National Wealth and Individual Happiness

Abstract

Easterlin has argued that national economic prosperity is of no consequence for the individual’s appreciation of life. He contends that people in poor countries are as happy as those of rich welfare states, and that decades of economic growth have left people no happier than before. This paper attacks these empirical claims, as well as the underlying theory that happiness depends largely on social comparison.

Cross-national comparison shows that people in the poorest countries of the world are actually the least happy. This appears both in a re-analysis of Easterlin’s own data and also in a new, more representative sample of countries. In fact, a curvilinear pattern emerges, indicating that wealth is subject to the law of diminishing utility.

Comparison over time in Western Europe shows that the post-war economic recovery was paralleled by an increase in happiness. The slower rate of growth during the last decade has not been accompanied by a definite rise in happiness, though fluctuations in happiness have tended to follow economic ups and downs with a year’s delay.

It is argued that social comparison theory cannot explain these results.