Economic Growth Can't Buy Happiness

Posted on October 21, 2015

It's often assumed that economic gains will lead to a corresponding boost in happiness, but science suggests that the relationship between economics and happiness is actually much more complicated. Research has shown that getting promotion or a raise can give people an emotional boost for a short period of time, but even winning the lottery doesn't seem to make a permanent change in people's overall satisfaction with life.

Just as individuals' happiness depends on more than money, social scientists have observed that a country’s economic growth doesn't always translate into greater happiness for its citizens. The economist Richard Easterlin documented this conundrum, now known as the Easterlin paradox.

Although some countries follow the Easterlin paradox, others do not. Critics have pointed out that in several countries - Italy, Denmark, and Luxembourg, for example - citizens' happiness has increased in tandem with the local economy. The United States, on the other hand, does follow the Easterlin paradox: Major economic gains over the past 40 years have not led to an overall increase in national happiness.

Psychological scientists Shigehiro Oishi (University of Virginia) and Selin Kesebir (London Business School) have one explanation for why some countries show the paradox and others don't: income inequality.

"Economic growth is typically not shared equally across segments of society and often results in increased income inequality," the researchers explain. So, although a country's GDP may be rapidly expanding, only relatively few people are actually benefiting from this economic prosperity.

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Source material from Psychological Science