Remember where you come from – and don't compare

#403

Friend of Democracy,

Have you ever heard of Richard A. Easterlin? He lived from 1926 to 2024 and was an American economist, best known for founding the modern field of happiness economics.

He is especially famous for identifying the Easterlin Paradox, one of the most influential findings in the study of well-being and economic growth.

Here is what Easterlin found out:

Within a country, richer people tend to be happier than poorer people. But over the decades, average happiness does not rise in step with GDP (which stands for Gross Domestic Product and indicates a country’s total material prosperity).

These two findings seem to contradict each other. If income makes individuals happier, then as everyone gets richer over time, the whole society should become happier too. But decades of data often show little or no long-term increase in average national happiness despite significant increases in wealth.

Why?

Here is the most likely explanation. To be more precise, there are two:

First, people quickly get used to higher income or living standards. Second, happiness depends partly on how much you earn compared to others, not just on absolute income levels.

What can we learn from the results?

If we want to be happy, we mustn’t adapt too easily to better circumstances, for example, by reminding ourselves how things could be, how they might have been in the past. And we shouldn’t compare ourselves with others so much. At least not if we are among the few rich people in a group. ;-)

Best,

Johannes Eber