Easterlin paradox

The Easterlin paradox is a concept in happiness economics. It is named for the economist and USC professor Richard Easterlin, who discussed the factors contributing to happiness in a 1974 book chapter.[1]

Theory

Easterlin argued that while within a given country people with higher incomes were more likely to report being happy, this would not hold at a national level, creating an apparent paradox.[1] He reported data that showed that reported happiness was not significantly associated with per capita GDP, among developed nations. Examining trends within nations, he suggested that the increase in income in the United States between 1946 and 1970 contrasted with flat levels of reported happiness, and declines between 1960 and 1970. These claimed differences between nation-level and person-level results fostered an ongoing body of research and debate.[2]

Research

Recent research has utilised several measures of happiness, including biological measures, showing similar patterns of results. This goes some way to answering the problems of self-rated happiness. The claim was taken up by Andrew Oswald of the University of Warwick in 1997,[3] driving media interest in the topic.

Controversy

In 2003, Ruut Veenhoven and Michael Hagerty published an analysis based on various sources of data, and concluded that there was no paradox, and countries did indeed get happier with increasing income.[4] In his reply in 2005 Easterlin maintained his position, suggesting that his critics were using inadequate data.[5]

In 2008, economists Betsey Stevenson and Justin Wolfers, both of the University of Pennsylvania, published a reassessment of the Easterlin paradox using new time-series data. They concluded like Veenhoven et al. that, contrary to Easterlin's claim, increases in absolute income were linked to increased self-reported happiness, for both individual people and whole countries.[6] They found a statistical relationship between happiness and the logarithm of absolute income, suggesting that happiness increased more slowly than income, but no "satiation point" was ever reached. The study provided evidence that absolute income, in addition to relative income, determined happiness. This is in contrast to an extreme understanding of the hedonic treadmill theory where "keeping up with the Joneses" is the only determinant of behavior.[7]

In 2010, Easterlin published data from a sample of 37 countries reaffirming the paradox[8][9] which was soon questioned by Wolfers.[10] In a 2012 report prepared for the United Nations, Richard Layard, Andrew Clark and Claudia Senik point out that other variables co-vary with wealth, including social trust, and that these, and not income, may drive much of the association of GDP per capita with well-being.[11]

In 2015, psychologists Thomas Gilovich and Amit Kumar published a review which demonstrated that "experiential purchases (such as vacations, concerts, and meals out) tend to bring more lasting happiness than material purchases." They found this was because "Compared to possessions, experiences are less prone to hedonic adaptation".[12]

See also

References

  1. 1 2 Easterlin (1974). "Does Economic Growth Improve the Human Lot? Some Empirical Evidence" (PDF). In Paul A. David; Melvin W. Reder. Nations and Households in Economic Growth: Essays in Honor of Moses Abramovitz. New York: Academic Press, Inc.
  2. ↑ Diane J. Macunovich and Richard A. Easterlin, 2008 [1987], "Easterlin hypothesis," The New Palgrave Dictionary of Economics, 2nd ed. Abstract.
       • Andrew E. Clark; Paul Frijters; Michael A. Shields (2008). "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles" (PDF). Journal of Economic Literature. 46 (1): 95–144. doi:10.1257/jel.46.1.95.
  3. ↑ Oswald, A. (January 19, 2006). "The Hippies Were Right all Along about Happiness" (PDF). Financial Times.
  4. ↑ Hagerty, M. R.; Veenhoven, R. (2003). "Wealth and Happiness Revisited – Growing National Income Does Go with Greater Happiness". Social Indicators Research. 64: 1–27. doi:10.1023/A:1024790530822.
  5. ↑ Easterlin, R. A. (2005). "Feeding the Illusion of Growth and Happiness: A Reply to Hagerty and Veenhoven". Social Indicators Research. 74 (3): 429–443. doi:10.1007/s11205-004-6170-z.
  6. ↑ Stevenson, Betsey; Wolfers, Justin. "Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox". Brookings Papers on Economic Activity. 2008 (Spring): 1–87. JSTOR 27561613.
  7. ↑ Akst, Daniel (23 November 2008). "A talk with Betsey Stevenson and Justin Wolfers". The Boston Globe.
  8. ↑ Easterlin, R. A.; McVey, L. A.; Switek, M.; Sawangfa, O.; Zweig, J. S. (2010). "The happiness-income paradox revisited". Proceedings of the National Academy of Sciences. 107 (52): 22463–22468. doi:10.1073/pnas.1015962107.
  9. ↑ Alok Jha (13 December 2010). "Happiness doesn't increase with growing wealth of nations, finds study". The Guardian.
  10. ↑ Justin Wolfers (13 December 2010). "Debunking the Easterlin Paradox, Again". Freakonomics.com.
  11. ↑ Richard Layard; Andrew Clark; Claudia Senik (2 April 2012). "First World Happiness Report Launched at the United Nations" (Report). Earth Institute, Columbia University New York.
  12. ↑ Thomas Gilovich; Amit Kumar (2015). "We'll Always Have Paris: The Hedonic Payoff from Experiential and Material Investments". Chapter Four – Advances in Experimental Social Psychology (PDF). 51. Elsevier Inc. pp. 147–187. doi:10.1016/bs.aesp.2014.10.002. ISSN 0065-2601.

Further reading


External links

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