The Easterlin Paradox

Can money buy happiness? Although economic growth has long been considered an important goal for societies' prosperity and people's wellbeing, some research indicates that when a society reaches a certain economic level, further increases in wealth does not increase happiness to the same extent.

In the mid-70s, the economist Richard Easterlin showed that despite a steadily growing American economy over the previous decades, the average happiness had remained almost unaltered. The 'Easterlin Paradox' suggests that there is no link between the level of economic development of a society and the overall happiness of the citizens. Life satisfaction does rise with average incomes but only up to a point - beyond that the gain in happiness goes down.

However, there is robust evidence that within countries those with more income are happier – perhaps because people compare themselves with others around them and consider their relative income, and whether it falls short in their own eyes.

The Easterlin Paradox has been contested but highly influential, both on wellbeing research and because of the far-reaching policy implications. If economic growth does little to improve social welfare, should it be a primary goal of government policy – or should 'gross national happiness' be the main target?