Does Economic Growth Improve the Human Lot? Some Empirical Evidence

Does Economic Growth Improve the Human Lot? Some Empirical Evidence
In this piece, Richard Easterlin investigates the effect of wealth on human happiness. He begins by discussing the concept of happiness, establishing that “it is not confined to economic well-being” (90). He explains that happiness also correlates to social welfare and welfare at large. However, economists rarely recognize potential boundaries between these concepts of welfare, and operate on the Pigou’s dictum, or that “there is a clear presumption that changes in economic welfare indicate changes in social welfare in the same direction, if not in the same degree” (90). Easterlin conveys that this dictum—relative to the study of economic proliferation—is the primary focus of the piece.
The first section of the paper discusses “the concept and measure of happiness” (91). Easterlin establishes that factors influencing personal happiness have shown to be relatively similar across distinct cultures (94). However, measurement problems persist due to the subjective nature of self-reports and ability of participants to accurately gauge their happiness. Participants may also respond more genuinely if asked to gauge happiness via a self-administered questionnaire rather than an in-person interview. Additionally, polls utilized for analysis do not place questions that assess happiness close to those that determine the participant’s income in order to deter the individual from considering social norms of wealth and happiness. Finally, wording of the happiness question was a concern in terms of ensuring accurate reports of happiness, as different surveys present contrasting categorizations of happiness. However, after comparing two surveys with different categorical representations of happiness, it was found that “the direction of the shift and the consistency by income level suggest that respondents throughout the population are placing similar interpretations on the question asked and are answering, at least to some extent, in terms of their real feelings” (99). Despite these concerns, Easterlin claims, “…while such bias may exist, it is not significant enough to invalidate the conclusions on the association between income and happiness” (99).
The second part of the piece presents empirical evidence in order to establish an association between income and happiness. Easterlin utilizes individual reports on subjective happiness levels from nineteen countries, developed and less developed, from 1946 to 1970. Specifically, Easterlin studies associations between income and happiness on: an individual level, by comparing happiness levels of wealthier individuals to poorer ones of a given society; a large-scale, by comparing happiness levels of wealthier countries to poorer ones; and over time, by investigating the influence of economic growth on human happiness. He finds that—generally—wealthier individuals communicate higher happiness levels than others at a point in time. However, over time, the average happiness level remains fairly constant despite continuous growth of both personal and national wealth.
In the third section, Easterlin interprets his analytical results. He proposes possible explanations for the observed paradox. Namely, he states, “…an increase in the income of any one individual would increase his happiness, but increasing the income of everyone would leave happiness unchanged” (112). This rationale justifies Easterlin’s findings, which demonstrate differential effects of income on happiness when observing happiness levels at one point in time versus over a period of time. Moreover, “this provides a common point of reference in self-appraisals of well-being, leading those below the norm to feel less happy and those above the norm, more happy. Over time, this norm tends to rise with the general level of consumption, though the two are not necessarily on a one-to-one basis” (113). Another explanation Easterlin offers is that “at a given time, it might be argued, the rich are better able to avoid these sources of ‘ill-fare’ and hence are happier. But over time and across societies increases in income are largely or wholly offset by a corresponding growth in pollution, congestion, and so forth” (113). Lastly, Easterlin proposes a radical interpretation of the data, which suggests that power may have bearing on levels of happiness. He explains that those with more power (i.e the rich) at a given time are happier. However, as time progresses and societies develop, increases in income are not coupled with a broader power distribution amongst socioeconomic levels; therefore, happiness has not increased (113). He goes on to convey the relative nature of the evidence, stating that “it would be premature to assert that ‘everything is relative,’ but it is hard to resist the inference that relative considerations play an important part in explaining evidence presented here” (116). Moreover, societal norms contribute to perceptions of happiness, which may alter observed associations between happiness levels and income over time. In closing, Easterlin posits, “The only sure conclusion is that we need much more research on the nature and causes of human welfare” (119).