The Easterlin Paradox

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The Easterlin Paradox was theorized by Professor Richard Easterlin, who is an Economics Professor at the University of Southern California. In his paper titled, “Does Economic Growth Improve the Human Lot? Some Empirical Evidence”, he concluded that a country’s level of economic development (i.e., the increase in the standard of living) and level of happiness are not connected.

Easterlin Paradox Explained

Essentially, he suggests that an increase in economic growth could actually reduce some of the effects of happiness by economic growth.

What is the Easterlin Paradox?

Professor Easterlin discovered that in countries with higher average incomes are in general happier than those in countries with lower average income levels. As long as the citizens have enough income to meet their basic needs, they are content. He drew a relationship between the rise in average income per person in the United States between 1946 and 1970 and the consistency of happiness during the same period.

However, over the years many researchers have provided evidence to disprove the Easterlin Paradox. For example, in an August 2008 research paper, Betsey Stevenson, Justin Wolfers proved that richer countries are happier and that wealthier people are in fact, on average happier. They concluded that there is no maximum wealth threshold after which happiness remains constant or even decreases.

In fact, Professor Easterlin also revisited his previous theory in 2017 in a paper titled Paradox Lost? He found that the “long-term trends in growth rates of happiness and real GDP per capita are not significantly positively related.” He believes that the criticism towards the Easterlin Paradox is misguided and detractors “omit available data, overlook problems of data comparability, err in the measurement of economic growth, or, most importantly, fail to focus on long-term rather than short-term growth rates.”

Prateek Agarwal
Prateek Agarwal
Member since June 20, 2011
Prateek Agarwal’s passion for economics began during his undergrad career at USC, where he studied economics and business. He started Intelligent Economist in 2011 as a way of teaching current and fellow students about the intricacies of the subject. Since then he has researched the field extensively and has published over 200 articles. If you have any questions, comments or suggestions, please email me or connect with me on LinkedIn - https://www.linkedin.com/in/prateekgrwl/

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