THE EASTERLIN PARADOX REVISITED , REVISED , AND PERHAPS RESOLVED

(Continued on next page.) Editor's Note: This issue of SINET commences with an essay by Ed Diener and Daniel Kahneman on recent research they have done on the famous Easterlin paradox. They believe their research has solved some of the classical aspects of this paradox (debated in the social indicators/quality-of-life literature for the past 35 years), but, at the same time, points to new questions to motivate research for the next decades. This is followed by Mahar Mangahas's column from the Philippine Daily Inquirer (October 31, 2009) on the recent OECD World Forum on "Statistics, Knowledge, Policy" held in Busan, Republic of Korea. Alex Michalos then adds to the discussion initiated by Mahar. Among the News and Announcement entries, readers will be particularly interested in Joe Sirgy's Summary of the Discussion of the OECD/ISQOLS Satellite Meeting held in Florence last July after the 9th ISQOLS Conference. One of the most important papers ever published on well-being was Easterlin's 1974 classic, in which he claimed that there was little evidence that economic growth had improved "the human lot." Specifically, Easterlin suggested that despite considerable economic growth, subjective well-being (SWB) had not increased in developed countries. Reviewing the data existing at that time, Easterlin concluded that although there were noticeable differences in "happiness" between rich and poor individuals within nations, differences in SWB between rich and poor nations were small or nonexistent. Furthermore, he suggested that increases in the wealth of nations over time were not accompanied by similar increases in SWB. The now famous "Easterlin Paradox" is the puzzling fact that, whereas individual income is associated with happiness, the wealth of nations seemed not to be, at least among relatively prosperous countries. Easterlin explained this paradox with the concept of social comparison the idea that a person's relative position influences happiness, but as people in a society achieve higher average income there is no net increase in SWB because the comparison standard rises. Thus, he hypothesized that the pattern of income findings was due to the fact that income only has an effect insofar as people are richer than those around them, but there is no beneficial effect as a society's income rises. Easterlin's paper was both controversial and important. On one side of the debate were those who argued that an overemphasis on economic growth hurts the environment and human relationships. On the other side were most economists, who focus on the importance of economic growth. Richard Easterlin had fired a shot heard round the academic world, and began a debate that has lasted 35 years. A number of scholars weighed in against Easterlin. In a 2002 review, Diener and BiswasDiener concluded that there were a number of studies showing strong correlations between nations' income and the average SWB in them. Because the association of national income and national happiness was so strong, it appeared that Easterlin was misled because the early surveys on which he based his conclusions were all wealthy nations, and hence there was a very restricted range of national wealth available to him. The debate next focused on the question of whether rising incomes lead to rising SWB. For example, Hagerty and Veenhoven suggested that although there was variability between nations, on average happiness increased in those nations with the greatest increases in income. Easterlin fired back with his own analyses. He showed that the growth of happiness in the USA and Japan was small or nonexistent, at a time when economic growth was phenomenal. The Easterlin critics argued that perhaps these nations were exceptional. Often the sampling of nations and of years, as well as the wording of SWB questions, were issues in the debate. In the last year a number of studies appeared that shed new light on the important Easterlin question. In recent years the Gallup Organization has been conducting a World Poll, in which large representative samples are collected from most nations in the world. Cantril's "ladder of life" is one of the measures of well-being used in that survey. The economist Angus Deaton reported an analysis of the relationship between the country average of the ladder of life and the logarithm of GDP. The first result was that plotting the data against THE EASTERLIN PARADOX REVISITED, REVISED, AND PERHAPS RESOLVED