The Price of Everything - Eduardo Porter [35]
American happiness remains peculiarly impervious to progress. Between 1946 and 1991 income per capita in the United States rose by a factor of 2.5—ownership of consumer durables from TV sets to cars soared, educational attainment jumped, and life expectancy at birth climbed. Still, Americans’ average happiness measured by surveys fell slightly. The United States was one of only four industrialized countries—alongside Hungary, Portugal, and Canada—where life satisfaction fell between 2000 and 2006.
But outside the United States, surveys of life satisfaction find that gains in income almost always led to gains in happiness. Surveys in fifty-two countries over the past quarter century or so found that happiness increased in forty-five and declined in only seven. Among the poorer countries—India, Ireland, Mexico, Puerto Rico, and South Korea—it increased a lot. With the odd exception of Belgium, all nine countries that were members of the European Community in 1973 have reported rising happiness alongside economic growth since then.
These data contradict the proposition that we are stuck, recalibrating our aspirations with every step we take, falling right back to where we were. They suggest that if indeed we do adapt to improvements in income, adaptation does not swallow all our gains. If we get a kick out of staying ahead of the neighbors, we also enjoy the improvements to life that money can buy.
If $100 provides much more happiness in Burundi than in the United States, that reflects the fact that $100 is a much bigger deal when your annual income is less than $400 than when it is more than a hundred times that much. But economic development seems to improve the satisfaction with life in rich countries too. In fact, the lesson to take from Easterlin’s research is not that economic growth doesn’t provide further happiness past a certain point of development. It does. What happens is that having a bigger income matters less when our income is already big. This dynamic is well understood by economists. It is called diminishing returns. Other scarce endowments, such as free time or an unpolluted environment, are also important for our well-being. As money becomes relatively less important they start to matter more. When we sacrifice some of these endowments to achieve economic prosperity, the net extra happiness must balance the money gained against all that is spent to gain it.
Americans are richer than Europeans. Gross domestic product per head in the United States averages $47,700, more than one-third greater than in France or Germany. Yet the average American recorded a 2.2 happiness level on a scale of one to three, according to the General Social Survey, almost identical to Europe’s ranking, according to the Eurobarometer polls, of 2.9 on a scale of one to four.
Several things probably account for Americans’ stagnant satisfaction. The first is the lopsided nature of American income growth. From 1972 to 2005, household income grew less than 20 percent for those in the poorer half of the population. It grew 59 percent for the richest fifth. Happiness followed the trend: it increased slightly for the top 40 percent of earners but declined for everybody else. If today the United States has the most unequal distribution of happiness among the richer members of the Organization for Economic Cooperation and Development (OECD), it is likely because it also has the most unequal distribution of income.
But there are other potential explanations. The notion that money doesn’t improve our perceived well-being may be due to conceptual confusion about what such improvement means. Using the survey responses of some 450,000 Americans, Daniel Kahneman and Angus Deaton of Princeton found that people’s “emotional wellbeing”—measured by their reporting of recent feelings such as joy or sadness—did in fact stop improving after income hit a threshold of about $75,000 a year. But people’s sense of satisfaction with their life increased continuosly with income, with no evidence