make you happy? A common saying says that it doesn’t. Nevertheless, it’s nice
to have some, and not only a little bit but enough to satisfy your basic needs
and a little bit more. It makes you happy, if you haven’t only enough to eat
and have a decent house, but also if you can – depending on your personal
preferences – go to concerts, travel abroad, buy a lot of books etc. In this
sense money makes you happy, for you need money in order to be able to do such
things. Indeed, as Daniel Kahneman tells us in his Thinking, Fast and Slow:
“An analysis of more than 450,000 responses to the Gallup-Healthways Well-Being
Index, a daily survey of 1,000 Americans,” definitively makes clear “that being
poor makes one miserable, and that being rich may enhance one’s
life-satisfaction”, although at a certain level of income your feeling of
well-being levels off. But below that level, money will certainly make you
This seems in line with what Richard Easterlin discovered. Easterlin, who is considered to be the first happiness economist, studied in the 1970s the relation between economic welfare and standard of living. His results were:
1) Within a society, rich people tend to be much happier than poor people.
Then you would think that people in rich countries are happier than those in poor countries. Not true, so Easterlin, for he also discovered that
2) rich societies tend not to be happier than poor societies (or not by much).
And also, which is actually a variation on the just mentioned levelling off thesis:
3) As countries get richer, they do not get happier.
Since these three points together seem contradictory, they are called the Easterlin Paradox.
Actually it is so, according to Easterlin, that happiness – certainly economic happiness – is relative and your feeling of (economic) happiness is related to what people around you have. So, if you become richer but everybody around you as well, your position in relation to those around you doesn’t change and so your feeling of happiness remains the same (compare also point 3 above). Or (I took this example from Geoff Riley): Faced with this choice what would you rather have: You get £5,000 and a friend gets £3,000 or you get £10,000 and a friend gets £15,000? You feel happier in the first case, so Easterlin.
Since Easterlin published his study in 1974, many other researchers have discussed the thesis and also many presented results that seem to refute the paradox. Nevertheless, yet in 2017 Easterlin maintained his original view and stated (quoted from Agarwal; see sources below) “that the ‘long-term trends in growth rates of happiness and real GDP per capita are not significantly positively related.’ He believes that the criticism towards the Easterlin Paradox is misguided and detractors ‘omit available data, overlook problems of data comparability, err in the measurement of economic growth, or, most importantly, fail to focus on long-term rather than short-term growth rates.’ ”
So far so good, and here I cannot judge who is right and who isn’t. The Easterlin paradox sounds interesting and there can be some truth in it. Nevertheless, I have some questions. Point 1 of the paradox says that within a society rich people tend to be much happier than poor people, while point 2 says that rich societies tend not to be happier than poor societies (or not by much). Then I would conclude that each country is more or less as happy as each other country, and if you live in a poor country you don’t need to compare your happiness with the happiness of the rich in the rich countries: an average happy person in a poor country is as happy as an average happy person in a rich country; there is no need to feel miserable because the average happy person in the rich country is, for instance, ten times or even 25 times richer than you in the poor country. Only the relative happiness counts, and average happiness is the same everywhere in the world in every country (and the same so for those 10, 20, 30 … % below or above the average happiness; etc.).
I have my doubts. Take for instance the ranking of happiness by country in the World Happiness Report 2019, Figure 2.7. In the first place you can see there that countries do differ in the degree of happiness and also that on average the richer countries are happier than the poor countries. The ranking gives the results of 156 countries and the top happiest countries in the world are Finland, Denmark, Norway, Iceland and the Netherlands (which belong to the richest countries in the world), and at the other end you find Rwanda, Tanzania, Afghanistan, Central African Republic and South Sudan (which are among the poorest countries). And why would all those economic migrants try to come to Europe and North America, if they would be happy where they live? I guess that on average people are happier if they are richer (even if this may level off above a certain income level) and that your feeling of (un)happiness is not limited by international borders.
- Agarwal, Prateek, “The Easterlin Paradox”, https://www.intelligenteconomist.com/easterlin-paradox/
- Kahneman, Daniel, Thinking, Fast and Slow. London: Penguin Books, 2012; pp. 396-397
- Riley, Geoff, “Q&A: What is the Easterlin Paradox?”, https://www.tutor2u.net/economics/blog/qa-what-is-the-easterlin-paradox. 1st April 2009
- World Happiness Report: John F. Helliwell, Haifang Huang, Shun Wang, Chapter 2: Changing World Happiness, https://worldhappiness.report/ed/2019/changing-world-happiness/ (20 March 2019)