The Easterlin Paradox: Happiness Is Not Found In Money
The Easterlin paradox is both a psychological and an economic concept. Oddly enough, these two sciences have a lot in common nowadays. One of the things they have in common is the idea that links having money and consumption capacity to happiness.
No one can deny the importance of money. However, we constantly hear that money and happiness do not go hand in hand. At the same time, we also feel frustrated when we do not have enough money to buy something we want. It can be anything from a trip and clothes to a better medical service and a new car.
The Easterlin paradox reinforces the idea that having money and being happy are not related. Let’s dive deeper into this interesting idea.
The Easterlin paradox
Richard Easterlin’s first reflection was global. It spoke of a reality many of us know: the countries with higher income levels are not the happiest. The countries with lower income levels are also not the most unhappy.
This one theory, supported by evidence, opposed the widespread idea that the more income one has, the happier one is. The first question that came up was whether people limit their ability to be happy when they reach a certain income level.
Another aspect of the Easterlin paradox is that if we compare income differences in the same country, the results change. In the same country, people with lower incomes are less happy and vice versa. How do we explain this?
Income relativity
To explain all these observations, Easterlin used a Karl Marx metaphor. Marx once said that if a person has a house that meets their needs, they can feel satisfied. But if their neighbor is a millionaire with a mansion, they begin to feel as if their house was nothing more than a simple cottage.
Easterlin draws two conclusions based on this. The first is that people with higher incomes do not tend to be happier. The second is that people perceive their income as “high” depending on the income of those around them. This would explain the difference in the relationship between happiness and income.
Therefore, the Easterlin paradox says that the comparisons we make with those around us affect our perception of well-being. In other words, the environment is crucial to our income level to bring happiness or sadness.
Income or equality?
Richard Easterlin never directly said that higher or lower incomes were the cause of happiness or misfortune. What the Easterlin paradox explains is that a higher income level does not necessarily make us feel even happier. Happiness depends on the setting. This makes us all ask the same question: Is it true that what actually generates happiness or unhappiness is equality and not income?
In other words, is it possible to believe, based on the Easterlin paradox, that the large differences in income in a society are the source of discomfort? When there are big differences, it makes us very happy to be above others. But when we feel that we are under others, we can feel frustration and sadness.
This has to do with satisfying our needs directly. Basically, my income gives me the opportunity to live well. But if I perceive that others live much better than I do, I feel that what I earn is not enough.
This is probably what is happening in the richest countries. Although as much as the majority of the population has satisfied their needs, the exhibition of the rich elites casts a shadow over those who are not so lucky. In turn , people in poor countries may feel happier because they have less to compare themselves with.
