What is the Easterlin paradox in simple terms?

At any one time richer people are happier, but when a whole country becomes richer, its people's average happiness does not rise much.

Has the paradox been confirmed?

Critics argue that income and life satisfaction are linked over the long run as well, while Easterlin responds that the paradox holds in long-run trends, so the question remains debated.

Easterlin Paradox

📈 Economics By CampusDown Wiki Editorial Team Last updated October 26, 2026

The Easterlin paradox is the observation that, at a given point in time within a country, people with higher incomes report greater subjective happiness, yet as national income rises substantially over time, the country's average happiness barely increases. The American economist Richard Easterlin proposed it in 1974, and it became a starting point for happiness economics.

Contents

1. Discovery and content
2. Explanations: relative income and adaptation
3. Critiques and debate
4. FAQ
5. References

Discovery and content

Analyzing survey data from the United States and other countries, Easterlin (1974) set out three facts: within a country, people with higher incomes report being happier; across countries, richer nations are not necessarily happier; and although US per capita income rose substantially between 1946 and 1970, average happiness did not rise. Easterlin (1995) reaffirmed that raising everyone's income together does not raise everyone's happiness.

Explanations: relative income and adaptation

The leading explanation is that people care about their relative income compared with others rather than about absolute income. Duesenberry's (1949) relative income hypothesis lies at the root of this idea, and Luttmer (2005) found evidence that people's happiness falls as their neighbors' incomes rise. Another explanation is hedonic adaptation: Brickman and Campbell (1971) argued that people quickly get used to a new standard of living and their expectations rise with it. Frey and Stutzer (2002), Clark, Frijters and Shields (2008) and Layard (2005) synthesized this research and led arguments that economic policy should consider factors beyond income.

Critiques and debate

Using data on more countries and longer periods, Stevenson and Wolfers (2008) argued that there is a consistent positive relationship between the logarithm of income and life satisfaction both across countries and over time. Deaton (2008) showed in the Gallup World Poll that per capita income and life evaluations are clearly linked across countries. In response, Easterlin et al. (2010) defended the paradox, arguing that over long-run trends of ten years or more, happiness does not follow income growth even in fast-growing countries such as China and South Korea. Kahneman and Deaton (2010) distinguished between life evaluation, which keeps rising with income, and day-to-day emotional well-being, which rises less beyond a certain level, while Killingsworth (2021) reported that emotional well-being also continues to rise at higher incomes. Because conclusions vary with measures and time spans, the debate continues.

FAQ

What is the Easterlin paradox in simple terms?: At any one time richer people are happier, but when a whole country becomes richer, its people's average happiness does not rise much.
Has the paradox been confirmed?: Critics argue that income and life satisfaction are linked over the long run as well, while Easterlin responds that the paradox holds in long-run trends, so the question remains debated.

Sources reviewed: 2026-10-26

References

Easterlin, R. A. (1974). Does economic growth improve the human lot? Some empirical evidence. In P. David & M. Reder (Eds.), Nations and Households in Economic Growth (pp. 89–125). New York: Academic Press.
Easterlin, R. A. (1995). Will raising the incomes of all increase the happiness of all? Journal of Economic Behavior & Organization, 27(1), 35–47.
Duesenberry, J. S. (1949). Income, Saving and the Theory of Consumer Behavior. Cambridge, MA: Harvard University Press.
Brickman, P., & Campbell, D. T. (1971). Hedonic relativism and planning the good society. In M. Appley (Ed.), Adaptation-Level Theory (pp. 287–302). New York: Academic Press.
Frey, B. S., & Stutzer, A. (2002). What can economists learn from happiness research? Journal of Economic Literature, 40(2), 402–435.
Clark, A. E., Frijters, P., & Shields, M. A. (2008). Relative income, happiness, and utility. Journal of Economic Literature, 46(1), 95–144.
Layard, R. (2005). Happiness: Lessons from a New Science. London: Penguin.
Stevenson, B., & Wolfers, J. (2008). Economic growth and subjective well-being: Reassessing the Easterlin paradox. Brookings Papers on Economic Activity, 2008(1), 1–87.
Deaton, A. (2008). Income, health, and well-being around the world: Evidence from the Gallup World Poll. Journal of Economic Perspectives, 22(2), 53–72.
Easterlin, R. A., McVey, L. A., Switek, M., Sawangfa, O., & Zweig, J. S. (2010). The happiness–income paradox revisited. Proceedings of the National Academy of Sciences, 107(52), 22463–22468.
Kahneman, D., & Deaton, A. (2010). High income improves evaluation of life but not emotional well-being. Proceedings of the National Academy of Sciences, 107(38), 16489–16493.
Luttmer, E. F. P. (2005). Neighbors as negatives: Relative earnings and well-being. Quarterly Journal of Economics, 120(3), 963–1002.
Killingsworth, M. A. (2021). Experienced well-being rises with income, even above $75,000 per year. Proceedings of the National Academy of Sciences, 118(4), e2016976118.

Reports and materials that use this theory (Korean)

There are no materials dedicated to this theory yet, but you can search related reports in the CampusDown library (Korean).

Find more reports · Search '이스털린의 역설' on CampusDown →

Relative Income HypothesisWhat the relative income hypothesis is: Duesenberry's theory that consumption depends on income relative to others and past peaks, demonstration and ratchet effects, the consumption puzzle, happiness research and positional goods.📈 Economics Permanent Income HypothesisWhat the permanent income hypothesis is: Friedman's theory that people consume out of expected long-run income, how it solved the consumption puzzle, Hall's random walk, excess sensitivity, and stimulus evidence.📈 Economics Kuznets curveWhat the Kuznets curve is, Simon Kuznets’ 1955 inverted-U hypothesis linking growth and income inequality, the explanation via industrialisation, the environmental Kuznets curve and criticisms including Piketty’s.📈 Economics Solow Growth ModelWhat the Solow growth model is: the Solow–Swan production function, diminishing returns to capital, the steady state, the golden rule, technical progress and the Solow residual, conditional convergence, the MRW extension, and the East Asian growth debate.📈 Economics Theory of the Second BestWhat the theory of the second best is: the result that when one Pareto condition cannot be met, satisfying the others is not necessarily desirable, its origins in customs union analysis, applications to taxation and pricing, third-best theory and institutions.📈 Economics

Latest ArticlesView all ›

New guides for college study and assignments (Korean)

This article was last updated on October 26, 2026. It is based on widely recognized original works and textbooks; when citing it in a paper, please check the original sources listed in the references.