Easterlin Paradox – Can’t Buy Me Love

The Easterlin Paradox paradox 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.

In his 1974 paper “Does Economic Growth Improve the Human Lot? Some Empirical Evidence” Richard Easterlin offered an appealing resolution, 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.

But recently, economists Justin Wolfers and Betsy Stevenson, both of the University of Pennsylvania, reassessed the Easterlin paradox using Gallup polls done around the world. They conclude that, contrary to Easterlin’s claim, increases in absolute income are tightly linked to increased self-reported happiness.

Continue reading here.

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