Q&A: What is the Easterlin Paradox? | tutor2u Economics

The Easterlin Paradox concerns whether we are happier and more contented as our living standards improve. In the mid 1970s Richard Easterlin drew attention to studies that showed that, although successive generations are usually more affluent that their parents or grandparents, people seemed to be no happier with their lives? It is an interesting paradox to study when you are writing about measuring economic welfare and the standard of living.

What is the Easterlin Paradox?

1) Within a society, rich people tend to be much happier than poor people.
2) But, rich societies tend not to be happier than poor societies (or not by much).
3) As countries get richer, they do not get happier.

Easterlin argued that life satisfaction does rise with average incomes but only up to a point. Beyond that the marginal gain in happiness declines.

Easterlin and others including Professor Richard Layard and Daniel Kahneman have spawned a huge amount of research into the economics of happiness and well-being.

One of Easterlin’s conclusions was that relative income can weigh heavily on people’s minds.

Faced with this choice what would you rather have?

You get £5,000 and a friend gets £3,000
or
You get £10,000 and a friend gets £15,000

Economists such as Justin Wolfers have challenged the Easterlin Paradox - see this recent article:

There is a continuous debate about whether we can actually get accurate and reasonably objective measures of our well-being. Clearly income is just one of many factors that influences how satisfied we are with our lives.

Job board

Teacher of Economics

Tonbridge School, Tonbridge, Kent

From the Blog

Teaching Vacancies

Recruitment

Advertise your vacancies with tutor2u

Much cheaper & more effective than TES or the Guardian. Reach the audience you really want to apply for your teaching vacancy by posting directly to our website and related social media audiences.

Find our more ›

Advertise your teaching jobs with tutor2u

A New Home for tutor2u Resources

We've just flicked the switch on moving all our digital resources to instant digital download - via our new subject stores.

For every subject you can now access each digital resource as soon as it is ordered. This will always be the latest edition of each resource too (and we'll update you automatically if there is an upgraded version to use).

Simply add the required resources to your cart, checkout using the usual options and your resources will be available to access immediately via your mytutor2u account.