Download ECONOMIC GROWTH AND SUBJECTIVE WELL

ECONOMIC GROWTH AND SUBJECTIVE WELL-BEING:
REASSESSING THE EASTERLIN PARADOX
Stephanie Carret
&
Jinjie Cui (Eric)
Faculty of Economic Science
University of Warsaw
13th October, 2009
S.Carret & J.Cui
Development Workshop
1
The Planning for today
1.
2.
3.
4.
Review of the paper: main ideas
Analysis of illustrative graphs
Other views on the subject «Income-Well being
link»
What questions can we raise?
« In the end, economics is not about wealth,
it’s about the pursuing of happiness »
Krugman, 1998
S.Carret & J.Cui
Development Workshop
2
Review of the paper: main
ideas (1)


Betsey Stevenson and Justin Wolfers examine the Easterlin Paradox
with a critical view, analyzing the data available since the 1940’s
Richard Easterlin is University Professor and Professor of Economics
at the University of Southern California is in particular known for his
1974 article "Does Economic Growth Improve the Human Lot? Some
Empirical Evidence" and The Easterlin Paradox: this theory assets
there’s no link between the level of income and the level of well-being
once basic needs are fulfilled



The importance of distinguish the analysis within and in between
countries
The problematic of the link between a country’s economical growth
and the well being of its inhabitants
The transformation of subjective data in analytical data
S.Carret & J.Cui
Development Workshop
3
Review of the paper: main
ideas (2)



When the income reaches a certain level for example $15,000
GDP per capita, additional income does not raise or very little,
the level of well-being: satiation point
Within a given country, there’s a huge difference in subjective
well-being between the richest and the poorest areas:
 Example: China GDP’s per capita per region
 HK: $30,755 (//Ireland); SH: $10,537 (//Hungary); Tibet:
$1997 (//Mongolia)
The paper’s final conclusion: « absolute levels of income in
shaping happiness » are more » have a more important role
than the relative income comparison » (p.29)
S.Carret & J.Cui
Development Workshop
4
Review of the paper: main ideas
(3): Maslow’s Hierarchy of NEEDS
S.Carret & J.Cui
Development Workshop
5
Analysis of illustrative
graphs (1)

Figure 4: Life satisfaction and the real GDP per capita: Gallup
World Poll





132 countries, people aged 15+
Subjective well-being questions, with a « ladder »
Correlation is high and links level of GDP with level of well-being
The graph follows the hierarchy of the countries’ wealth
Figure 6: Subjective well-being and real GDP per capita in
selected surveys


Comparison surveys between the hapiness and life satisfaction
notions
3 different sources of surveys: analysis of the questions asked
and period of time
S.Carret & J.Cui
Development Workshop
6
Analysis of illustrative
graphs (2)

Graph 11: Within countries and between countries estimates of the
life satisfaction income Gradient: Gallup World Poll



Graph 16: Change in life satisfaction and economic growth in
Europe: Eurobarometer survey





Combines both data for within and in between countries
Again here the representation follows the hierarchy of the countries’
development
Cases of Belgium
Cases of Danemark/Italy/France
Cases of West Germany/Netherlands
Case of Ireland
Graph 18: Life satisfaction and GDP per capita over time in Japan


Life satisfaction follows the growth evolution
See Graph 20: Hapiness and Income over time in USA (counter
example)
S.Carret & J.Cui
Development Workshop
7
Other views on the «IncomeWell being» link (1)



Important Scholars in the debate of the « Income-Well
being » link: Richard Easterlin, Robert Frank, Andrew Oswald
(economics), Daniel Kahneman, Ed Diner, Tom Tyler (psychology),
Ruut Veenhoven (sociology), Robert Lane (Political science)
Relative or Absolute: The relationship between income and
subjective well-being: Relative or absolute? by Ed Diener, Ed Sandvik,
Larry Seidlitz and Marissa Diener. Paper refers to Easterlin and
Veenhoven, Revue Social Indicators Research, Ed. Springer,
March 1993,
Individuals’ answers during well-being measures depends on
many factors: Developments in the Measurement of Subjective
Well-Being by Daniel Kahneman, Alan B. Krueger, Journal of
Economic Perspective, Winter 2006
S.Carret & J.Cui
Development Workshop
8
Other views on the «IncomeWell being» link (2)


Does our social comparative attitude affects our perception
of self satisfaction: Neighbors as Negatives: Relative Earnings
and Well-Being, by Erzo and Lutmer, Quaterly Journal of
Economics, August 2005
The developed countries’ problematic, why does USA have
the same level of subjective well-being since the 1950’s,
although there has beem a huge general increase of
income?: Does Relative Income Matter?Are the Critics Right?, by
Richard Layard, Guy Mayraz and Stephen Nickell, Center for
Economic Performance Discussion Paper, LSE, March 2009
S.Carret & J.Cui
Development Workshop
9
What questions can we raise
Debate

What causes the link between the level of income and that of
hapiness?





Is the relation absolute or relative: Does income relate to subjective
well-being because it ensures universal human needs or because
people make evaluative judgments of themselves compared to
others?
Can this field of economics been considered as rationnal as other
fields? Is there a universality of emotions?
Does the increase of material prosperity provoke the increase of
subjective well-being?
The approach of the need fulfillment to explain the link
« income/well-being » (Maslow’s pyramid of needs)
Link to inequality, Kuznets Curve: check NL/USA (check GDP)
S.Carret & J.Cui
Development Workshop
10
Source:
Paper:
Stevenson, Betsey and Wolfers, Justin. “ECONOMIC GROWTH AND
SUBJECTIVE WELL-BEING: REASSESSING THE EASTERLIN
PARADOX.” Philadelphia: University of Pennsylvania, 2008; NBER
Working paper series
Internet:
www.wikipedia.org
Google Scholar
BOOK:
Kolter & Armstrong. “Principles of Marketing”, Chapter 5, 2003.
S.Carret & J.Cui
Development Workshop
11
Questions???
Thank you for your attention!!!
S.Carret & J.Cui
Development Workshop
12