Arguably the most important finding from the emerging economics of happiness has been the Easterlin Paradox.
What is this paradox? It is the juxtaposition of three observations:
1) Within a society, rich people tend to be much happier than poor people.
2) But, rich societies tend not to be happier than poor societies (or not by much).
3) As countries get richer, they do not get happier.
Easterlin offered an appealing resolution to his paradox, arguing that only relative income matters to happiness. Other explanations suggest a “hedonic treadmill,” in which we must keep consuming more just to stay at the same level of happiness.
Either way, the policy implications of the Paradox are huge, as they suggest that economic growth may not raise well-being by much.
Given the stakes in this debate, Betsey Stevenson and I thought it worth reassessing the evidence.
