Income and Happiness: A Unique Paradox
The Unique Paradox
At any given point in time rich people are substantially more happy on average when compared to poor people. This fact is contrasted to the notion that over a life cycle, societies and the people within those socities have not grown happier. The table below shows the how happiness within the top income quarter is higher compared to the bottom quarter. However a striking comparision is also highlighted; Nations have grown richer and their people gained more income, but the average happiness level has not changed from 1975 to 1978.
There are two main economic views on the reasons for this unique trend that occurs.
- Richard Easternlin's ideas of material aspriations
- Layard's ideas of Rivalry, Habituation and Comparision
Material Aspirations and Income
To describe the unique occurences with income and happiness, Richard Easterlin, looks at how income and aspirations vary from a point in time aspect, as well as looking over time. As adults begin their life cycle, their set of material aspirations are very similar. (shown as A1 on the graph) It is then plausible to assume that those with higher incomes would be able to fufill those wants with greater ease. This is shown on the graph by the various points 1,2,3. This explains why at any given moment individuals with a higher income are happier than those with a lower income. To explain why it seems that over a life cycle, happiness doesn't change as income increases Easterlin also uses some assumptions of material aspriations and income. He believes that as people increase their income, the set of material aspirations that conicide with the previous level change and rise. This rise in aspirations and income offset and instead of moving to points such as 3 or 4, the movement travels to point 5.
