Measuring Happiness: The Economics of Well-Being by Joachim Weimann & Andreas Knabe & Ronnie Schöb

Author:Joachim Weimann & Andreas Knabe & Ronnie Schöb [Weimann, Joachim & Knabe, Andreas & Schöb, Ronnie]
Language: eng
Format: epub
Tags: Business, Economics, Psychology, Personal Success, Happiness, Mental Health, Non-Fiction
ISBN: 9780262323727
Google: r0aqBgAAQBAJ
Amazon: B00TL61MZG
Goodreads: 29952260
Publisher: MIT Press
Published: 2014-02-06T00:00:00+00:00

8

How Much Truth Is There in the Easterlin Paradox?

The Easterlin Paradox is the central finding of the research into the economics of happiness, which began in the 1970s. Until a few years ago it was relatively undisputed, and research concentrated on finding an explanation for why income was arguably so unimportant. Recently, however, research has taken a different direction. New data and improved analytical methods have raised the question of whether the Easterlin Paradox really exists. Today quite a few people tend toward a significantly more moderate interpretation of the data. They point out that although older happiness research showed that people’s relative position also plays an important role, it isn’t nearly as dominant as Easterlin and his successors believed. In this chapter will go over the considerations that led to this assessment and augment them with our own findings. But first a point on which there is very broad consensus among happiness researchers should be clarified.

We Are Talking About a Luxury Problem

Imagine that you are living in Zimbabwe or the Democratic Republic of the Congo—that is, in one of the world’s poorest countries. You have an extremely low income, and it is very insecure because it depends on such things as whether there is enough rainfall to ensure a harvest and whether you are lucky enough not to be robbed by someone. You have scarcely enough to feed you and your family. Your life is a constant struggle for your very existence. You are alone in this struggle, for there is no social security system, there is no welfare state, and there are no charities. Now suppose that you are, instead, a relatively rich American or Western European. How important is your income to you in each situation? Is it the same? Or does it make a difference whether your basic needs are sure to be met or not? Of course it makes a difference. Money’s importance in a situation in which you have to use it to ensure your own survival and that of your family is completely different from its importance in a situation in which survival is guaranteed and spending money calls for creativity and imagination.

If you are poor and your survival depends on your material resources, material income is bound to be extremely important to your life satisfaction. It is therefore necessary to assess very poor societies and richer ones differently. Happiness research is, therefore, dealing with a “luxury problem” when it examines the effects of higher income in rich countries. The idea that the psychological importance of income depends on the level of income is also implied by “need theory.” (See, for instance, Howell and Howell 2008.) Basically, “need theory” says that income plays an extremely important role in life satisfaction as long as it involves meeting basic needs. As soon as one has sufficient income to have enough food, to have shelter, and perhaps to be able to provide for the family, income rapidly loses its importance. Income tends

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