Critiquing the Paradox

Richard Easterlin

Chapter 14 in An Economist’s Lessons on Happiness, 2021, pp 129-139 from Springer

Abstract: Abstract In the three statistical relationships between happiness and income, cross-section data display a positive association, and time-series statistics show a positive short-run relationship between fluctuations but a nil association for the long-run trends. Critics of the Paradox mistakenly draw on the first two relationships to refute the third, but it is the third, the trend relationship, on which the Paradox is based. For example, when income is measured in absolute amount, the positive cross-section association is curvilinear, leveling off at a higher “threshold” value of income. This, it is claimed, shows that increases in income below the threshold level are, in fact, accompanied by greater happiness and that the Paradox does not hold at lower incomes. But time-series trends for poor countries do not support this association. Thus, China, Japan, and India, who started from well below the supposed threshold and have had exceptional increases in income in short timespans, give no evidence of an increase in happiness. The Paradox holds in poor as well as affluent countries. Other analysts who seek to disprove the Paradox point to a positive happiness-income relationship they find in time series data. But this claim turns out to be based, not on long-run trends, but on the positive relationship between short-run fluctuations. Thus, an oft-cited critique of the Paradox results from researcher decisions that deliberately shorten the time series analyzed to 10 years or less rather than studying the full time span of the data, which is needed in order to establish long-term trends.

Date: 2021
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DOI: 10.1007/978-3-030-61962-6_14

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