Edited by Luigino Bruni and Pier Luigi Porta
Chapter 13: The Income–Unhappiness Paradox: A Relational Goods/Baumol Disease Explanation
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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