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WASHINGTON: The saying goes that money can’t buy happiness. But
inquiring economists have been working for decades trying to prove
or disprove the notion.
Researchers at the University of
Pennsylvania’s Wharton School of Business released a study in
April showing “a clear positive link” between wealth and
“subjective well-being,” based on global surveys.
While this may seem logical to some, the
research flew in the face of a longstanding theory that happiness of
a country’s population does not rise with income, after certain
basic needs are met.
This theory, dubbed the “Easterlin Paradox,”
was developed in 1974 by Richard Easterlin, an economist currently
on the faculty at the University of Southern California.
Easterlin’s research had drawn on surveys
notably from Japan, where surveys had shown little or no increase in
national happiness despite the country’s post-World War II
economic miracle.
Wharton economists Betsey Stevenson and Justin
Wolfers contend in the new research that better data over the past
three decades and a closer analysis suggest the Easterlin Paradox is
flawed.
They found that the wealthiest countries in
terms of gross domestic product (GDP) per capita rank near the top
of surveys on happiness, with the poorest at the bottom. More
significantly, within each country, higher incomes translated to
higher ratings of life satisfaction, they found.
“There appears to be a very strong
relationship between subjective well-being and income, which holds
for both rich and poor countries, falsifying earlier claims of a
satiation point at which higher GDP is not associated with greater
well-being,” they said in a paper to be published by the Brookings
Institution.
“The Easterlin Paradox says that what I care
about is my relative ranking in society,” Stevenson told Agence
France-Presse. “It says economic development doesn’t matter at
all—that the United States is no better off in 2008 than it was in
1920.”
The results have important implications for
public policy. Stevenson and Wolfers note that economic growth might
not be considered an important policy goal if it does little to
raise well-being.
The Wharton researchers said multination surveys
such as the Gallup World Poll and the Pew Global Attitudes Survey
reveal “quite powerful effects of income on happiness.”
“There is no evidence of a satiation point,”
Wolfers said. “Even as rich counties get richer they appear to get
happier.”
The researchers said they were not seeking to
make any political point or support an ideology.
Although backers of the Easterlin theory said it
argues against unbridled pro-growth capitalism, Stevenson said the
new research could also be used to promote more distribution of
wealth.
“A 10-percent increase in income for a poor
person will give you the same gain [in happiness] as a 10-percent
gain for a rich person, but it would cost a lot less,” she said.
Accordingly, she said redistributing income from
the rich to the poor could increase a country’s overall happiness
quotient.
Easterlin, meanwhile, stands by his research,
updated several times since the 1970s.
In a 2004 paper, Easterlin said surveys continue
to support his thesis.
“Contrary to what economic theory assumes,
more money does not make people happier,” he wrote.
“Most people could increase their happiness by
devoting less time to making money, and more to non-pecuniary goals
such as family life and health,” Easterlin said.
“It’s necessary to separate shorter-term
fluctuations in which GDP and happiness are positively related from
the long-term association between growth and happiness,” Easterlin
said in comments
e-mailed to Agence France-Presse.
“The conclusions of [the Wharton] paper appear
to be based on the short-term association and do not contradict the
findings regarding the longer term.”
The new research meanwhile has set off a fierce
debate among scholars.
Andrew Oswald, a self-described “happiness
economist” at Britain’s Warwick University and visiting fellow
at Cornell University, called the Wharton paper “interesting”
but argued that “the bulk of the evidence is on Easterlin’s
side.”
Oswald, who has studied the issue for 15 years,
said, “There is extremely strong evidence that we are no happier
than in the 1970s across the industrialized countries.”
Oswald said Easterlin’s research “is about
80-[percent] to 90-percent right.”
“Economic growth buys only the most marginal
amount of happiness for a country that is already rich. But in
developing countries, there is very little dispute—economic growth
does make people happier.”
Angus Deaton, a Princeton University economist,
said Stevenson and Wolfers expanded on some of his research, and
that “they are raising questions that are important” about the
link between money and happiness.
But he added, “I think the question is far
from settled. There may be some parts of the Easterlin Paradox that
are still valid.”
One problem, Deaton said, is that it is
difficult for surveys to identify happiness and separate that from
other measurements of well-being.
“These surveys ask people how happy you
are,” said Deaton. “The problem is you could think your life was
great overall, but not be particularly happy.”
-- AFP
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