In the News
Richard Easterlin (1926-2024): A Legacy in Economic Thought

17th December 2024
Professor Richard Easterlin (1926–2024) leaves behind a profound and multi-faceted legacy in the field of economics. As a distinguished professor of economics at the University of Southern California, Easterlin's work traversed economic history, demography, and behavioral economics, but he is perhaps best known for his groundbreaking contribution to the understanding of human well-being through the Easterlin Paradox.
The Easterlin Paradox: Challenging Conventional Wisdom
In the 1970s, Easterlin identified a phenomenon that challenged traditional economic assumptions: the Easterlin Paradox. His research demonstrated that increases in a country's per capita income do not necessarily lead to proportional increases in happiness or life satisfaction among its citizens. This counterintuitive observation reshaped perspectives on economic growth and human welfare.
Easterlin's work revealed that:
- While individuals in wealthier countries generally report higher levels of happiness compared to those in poorer countries, income growth within a country over time does not always correspond to rising happiness.
- Relative income and social comparisons play a central role in individual happiness. People often measure their well-being not by absolute income levels but by their standing relative to others.
This insight fundamentally questioned the notion that economic growth alone is sufficient for societal progress. It redirected focus toward non-monetary determinants of well-being, such as health, social relationships, and work-life balance.
Recent Work: The Pandemic and Life Satisfaction
Easterlin's later research continued to explore the dynamics of happiness and well-being, offering valuable insights during the COVID-19 pandemic. His recent analysis of European countries revealed the profound yet temporary impact of the pandemic on life satisfaction:
- Every country in Europe experienced an adverse effect on life satisfaction during the pandemic.
- By the summer of 2022, life satisfaction levels had returned to pre-pandemic values seen in the autumn of 2019.
- The severity of the pandemic, measured by COVID-19-related deaths, was closely linked to fluctuations in life satisfaction. The sharpest declines typically occurred during the second wave in 2021, while the third wave saw a mitigated response due to the widespread availability of vaccines and the spread of less severe omicron variants.
Recent Work: Income Changes and Happiness Asymmetry
In his 2023 research, Easterlin examined the asymmetric impact of income changes on happiness, uncovering the psychological dynamics underlying income evaluations:
- During periods of economic growth, people tend to evaluate their income situation through social comparisons – comparing their income to that of others. If their income merely keeps pace with others ("keeping up with the Joneses"), happiness remains unchanged.
- In times of recession, however, evaluations shift toward personal comparisons – how current income compares with previous peak income. As incomes decline, people face increasing difficulty satisfying consumption habits and fixed financial obligations acquired during better economic conditions. The greater the shortfall, the lower their happiness.
This shift in the psychological benchmark, from social comparisons during income growth to personal comparisons during income decline, creates an asymmetry in the happiness response to income changes. While income growth has little effect on happiness, income declines can significantly reduce happiness, reflecting the burden of unmet financial commitments and consumption habits.
This work deepened our understanding of the nuanced relationship between income dynamics and subjective well-being, emphasizing the role of psychological benchmarks in shaping economic outcomes.
Pioneering Interdisciplinary Research
Easterlin's contributions extended far beyond the paradox that bears his name. His work integrated economics with psychology and demography, laying the groundwork for the economics of happiness – a now-vibrant subfield of economic research. By emphasizing subjective well-being as a measurable economic outcome, Easterlin helped pioneer the use of surveys to capture individuals' life satisfaction, pushing the boundaries of traditional economic analysis.
Economic History and Demography
Easterlin was also a noted scholar in economic history and demography. His research on population dynamics and long-term economic development offered critical insights into how demographic changes influence economic outcomes. He explored fertility trends, the relationship between population growth and economic development, and the role of human capital in economic progress. His work often illuminated the interplay between demographic factors and societal well-being, emphasizing a holistic approach to economic analysis.
A Lasting Impact
Richard Easterlin's contributions remain highly relevant in today's debates on economic policy and societal well-being. The Easterlin Paradox continues to inform discussions about sustainable development, inequality, and the limitations of GDP as a measure of progress. His work serves as a reminder that economic growth is a means to an end, not an end in itself, and that human happiness depends on far more than material prosperity.
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