"Consider Easterlin's Paradox, the finding that after a minimum level of income has been achieved, measured happiness does not appear to rise much. If people's happiness is a function of wealth, we are much wealthier than our ancestors but not much happier. This has been documented in many countries, such as Japan, where income rose five-fold from 1958-1987, yet people remained about as happy. This puzzle been addressed in such books as Gregg Easterbrook's The Progress Paradox, David Myer's The American Paradox, Barry Schwart's The Paradox of Choice. It is a paradox, because it is contrary to what we think should make people happy. If people are primarily envious, this is no paradox at all. Libertarians are fond of highlighting criticisms of Easterlin’s Paradox, because they can’t stand the thought that people are primarily status seeking. This is because the assumption of simple wealth maximization has the nice property that liberty maximizes people’s wealth and thus happiness; if people are primarily status seeking, letting people alone won’t necessarily increase aggregate welfare, because there will always be an underclass that is relatively poor, and unhappy. "
Happier countries seem to be ones where there is less inequality. Let inequality rise too far, especially as unemployment rises, and you get expropriation as in my mother's country of birth, Argentina. .
The implications for policy analysis are huge. For example, the benefits of Fed policy that produces wealth effects also need to be evaluated if they are increasing inequality.
Merry Christmas.
Happier countries seem to be ones where there is less inequality. Let inequality rise too far, especially as unemployment rises, and you get expropriation as in my mother's country of birth, Argentina. .
The implications for policy analysis are huge. For example, the benefits of Fed policy that produces wealth effects also need to be evaluated if they are increasing inequality.
Merry Christmas.
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