Thursday, 6 September 2018

Easterlin?

I'm glad that Thomas Coughlan and Richard Harman went to the Wellbeing Revival this week so I didn't have to.

Coughlin highlights the Easterlin paradox:
The case for assessing the welfare implications of Budget bids rests on what is known as the Easterlin paradox.

Developed by economist Richard Easterlin in the mid-1970s, the Easterlin paradox describes the point at which rising GDP ceases to translate into greater happiness.

Examples can be found at both ends of the scale. Countries riven by war and poverty would be markedly happier if they could add to their wealth, but the world’s wealthiest country, the United States, faces an epidemic of suicide and opioid addiction — clear symptoms of rising unhappiness.

The obvious question, then, is how will a Wellbeing Budget fix these problems? 
If that formed much of the basis for what was going on at the meetings, that's a bit of a worry. The Easterlin paradox was resolved a decade ago. 

Stevenson and Wolfers show that there is a link between economic development and happiness and between economic growth and happiness - at least across Europe and Japan. When they take another indicator, net affect (positive experience less negative experiences), they find strong correlation with log household income and log GDP per capita. 

They conclude:
The time-series part of our analysis is necessarily only suggestive: repeated (and comparable) surveys of subjective well-being data are both noisy and scarce, and hence they speak less clearly. In many cases we find happiness within a country rising during periods of economic growth and rising most rapidly when economic growth is more rapid. The United States stands out as a notable exception: Americans have experienced no discernable increase in happiness over the past thirty-five years (and indeed, happiness among U.S. women has declined). In contrast, Japan stands out as a remarkable success story, recording rising happiness during its period of rapid economic growth. So, too, life satisfaction has trended upward in Europe, and this trend has been most evident in those countries in which economic growth has been most robust. All told, our time-series comparisons, as well as evidence from repeated international cross-sections, appear to point to an important relationship between economic growth and growth in subjective well-being. Quantitatively, the time-series well-being–GDP gradient yields a role for income similar to that seen in our within- and between-country
contrasts. Taken as a whole, the time-series evidence is difficult to reconcile with earlier claims that economic growth yields no boost to happiness. 
It would be stupid to say that income is the only thing in a utility function. There are lots of things in a utility function. But it's also odd to be hanging much on the Easterlin Paradox. 

No comments:

Post a comment