… and the Pursuit of Happiness - Institute of Economic Affairs

… and the pursuit of happiness
subjective wellbeing
slightly with GDP, although there is not a strong pattern.
The Gallup poll also probes respondents for an array of sentiments
about their day yesterday, asking whether they: felt well
rested; were treated with respect; chose how to spend their time;
if they smiled or laughed a lot; were proud of something they did;
or ate good-tasting food. The daily experience questions, which
uniformly measure positive experiences, paint a picture that is
consistent with our analysis thus far. People in richer countries
are more likely to report feeling better rested and respected,
smiling more and eating good-tasting foods than people in poorer
countries, although they are no more likely to take pride in what
they did or to have learned something interesting.
These data point to a more nuanced relationship between
wellbeing and income. While they give no reason to doubt that
wellbeing rises with income, they also suggest that certain facets
of wellbeing respond less to income than others. These data hint
at the possibility of understanding which emotions and experiences
translate into that part of life satisfaction which is sensitive
to changes in income.
Conclusions
This paper revisits the stylised facts on the relationship between
subjective wellbeing and income. We find that, within a given
country, rich individuals are more satisfied with their lives than
poorer individuals and we find that richer countries have significantly
higher levels of average life satisfaction. Studying the time
series relationship between satisfaction and income, we find that
economic growth is associated with increases in life satisfaction.
The key innovation in this chapter is to focus explicitly on the
magnitude of the subjective wellbeing–income gradient (rather
than its statistical significance), while also bringing the greatest
quantity of data to bear on these questions. We show that the
within-country, between-country and over-time estimates all
point to a quantitatively similar relationship between subjective
wellbeing and income. This relationship is robust: we find it not
only at different levels of aggregation but using different data
sets. We also find that income is positively associated with other
measures of subjective wellbeing, including happiness as well as
other upbeat emotions.
The fact that life satisfaction and other measures of sub jective
wellbeing rise with income has significant implications for
development economists. First, and most importantly, these
findings cast doubt on the Easterlin paradox and various theories
suggesting that there is no long-term relationship between wellbeing
and income growth. Absolute income appears to play a
central role in determining subjective wellbeing. This conclusion
suggests that economists’ traditional interest in economic growth
has not been misplaced. Secondly, our results suggest that differences
in subjective wellbeing over time or across places are likely
to reflect meaningful differences in actual wellbeing.
Subjective wellbeing data therefore permit cross-country wellbeing
comparisons without reliance on price indices. As Deaton
(2010) notes, if we wish to use some kind of dollar-a-day threshold
to count poverty, then we need price indices that account for
differences in quality and in quantity of consumption in different
countries. In practice, these are difficult to construct. Instead we
can use wellbeing data. Deaton notes that these comparisons
using wellbeing data are valid only if life satisfaction responds to
absolute rather than relative wellbeing. If individuals assess their
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