[News Figures] "The Happiness from Income Growth Has Limits"... The Person Who Advocated 'Happiness Economics'

American Economist Richard Easterlin
Died at Home Last Month at Age 98

Richard Easterlin, an American economist known as the "father of happiness economics," has passed away, the New York Times (NYT) reported on the 2nd (local time). He died at the age of 98 on the 16th of last month at his home in California. He was an economist and demographer who devoted his life to studying the relationship between income growth and happiness.

Born in 1926, Easterlin earned his Ph.D. in economics from the University of Pennsylvania and taught economics at the university for over 30 years. He gained worldwide attention by presenting the theory known as the "Easterlin Paradox," named after him. The core logic is that the wealthier one is, the higher life satisfaction is not necessarily guaranteed.

American economist Richard Easterlin

In 1974, Easterlin argued in a paper titled "Does Economic Growth Improve the Human Lot?" that an increase in income does not necessarily guarantee happiness. At that time, economists, government authorities, and people worldwide believed that an increase in a country's Gross Domestic Product (GDP) would lead to an improvement in the happiness of its citizens.

Starting in 1946, Easterlin studied happiness in over 30 countries, including wealthy and poor nations, socialist and capitalist states, and conducted surveys in 19 countries. He confirmed that citizens of wealthy countries were happier than those in poor countries, but analyzed that happiness did not increase proportionally with income growth. Once income surpasses a certain level and basic needs are met, further income increases do not lead to greater happiness.

He particularly cited the example of the United States, where income dramatically increased after World War II, but the happiness of Americans surveyed did not improve. He also noted that in Japan, income quintupled between 1958 and 1987, yet the number of Japanese respondents reporting increased happiness did not rise significantly. Ultimately, Easterlin's argument was that "money cannot buy happiness."

At the same time, Easterlin argued that for income growth to affect an individual's happiness, one's income must increase more than that of those around them. He explained that even if one's income rises, if friends, colleagues, and neighbors also experience income growth, social comparison prevents the individual from enjoying the increase and feeling greater happiness. This presentation by Easterlin became a core logic of happiness economics.

However, counterarguments followed. In 2008, American economists Betsey Stevenson and Justin Wolfers refuted the Easterlin Paradox by stating that both individuals and nations experience higher happiness with larger absolute income levels. Daniel Kahneman, a psychologist at Princeton University and Nobel laureate in economics, also argued in an NYT op-ed that year that "there is a tremendous amount of evidence that the Easterlin Paradox may not exist."

In response, Easterlin said he was willing to accept if his theory did not hold but rebutted that "there is not enough evidence." In 2016, at the age of 89, Easterlin appeared in person at the American Economic Association (AEA) and sought once again to prove that his theory was not wrong by pointing out that while personal income in the U.S. tripled over about 70 years since 1946, happiness remained stagnant or declined.

Easterlin once believed that no public policy had a significant effect on improving citizens' happiness. However, in a 2021 interview when he was in his mid-90s, he emphasized the need for related public policies, stating, "While income growth has a relatively smaller impact on happiness, improvements in health and family life have a tremendous effect."

Meanwhile, based on this logic, Easterlin received the IZA Labor Economics Award in 2009 from the non-profit research institute Institute of Labor Economics (IZA), headquartered in Germany. IZA mourned Easterlin's death, saying, "We mourn the passing of Easterlin, who conducted pioneering research that changed the way we think about economic growth, happiness, and human well-being," and added, "His insights have left an indelible mark in this field."