Towards a Multi-Disciplinary Approach
Edited by Amitava Krishna Dutt and Benjamin Radcliff
Chapter 7: The Easterlin Paradox Revisited
Robert H. Frank For more than three decades social scientists have debated the Easterlin Paradox. In his celebrated 1974 paper, ‘Does economic growth improve the human lot?’, Richard Easterlin called attention to two seemingly contradictory patterns in data on the relationship between income and measured happiness. One is that in any country at a single point in time measured happiness levels rise with income. The second is that as average income levels rise over time within a country average measured happiness levels remain the same. If wealthy people are happier than poor people at any moment, he asked, why doesn’t rising income make people happier over time? The answer, he suggested, was that once a threshold level of absolute income is attained, further increases serve only to shift the frame of reference that defines what people consider necessary. His conclusion was that in advanced economies there is no longer any compelling reason to pursue economic growth. In this chapter, I will examine Easterlin’s argument in the light of research findings published in the wake of his original paper. My summary conclusion is that economic growth is far more important than his analysis suggests. The chapter is organized as follows: Section 7.1 briefly reviews the kinds of data that led Easterlin to his original conclusion. Section 7.2 describes a recent study suggesting that happiness may indeed rise over time as income rises. Section 7.3 makes the point that many conditions believed to be conducive to human welfare tend to improve...
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