Although the study of happiness has been around for ages, and especially strong in the last 30 years, there is one area that has captured the lion’s share of research attention: the relationship of money and happiness. The truth is, researchers are not interested in how money itself affects happiness but, rather, use income as a proxy measures of material living standards. A person’s income translates to leisure opportunities, psychological security, comforts, and the provision of basic needs. Even among lay people the interest in material circumstances and happiness is fierce. Unfortunately, many lay people do not have a good understanding of the results of this large body of research. Misunderstandings and unsophisticated conclusions abound. Nowhere is this more clear, perhaps, than in the case of the “Easterlin Paradox.”
To bring you up to speed the Easterlin Paradox is a conundrum identified by economist Richard Easterlin way back in the mid-1970s. Easterlin noticed that economic growth (most often assessed as GDP) was not strongly associated with gains in happiness. That is, as countries like Japan and the United States grew richer in the years following World War II they did not enjoy similar increases in happiness. In particular, Easterlin and others argued that the absence of happiness might be explained by the “hedonic treadmill.” This is the phenomenon that occurs when people naturally adapt to new circumstances. In the case of income a pay-raise, for instance, is fun at first but you adjust to it and then need a new pay-raise for a new jolt of pleasure. This conclusion has been welcome news to those who are skeptical of increasing materialism and news of the Easterlin Paradox has filtered into the public vernacular. Unfortunately it is not, technically, true.