… and the Pursuit of Happiness - Institute of Economic Affairs

… and the pursuit of happiness
Ormerod, P. and C. Mounfield (2000), ‘Random matrix theory
and the failure of macroeconomic forecasting’, Physica A, 280:
497–504.
3 Subjective WellBeing, Income,
Economic Development and
Growth
Daniel W. Sacks, Betsey Stevenson and
Justin Wolfers
Introduction
Does economic growth improve the human lot? 1 Using several data
sets which collectively cover 140 countries and represent nearly
all of the world’s population, we study the relationship between
subjective wellbeing and income, identifying three stylised facts.
Firstly, we show that, within a given country, richer individuals
report higher levels of life satisfaction. Secondly, we show that
richer countries on average have higher levels of life satisfaction.
Thirdly, analysing the time series of countries that we observe
repeatedly, we show that, as countries grow, their citizens report
higher levels of satisfaction. Importantly, we show that the magnitude
of the relationship between satisfaction and income is roughly
the same across all three comparisons, which suggests that absolute
income plays a large role in determining subjective wellbeing.
These results overturn the conventional wisdom that there
is no relationship between growth and subjective wellbeing.
In a series of influential papers, Easterlin (1973, 1995, 2005a,
2005b) has argued that economists’ emphasis on growth is
misguided, because he finds no statistically significant evidence
1 This chapter is adapted from Sacks et al. (2010). In turn, that paper clarified and
simplified many of the findings originally described in Stevenson and Wolfers
(2008).
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