Richer people within a country report more happiness, yet rising national income does not raise average happiness over time.
Easterlin's 1974 finding. The within-country gradient is not disputed; the long-run time series is, with Stevenson and Wolfers arguing the paradox dissolves in better data.
In practice
- A team receiving a large pay rise reports high satisfaction for about four months, and then reports what it reported before.
- A country's average reported wellbeing is flat across thirty years of doubled GDP, while within any given year the richer report higher.
- Possible explanations
- One explanation is adaptation, since people adjust to a new income and return to their previous level of satisfaction. Another is relative position, in which what matters is income compared with others rather than its absolute level.
- In its favour
- The within-country gradient and the adaptation effect are both well documented, and several long national series do show flat average happiness alongside decades of growth.
- Against it
- Stevenson and Wolfers find a positive long-run relationship in wider and better data, and bounded survey scales may hide growth at the top, so the paradox may be an artefact of measurement.
- Standing
- Long-run data are contested; the within-country gradient is not.
- Further reading
- Wikipedia
- Subject
- Economics & Incentives
- Essay
- Rules for choosing, and the paradoxes that humbled the theory