The Economics Book

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