Handbook on the Economics of Happiness
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Handbook on the Economics of Happiness

Edited by Luigino Bruni and Pier Luigi Porta

This book is a welcome consolidation and extension of the recent expanding debates on happiness and economics. Happiness and economics, as a new field for research, is now of pivotal interest particularly to welfare economists and psychologists. This Handbook provides an unprecedented forum for discussion of the economic issues relating to happiness. It reviews the more recent literature and offers the interested reader an insight into the vast scope of the field in terms of the theory, its applications and also experimental design. The Handbook also gives substantial indications as to the future direction of research in the field, with particular regard to policy applications and developing an economics of interpersonal relations which includes reciprocity and social interaction theory.
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Chapter 13: The Income–Unhappiness Paradox: A Relational Goods/Baumol Disease Explanation

Leonardo Becchetti and Marika Santoro


Leonardo Becchetti and Marika Santoro* 1. Introduction The lives of our generation have definitely been enriched by a much wider range of consumption goods and living opportunities than those of any other generation in the past. Standard economic theory tells us that a wider range of consumption opportunities, accompanied by rising per capita income, should satisfy our taste for variety, ease our budget constraint and allow us to attain higher indifference curves, thereby increasing our happiness. In spite of this, however, recent econometric studies show that: (i) there is no positive relationship between economic growth and happiness; (ii) the marginal contribution of additional wealth on happiness for rich individuals is negligible (Oswald 1997); and (iii) the reduction of social life and social capital may reduce individuals’ happiness (Putnam 2000; Lane 2000;1 Bruni 2002). A purely descriptive but interesting example of this comes from the ‘very happy’ index of the US National Survey questionnaire, decreasing from 7.5 to 7 per cent in the 1946–90 period, while per capita GDP has risen in the same period from US$6,000 to US$20,000 (Bruni 2002). A similar absence of correlation between per capita income and happiness may be found in Great Britain, Ireland, and East and West Germany.2 One way to understand and explain this paradox is to look at the effects of two driving forces of economic and social change: technological progress and the information and communication technology revolution.3 These forces have dramatically improved some...

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