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.
A number of papers have been published in the last decade that have reassessed the Easterlin Paradox with mixed or disconfirming results. The most recent of these—and perhaps the most damning of all—was published in 2013 by my father, Ed Diener, and his colleagues in the Journal of Personality and Social Psychology. Using a demographically representative sample of the planet (more than 100 thousand people from more than 140 nations) the researchers asked two simple questions: Does GDP growth predict happiness, and do gains in household income over time predict happiness? It turns out that these two separate financial measures yielded different results. GDP growth does not really predict gains in happiness. Household income, on the other hand, is a better gauge of how changes in income actually affect individuals. Rises in household income , unlike GDP, did predict gains in happiness.
In the end, this research offers an important lesson for lay consumers of happiness research. Happiness research is often nuanced and contradictory and affected by subtle variations in measurement and analytic strategies. It is not as simple as the sound bites that often appear in the popular media. Single studies do not provide a final decree about moral issues such as materialism. Rampant consumerism may still be an emotional black hole with environmental consequences. But the Easterlin Paradox is not the best argument to make this case. More to the point the 2013 article points to the same conclusions that many other studies do: income and other circumstantial factors are, indeed, important to happiness but should not be taken as the only important factor in happiness.