We are richer in 2012, but are we happier?
Swing skirts were in vogue, the Royals dominated the front pages, and Germany was shelling out lump sums to Europe in reparations. Was 1952 really that different to life today?
Umm, I believe that by 1952 Germany was having money shovelled at it under the Marshall Plan. But never mind. Here\’s the wrong question:
John Hawksworth, chief economist at PwC, said: \”After adjusting for inflation, and with the population only increasing by around a quarter, this implies that average incomes are more than three times as high in real terms. But whether this extra money has made people happier is harder to answer.\”
The actual evidence is that richer countries are happier, yes. The point about the Easterlin Paradox is that it is wrong. Of course, increasing incomes are subject to the law of diminishing returns so that each rise in income has less effect in making us happier but it is still there, that rise.
But that isn\’t really the point or the corret question. For it isn\’t the level of wealth that really produces the happiness. It\’s the increase in it itself. Living in a growing economy, one radually getting richer, increases happiness. We can see a brighter tomorrow, the kiddies are going to be alright etc. Living in a static or declining economy does not produce those jollies.
And, of course, the effect of an eonomy growing 2 or 3 % a year each year to keep those jollies coming is that over a generation or two that economy will double, triple, even quadruple in size.
But it\’s the growth itself, not the level, which has the greater effect upon happiness.