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The Easterlin Paradox

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  • Easterlin, Richard A.
  • O’Connor, Kelsey J.

Abstract

The Easterlin Paradox states that at a point in time happiness varies directly with income, both among and within nations, but over time the long-term growth rates of happiness and income are not significantly related. The principal reason for the contradiction is social comparison. At a point in time those with higher income are happier because they are comparing their income to that of others who are less fortunate, and conversely for those with lower income. Over time, however, as incomes rise throughout the population, the incomes of one's comparison group rise along with one's own income and vitiates the otherwise positive effect of own-income growth on happiness. Critics of the Paradox mistakenly present the positive relation of happiness to income in cross-section data or in short-term time fluctuations as contradicting the nil relation of long-term trends.

Suggested Citation

  • Easterlin, Richard A. & O’Connor, Kelsey J., 2020. "The Easterlin Paradox," GLO Discussion Paper Series 743, Global Labor Organization (GLO).
    • Handle: RePEc:zbw:glodps:743
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    References listed on IDEAS

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    Cited by:

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    2. Kaiser, Caspar, 2022. "Using memories to assess the intrapersonal comparability of wellbeing reports," Journal of Economic Behavior & Organization, Elsevier, vol. 193(C), pages 410-442.
    3. Xhulia Likaj & Michael Jacobs & Thomas Fricke, 2022. "Growth, Degrowth or Post-growth? Towards a synthetic understanding of the growth debate," Basic Papers 2, Forum New Economy.
    4. Larry Dwyer, 2024. "Measuring the Sustainability of Tourism (SF-MST): New Wine in an Old Bottle?," Sustainability, MDPI, vol. 16(14), pages 1-20, July.
    5. Larry Dwyer, 2023. "Tourism Degrowth: Painful but Necessary," Sustainability, MDPI, vol. 15(20), pages 1-23, October.
    6. Felix FitzRoy & Jim Jin & Michael Nolan, 2023. "Higher tax and less work: reverse “Keep up with the Joneses” and rising inequality," Journal of Economics, Springer, vol. 139(3), pages 177-190, August.
    7. David G. Blanchflower & Alex Bryson, 2020. "Now Unions Increase Job Satisfaction and Well-being," NBER Working Papers 27720, National Bureau of Economic Research, Inc.
    8. Braganza, Oliver, 2022. "Market paternalism: Do people really want to be nudged towards consumption?," ifso working paper series 23, University of Duisburg-Essen, Institute for Socioeconomics (ifso).
    9. Luo, Jianbo, 2021. "Happiness adaptation to high income: Evidence from German panel data," Economics Letters, Elsevier, vol. 206(C).
    10. Naudé, Wim, 2023. "Melancholy Hues: The Futility of Green Growth and Degrowth, and the Inevitability of Societal Collapse," IZA Discussion Papers 16139, Institute of Labor Economics (IZA).
    11. FitzRoy, Felix & Nolan, Michael A., 2021. "The Inefficiency of Employment and the Case for Workplace Democracy," IZA Discussion Papers 14065, Institute of Labor Economics (IZA).
    12. Meltem Ucal & Simge Günay, 2022. "Household Happiness and Fuel Poverty: a Cross-Sectional Analysis on Turkey," Applied Research in Quality of Life, Springer;International Society for Quality-of-Life Studies, vol. 17(1), pages 391-420, February.
    13. Ekaterina Oparina & Andrew E. Clark & Richard Layard, 2024. "The Easterlin paradox at 50," CEP Discussion Papers dp2048, Centre for Economic Performance, LSE.
    14. Gabriela Mihaela Mureșan & Melinda Timea Fülöp & Cristina Ciumaș, 2021. "The Road from Money to Happiness," JRFM, MDPI, vol. 14(10), pages 1-13, September.
    15. Larry Dwyer, 2024. "‘Measuring What Matters’: Resident Well-Being and the Tourism Policy Cycle," Sustainability, MDPI, vol. 16(22), pages 1-19, November.

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    More about this item

    Keywords

    Easterlin Paradox; economic growth; income; happiness; life satisfaction; subjective well-being; long-term; short-term; trends; fluctuations; transition countries; less developed countries; developed countries;
    All these keywords.

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • D60 - Microeconomics - - Welfare Economics - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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