Easterlin paradox

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The Easterlin Paradox is a key 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] According to the University of Kent, the paradox explains that, "high incomes do correlate with happiness, but long term, increased income doesn't correlate with increased happiness".[citation needed]

Easterlin found that within a given country people with higher incomes were more likely to report being happy. However, in international comparisons, the average reported level of happiness did 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. The difference in international and micro-level results fostered an ongoing body of research.[2]

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

If true (see below), one possible implication for government policy is said to be 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).[original research?]


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 "saturation 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[edit]

Further reading[edit]


  1. ^ Easterlin (1974). Does Economic Growth Improve the Human Lot? Some Empirical Evidence. 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.pdf
  2. ^ Diane J. Macunovich and Richard A. Easterlin, 2008 [1987], "Easterlin hypothesis," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
       • Andrew E. Clark, Paul Frijters, and Michael A. Shields (2008). "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, 46(1), pp. 95-144.
  3. ^ Oswald, A. (2006). "The Hippies Were Right all Along about Happiness". Financial Times - January 19, 2006. . pdf
  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. 
  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. doi:10.1073/pnas.1015962107. 
  9. ^ Alok Jha Happiness doesn't increase with growing wealth of nations, finds study The Guardian, 13 December 2010
  10. ^ Justin Wolfers Debunking the Easterlin Paradox, Again Freakonomics.com, 13 December 2010
  11. ^ Richard Layard, Andrew Clark, Claudia Senik First World Happiness Report Launched at the United Nations Earth Institute, Columbia University New York, 2 April 2012
  12. ^ Thomas Gilovich, Amit Kumar We’ll Always Have Paris: The Hedonic Payoff from Experiential and Material Investments. Chapter Four – Advances in Experimental Social Psychology, Volume 51, 2015, Pages 147–187.doi:10.1016/bs.aesp.2014.10.002 Elsevier Inc. ISSN 0065-2601

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