Does Economics Growth Increase Happiness? Essay Examples

Type of paper: Essay

Topic: Economics, Happiness, Health, Wellness, Well-Being, Utilitarianism, Life, Taxes

Pages: 4

Words: 1100

Published: 2020/12/27


Economics of Happiness is a new direction in economic theory that emerged in the last decade due to the ever escalating criticism of GDP and related indicators with him. In the area have been created and continue to create alternative indicators to determine the development of the nation from all sides. One of the key weaknesses of the economy of happiness is the uncertainty of the method of quantitative measurement, as well as the problem of subjective assessments of information to the general form. A long time in economics dominated objective approach, according to which income (individual or household) in absolute terms was seen as the most appropriate indicator of an individual or family well-being, and national income (GDP per capita) - an indicator of economic well-being of the country. Over the past few decades there have been changes in the understanding of the concept of well-being. To date, economists, as well as many scientists from different fields have come to the conclusion that the welfare of the nation depends not only on economic well-being, but also by other factors. A new indicator: subjective well-being. The measurements now include a set of evaluation criteria, one of which is economic prosperity, determined by the value of GDP per capita. Moreover, additional criteria of measurement are: happiness, life satisfaction, and tolerance in a country, the freedom of choice and action, the level of religiosity, patriotism and the democratization of society. The question of identifying the relationship between the level of economic development and happiness reveals some features of the synthesis of the economy and other spheres of human life (Anielski, M, 2007).
According to Bruni, L. (2005), “now scientists are aware of the need to identify relationships and dependencies between an objective indicator of economic well-being (GDP per capita) and subjective assessments of the population”. Accounting subjective indicators is necessary because it allows you to select the desired direction of economic and social policy. Use of indicators and indices opens the discussion to find a more appropriate indicator of well-being of the population as a separate country, and for comparative studies of welfare of the population in different countries.


According to the research, many scientists have concluded that the level of happiness has remained stable in all countries for many years. That is, any positive changes in each person, such as success in life or revenue growth or failure in principle has little impact on the overall level of happiness. That is, we can say that the level of well-being deflected, adhering to its basic values, keeping the nation on the «hedonic treadmill» (a term used to describe the phenomenon in which people constantly need to meet all the new emerging needs) (Bruni, L., 2007). Regarding the nation's process can be described as follows: for overall economic growth, the relative positive and negative changes in the life of every individual balance each other without creating changes in the general level of happiness in the country. If there is a market society, income differentiation, the happy yourself will feel only a certain percentage of people (say 30-40%) consider themselves to be relatively richer (i.e. successful) other. The absolute level of wealth of society (for example, per capita GDP) may be different, but as long as there is differentiation of incomes, the average level of "happiness" in society will be permanent. This pattern R. Easterlin found in 1970 in an experiment where people from different countries were asked to mark their level of "happiness". It was found that the level of the country's wealth does not affect the proportion of people who considered themselves happy. This observation has been called "Easterlin paradox" and soon became a popular topic of discussion in the various social sciences, creating a whole new trend of economic theory - "economics of happiness" (Easterlin, R., 2002). However, in studies instead of the word "happiness" to eliminate unnecessary associations, foreign economists and sociologists use the term subjective well-being (SWB), which includes the criteria of happiness and life satisfaction criteria.
In 1974, Professor Richard Easterlin found that a higher standard of living in a particular time in a particular country inevitably leads to greater life satisfaction compared to poorer countries. At the same time, a gradual or rapid growth of the welfare of the nation as a whole in the longer period of time either in developed or developing countries is not accompanied by a similar increase in the level of happiness of citizens. In other words, according to the "Easterlin paradox" rich people are happier than the poor, but revenue growth does not lead to an increase in the level of happiness (Easterlin, R, 2010). Ed Diener study with colleagues to resolve this paradox by showing that the increase in individual income still leads to an increase in happiness and subjective well-being, but it occurs under certain conditions (Clark, A.).
The researchers analyzed data from Gallup World Poll, representing replies 806,526 people from 135 countries to questions about their lives, well-being experienced by emotions collected in the period from 2005 to 2011. Respondents rated their lives on a scale from 0 (worst possible) to 10 (best possible), answered questions about emotions (positive or negative), experienced the previous day, their optimism about the future and their satisfaction with the current level of life as well as the income of each household. To measure the level of material well-being, researchers asked whether the respondents have enough money to buy food, shelter, if they have a TV, and whether they are connected to the Internet. Also the data on gross domestic product (GDP) of these countries was analyzed, received from the International Monetary Fund.

The results showed:

The increase in household income associated with an increased assessment of life, a great experience and positive experience less negative emotions.

GDP per capita is less associated with the experience of personal well-being than the growth of personal income.

Evaluation of life is associated not only with the level of income, but also determined by changes in income. The income level of assessment to predict the future life.
Three factors - an increase in material well-being, satisfaction with financial situation and optimism - mediate the relationship between income and subjective well-being. Thus, the increase in income leads to a change in subjective well-being, if it leads to an increase in individual purchasing power, optimism and satisfaction with financial situation.
Summarizing the results, the authors conclude that the increase in income leads to an increase in happiness, but people at the same time to be optimistic, to have no exorbitant desires, and be able to purchase a sufficient number of different things. In other words, the results Diener and his colleagues are allowed to "Easterlin paradox" because show that revenue growth will affect the level of happiness, but only on condition that human aspirations and desires will not grow even faster. If people earn a lot of money, they can be happy. But if they are constantly frustrated because they have to earn even more money, income growth will not make them happy (Frey, B., 2013).


It is believed that economic development creates a shift in society from the maximization of economic growth to maximize subjective well-being SWB: the transition from the public deficit (scarcity) to public safety (security) provides a dramatic increase in subjective well-being. But there is a threshold at which economic growth is no longer brings a significant increase in the level of subjective well-being. This can be explained by the fact that at this level, hunger is no longer a real problem for most people. Survival becomes self-evident. And in such a society there is a significant number of postmaterialists and economic benefits for them no longer provide an increase in subjective well-being. At a low level of economic development, even small economic benefits will bring a high level of growth of subjective well-being and increase life expectancy. For every individual a priority will be to maximize the economic benefits for society and the priority will be economic growth. This strategy is effective enough to ensure the growth of welfare. But the process lasts until the moment when society reaches a certain threshold of development. Man reaches the point at which further economic growth brings only a minimal increase in the level of life expectancy and level of subjective well-being. Of course the process is still possible to trace spending ethnic comparisons, but from now on non-economic aspects of life are becoming increasingly important determining how long and how well people live. After reaching this threshold point is rational emphasis of all efforts to improve the quality of life, rather than the pursuit of economic growth. This shift is associated with significant changes at the individual level, namely the change in values: the displacement of attention from the economic and physical security for self-expression values, highlighting the participation in public life, freedom of expression, and quality of life. Given the shortage of people focus on survival and they must first take care of the economic and physical security. Economic development provides a sense of existential social security, which leads to a change in values ​​with survival in the direction of self-expression values ​​and free choice, which is a direct way to maximize happiness and life satisfaction. The main trend of the change in life strategies is the understatement of the role of external authorities and the maximization of individual autonomy.


Anielski, M. (2007). The economics of happiness building genuine wealth. Gabriola Island, BC: New Society.
Bruni, L. (2005). Economics and happiness: Framing the analysis. Oxford: Oxford University Press.
Bruni, L. (2007). Handbook on the economics of happiness. Cheltenham, UK: Edward Elgar.
Clark, A., Frijters, P., & Shields, M. (n.d.). Relative Income, Happiness, And Utility: An Explanation For The Easterlin Paradox And Other Puzzles. Journal of Economic Literature, 95-144.
Easterlin, R. (2002). Happiness in economics. Cheltenham, UK: Edward Elgar Publ.
Easterlin, R., & Hinte, H. (2010). Happiness, growth, and the life cycle. Oxford: Oxford University Press.
Frey, B. (2013). Recent developments in the economics of happiness. Cheltenham: Edward Elgar Pub.
OVER LONG HAUL, MONEY DOESN'T BUY HAPPINESS: "EASTERLIN PARADOX" REVISITED. (2010, December 13). States News Service. Retrieved March 22, 2015, from

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