The Economics Book

(Barry) #1

218


different countries did not vary
greatly, despite large differences
in national income. People in rich
countries were not necessarily
the happiest.
Over time, the picture seemed
even more peculiar. In the US
there were continual, comparatively
rapid increases in GDP over the
period since 1946, but the levels
of happiness reported in surveys
did not appear to follow suit—in
fact, it declined over the 1960s.
Money, it seemed, really did not
buy you happiness.
The results of Easterlin’s
surveys became known as the
Easterlin paradox. They sparked


fresh research into the relationship
between economics and well-being
that had otherwise been dormant
since the late 19th century.
Researchers tried to assess the

THE ECONOMICS OF HAPPINESS


A spring festival in Bhutan is
celebrated with dancing. In 1972,
the king decreed that his government
would pursue policies that maximized
“Gross National Happiness.”


ways in which decisions by
individuals, firms, and government
can impact how people feel about
themselves and society.
One explanation was offered
by the concept of the “hedonic
treadmill,” first proposed in 1971 by
US psychologists Phillip Brickman
and Donald Campbell. They
suggested that people adapt very
rapidly to their current levels of
well-being, maintaining this level
regardless of events, good or bad.
When income rises, they rapidly
adapt to the new level of material
security, treating it as normal and
so being no happier than they were
previously. An extreme version
of this theory would imply that,
beyond subsistence incomes,
nearly all economic development
is irrelevant for welfare, because
people’s happiness is determined
by something altogether different,
such as character or friendships.
Alternatively, researchers have put
forward the importance of status
and comparisons with others. For
example, if no one in a society has
a car, not having a car makes little
difference. But as soon as some
people obtain cars, others without

The Happy Planet
Index (HPI) was
introduced by the New
Economics Foundation
in 2006. It combines
three measures to
produce an overall
score: life expectancy,
individual well-being,
and the environmental
impact of people’s
consumption.

HPI

SUB-REGION

0102030405060

East Africa

Southern and Central Africa

North America

Australia and New Zealand

Central and Eastern Europe

Wealthy East Asia

Middle East and South West Asia

Western Europe

South Asia

China

South East Asia
North Africa

Central Asia and Caucasus

Nordic Europe

Southern Europe

Russia, Ukraine, and Belarus

West Africa

South America

Central America, Mexico, and Caribbean
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