economic Growth Improve the Human Lot? Some Empirical Evidence." Easterlin found 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 was revived recently by Andrew Oswald
Andrew Oswald
Andrew Oswald is a Visiting Fellow at the IZA Institute in Bonn and a Professor of Economics at the University of Warwick, UK. He is an ISI Highly Cited Researcher and has been a Professorial Fellow of the ESRC. He is currently a member of the board of editors of Science...
of the University of Warwick
University of Warwick
The University of Warwick is a public research university located in Coventry, United Kingdom...
in 1997, 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 Gross national happiness
Gross national happiness
The assessment of gross national happiness was designed in an attempt to define an indicator that measures quality of life or social progress in more holistic and psychological terms than only the economic indicator of gross domestic product .-Origins and meaning:The term...
(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 did indeed get happier with increasing income. In his reply Easterlin maintained his position, suggesting that his critics were using inadequate data.
In 2008, economists Betsey Stevenson and Justin Wolfers
Justin Wolfers
Justin Wolfers is an Australian-American economist at the Wharton School of the University of Pennsylvania. He is a contributor to the New York Times and the Wall Street Journal and an editor of the Brookings Papers on Economic Activity...
, both of the University of Pennsylvania
University of Pennsylvania
The University of Pennsylvania is a private, Ivy League university located in Philadelphia, Pennsylvania, United States. Penn is the fourth-oldest institution of higher education in the United States,Penn is the fourth-oldest using the founding dates claimed by each institution...
, 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. 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
Hedonic treadmill
The hedonic treadmill, also known as hedonic adaptation, is the supposed tendency of humans to quickly return to a relatively stable level of happiness despite major positive or negative events or life changes....
theory where "keeping up with the Joneses
Keeping up with the Joneses
"Keeping up with the Joneses" is an idiom in many parts of the English-speaking world referring to the comparison to one's neighbor as a benchmark for social caste or the accumulation of material goods...
" is the only determinant of behavior.
In 2010 Easterlin published as lead author a paper in the Proceedings of the National Academy of Sciences
Proceedings of the National Academy of Sciences
The Proceedings of the National Academy of Sciences of the United States of America, usually referred to as PNAS, is the official journal of the United States National Academy of Sciences...
reaffirming the Easterlin Paradox with data from a sample of 37 countries.
External links
- It's experts that make us miserable - Nick CohenNick CohenNick Cohen is a British journalist, author and political commentator. He is currently a columnist for The Observer, a blogger for The Spectator and TV critic for Standpoint magazine. He formerly wrote for the London Evening Standard and the New Statesman...
- The GuardianThe GuardianThe Guardian, formerly known as The Manchester Guardian , is a British national daily newspaper in the Berliner format...
- January 28, 2007. - Andrew Oswald's Website.
- The Hippies Were Right all Along about Happiness - Andrew OswaldAndrew OswaldAndrew Oswald is a Visiting Fellow at the IZA Institute in Bonn and a Professor of Economics at the University of Warwick, UK. He is an ISI Highly Cited Researcher and has been a Professorial Fellow of the ESRC. He is currently a member of the board of editors of Science...
- Financial TimesFinancial TimesThe Financial Times is an international business newspaper. It is a morning daily newspaper published in London and printed in 24 cities around the world. Its primary rival is the Wall Street Journal, published in New York City....
- January 19, 2006. - Happiness Is Increasing in Many Countries -- But Why? - Bruce Stokes - July 24, 2007.