The time-series part of our analysis is necessarily only suggestive: repeated (and comparable) surveys of
subjective well-being data are both noisy and scarce, and hence they speak less clearly. In many cases we find happiness
within a country rising during periods of economic growth and rising most rapidly when economic growth is more rapid.
The United States stands out as a notable exception: Americans have experienced no discernable increase in happiness
over the past thirty-five years (and indeed, happiness among U.S. women has declined). In contrast, Japan stands out as a
remarkable success story, recording rising happiness during its period of rapid economic growth. So, too, life satisfaction
has trended upward in Europe, and this trend has been most evident in those countries in which economic growth has been
most robust. All told, our time-series comparisons, as well as evidence from repeated international cross-sections, appear
to point to an important relationship between economic growth and growth in subjective well-being. Quantitatively, the
time-series well-being-GDP gradient yields a role for income similar to that seen in our within- and between-country
contrasts. Taken as a whole, the time-series evidence is difficult to reconcile with earlier claims that economic growth
yields no boost to happiness.
Easterlin and others have argued that comparisons of rich and poor people within a country yield starker
happiness differences than comparisons of rich and poor countries, and have cited this as evidence that relative income
differences are a key driver of happiness. Graham notes that “a common interpretation of the Easterlin paradox is that
humans are on a ‘hedonic treadmill’: Aspirations increase along with income and, after basic needs are met, relative rather
than absolute levels matter to well-being” (2008, p. 77). In its strong form this hypothesis suggests that people (and
public policy) are powerless to deliver lasting gains in happiness, because individual happiness returns inexorably to one’s
set point of happiness. Our findings clearly falsify this strong form of adaptation: we find that those enjoying materially
better circumstances also enjoy greater subjective well-being and that ongoing rises in living standards have delivered
higher subjective well-being. However, milder forms of adaptation are potentially consistent with our findings.
Our findings point to an important role for absolute levels of income in shaping happiness and a lesser role for
relative income comparisons than was previously thought. Equally, our findings are sufficiently imprecise that they may
still admit a role for relative income comparisons in shaping subjective well-being. We find that estimates of the within-
and between-country well-being-income gradient tend to cluster around 0.4, and we lack sufficient evidence to say that
these gradients are clearly different. Thus, our evidence is consistent with the view that only absolute income matters to
happiness (which would imply that the within- and between-country estimates are identical). Indeed, whereas previous
analyses of the link between income and happiness suggested a prima facie case for relative income playing a dominant
role, our updated reanalysis finds no such case.
Equally, our findings do admit the possibility of an interesting role for relative income comparisons. For instance,
the within-country coefficient is typically about 0.3 and might be biased downward by the influence of transitory income
in the cross section. Thus, perhaps the true within-country coefficient is 0.45, and our estimates are consistent with a view
that the between-country coefficient is about 0.36 (with the time-series coefficient a bit weaker still). This is consistent
with both absolute and relative income impacting well-being, with the former having a weight about four times as large as
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