Easterlin paradox
Topic: Measuring Development: Income, HDI and Sustainability · NCERT: Beyond NCERT
Meaning
The Easterlin paradox was put forward by Richard Easterlin in 1974. It has two parts:
- Within a country at a given time, richer people are happier than poorer people.
- Over time, average happiness hardly rises even as national income grows.
Two reasons are given:
- Relative income: people judge themselves against others.
- Adaptation: people soon get used to a higher income.
The finding is contested. Stevenson and Wolfers (2008) found that happiness does rise with income, both across countries and within them.
Example
Suppose everyone's income doubles over 30 years. By the paradox, average life satisfaction would barely change. Each person still compares their income with their neighbours' and gets used to the new level of comfort.
Don't confuse with
- Kuznets' warning (1934): Simon Kuznets said national income is a poor guide to welfare. That is a warning about measurement. The Easterlin paradox is a finding about how happiness moves as income grows.