Nicole Linger | The Easterlin Paradox – Can Money Buy Happiness?

The Easterlin Paradox denotes a study first published in 1974 by economist Richard Easterlin based on research of the inhabitants of post-war Japan. From the fifties until the time of the study Japan had experienced a major economic boom, with the output of the economy per person growing more than sevenfold, causing the country to develop from a war-torn area of devastation to one of the richest regions on Earth. The Easterlin Paradox focuses on evidence from polls which suggests that despite this boom, the average citizen reported feeling less happy in the seventies than in the fifties – the people were richer but apparently not happier.

The Easterlin Paradox is the juxtaposition of three observations made by Richard Easterlin:

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 argues that while lifting a society from poverty to be able to afford the basic necessities of life certainly increases happiness, once those basic needs are met the gains in happiness from further riches are negligible and that it is only relative income which increases happiness. When a society as a whole has plenty of money, says the Paradox, only those who feel they have more than their friends and neighbours see an increase in happiness.

In 2008, however, a further study by young economists Betsey Stevenson and Justin Wolfers argues that more in depth studies of more countries over the past thirty to forty years disprove this theory. The questions have changed, argue Stevenson and Wolfers, and the availability of more data equals a more in-depth study which shows that on average, those residing in richer countries have a noticeably higher level of happiness that those in poorer countries, regardless of their relative wealth in comparison to their peers.

Nicole LingerThe jury is still out on this debate, yet one thing most can agree on is that economic growth by itself is not a guarantee of people’s well-being. Some of the things which make people happiest such as spending time with friends and family are mostly unrelated to economic matters. Nicole Linger is an advocate of positive psychology, which focuses on the active pursuit of happiness on an individual level through the use of various techniques and practices. While it remains unclear as to just how much our income affects our state of mind, there is plenty of evidence to show that a continued positive outlook on life reduces stress, helps to keep us both mentally and physically fit and increases our general levels of happiness.