Update on the “happiness wars”: get rich!

William Easterly has reviewed a recent volume of papers on the relationship between economic wellbeing and happiness. Better samples and other refinements have rocked the counterintuitive suggestion from previous research that getting richer does not make a person happier. Lefties love that idea because they can use it to rubbish economic progress and demand more transfers from rich to poor.

This is a summary report on Easterley’s  Aid Watch website and this is the full review in The Lancet.

In a famous 1974 study by economic historian Richard Easterlin [not to be confused with Easterley] he found that within countries, rich people tended to be happier than the poor. But contrary to expectation, rich countries as a whole were not happier than poor countries. And even stranger, in the US, when per capita income rose sharply from 1946 to 1970, bliss did not rise alongside it.

Research using larger samples and more countries has pretty well reversed the so-called “Easterlin paraxox” in favour of the much more likely finding that happiness or at least “life satisfaction” follows the money.

The piece of the Easterlin paradox that really falls apart with newer data is his evidence that there was little difference between rich and poor countries on average happiness. Especially with the life satisfaction concept and a much larger sample, the differences are now recognised as vast, as shown in the chapter here by Ed Diener, Daniel Kahneman, and colleagues. As I heard a happiness researcher once state it most colourfully, the average Togolese man would be hospitalised for depression in Denmark. The non-paradoxical piece of the paradox remains as strong as it always was—within the same country, the richer are happier and more satisfied with their lives than the poor.

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6 Responses to Update on the “happiness wars”: get rich!

  1. samuel j

    Revealed preference. We don’t observe many people moving from rich countries to poor countries. we do observe many people moving (or trying to move) from poor countries to rich countries. We also don’t observe many people voluntarily giving away their wealth. Yet many aspire to be more wealthy. I’d trust revealed preference over happiness theory any day.

  2. Sleetmute

    Actually, the key point noted in the review is the conflicting evidence over the link, across countries, between absolute income and ‘life satisfaction’. Some of the research (by Diener et al) show the link is robust – that growth in absolute per capita income is associated with greater satisfaction in that country. Some of the research (unsurprisingly, by Easterlin and Sawangfa) do not find a link. This is the key point because lefties like Clive Hamilton have not really disputed the notion that happiness rises with income up to certain levels. Their argument is that once a country becomes reasonably well-off, further increases in per capita income don’t do any good and so it makes sense to sacrifice growth for greater equality. If it is actually the case that higher absolute income means greater satisfaction, their case falls apart. On this point, Easterly says the jury is out for now, but that he considers the Easterlin paradox to be a ‘cracked foundation’ for tax or development policy.

  3. Marks

    The trouble with all this is that there are so many confounding factors.

    Just one example of this is how both political parties in Australia are telling us how ‘tough’ ‘working famblies’ are doing it….and people actually believe it!

    I agree with SamuelJ on the ‘revealed’ bit. I go to the local mall and see a sea of new cars, people laden with consumer goods lined up at the cash registers, and suburban developments where the smallest houses are bloody huge. If any of these people are ‘doing it tough’, come on, pull the other one. Yet they truly believe as they watch the various news services on their multiple plasmas or brows the net on their netbooks (for the kids), and the laptop and standby desktop, that they are doing it tough. These people are deeply unhappy about how badly off they are. Because JG or TA say so.

    The point is, how can you correlate happiness to wealth, when people with all this can be firmly convinced that they are ‘battlers’? Of course there are those who are really battlers and who have justification for being unhappy. However, I suspect they are in a minority amongst a sea of whingers.

  4. Louis Hissink

    Hah, I have been rich and I have been poor. Rich is better.

  5. .

    I’d rather be rich and I’d rather be happy regardless of any circumstance that makes me poor or unhappy.

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