11 July, 2008

I Learned Two Things Today

First, that richer people are happier. For a long time, economists believed in the "Easterlin Paradox", which was the following: It appeared in the data that, while within any country the rich were happier than the poor, people in richer countries were typically no happier than people in poorer countries, and moreover, people in a particular country did not get happier as the country got richer. This paradox has been effectively demolished by the linked paper by Justin Wolfers and Betsey Stevenson. Using the latest happiness surveys, Wolfers and Stevenson show conclusively that reported happiness increases with income within countries at any point in time and between countries and somewhat less conclusively show that reported happiness also increases as a country gets richer. (I say *reported* happiness because there is some controversy over whether the number that is reported on these surveys actually gets at life-satisfaction or well-being.)

Second, that the "hump" in life-cycle expenditure (people consume more in middle-age than when young or old) is mostly explained by work-related expenses: eating out, dressing well, driving a lot.


1 comment:

higgy said...

I would imagine that the only meaningful disparity in happiness would be between those that don't have the 'essentials' to get by (food, clothes, shelter, utilities, etc), and those that do. Once a household moves into latter bracket, as their income increases I would expect them to adjust to it and the lifestyle it brings, and not see a significant increase in happiness.

I'd call this the 'adiabatic' theory of happiness stability for those that have what they need to get by. Of course, should a household see a sudden increase in wealth, they might be able to easily distinguish between their old lifestyle and their new standard of living.

I'd expect this to apply to a nation's wealth and population, as well. For instance, contrast a country who's standard of living is slowly increasing (say, Australia) to one that suddenly discovered domestic oil reserves.

Of course, the new data proves me wrong. Oh well. That's interesting.