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Why the Easterlin Paradox? The Scitovsky Hypothesis

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The Economics of Happiness

Abstract

Starting from the mid-1970s and the mid-1990s, Richard Easterlin has provided three key contributions to the development of Happiness Economics. These regard: the existence of the paradox that takes his name, its explanation, and the use of psychological concepts in economics, like happiness and aspirations. Each of these issues is still unresolved. Tibor Scitovsky, working in the same years on the same issues, advanced an explanation of the paradox that endogenizes what are today the most widespread explanations, i.e. those based on adaptation and relative income. Confirmation of his hypothesis can be found in psychology and in economics that now use psychological concepts, like motivations and non-cognitive skills.

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Notes

  1. 1.

    This puzzling result for the United States is even recognized by Stevenson and Wolfers (2008), and then confirmed on the basis of a different dataset by Herbst (2011).

  2. 2.

    Easterlin (2001, p. 468) defends bivariate correlation in that it captures all the channels through which GDP can affect subjective well-being.

  3. 3.

    More precisely, on using the same data as Stevenson and Wolfers (2008), Krueger (2008) shows that if the coefficient of (the logarithm of) GDP per capita on life satisfaction is not restricted to being the same across countries, but country-distinct coefficients are estimated, then the coefficient for the average country is negative and non-significant.

  4. 4.

    The argument that people’s mass consumption moulds their preferences refers to the old American Institutionalists, like John K. Galbraith, but Scitovsky soon emphasised another argument: that people’s preferences may be moulded by market pressure if they have not sufficiently learned consumption skill (see the discussion in Pugno 2016).

  5. 5.

    “[I]n man’s striving for his various goals in life, being on the way to those goals and struggling to achieve them are more satisfying than is the actual attainment of the goals” (Scitovsky 1976, p. 62).

  6. 6.

    “It is also possible […] that […people] were gradually lured into a new way of life by their love of comfort, unaware at first of the costs involved and finding themselves fully accustomed to their new ways by time they realize the extent of the loss of pleasure suffered” (Scitovsky 1976, p. 73).

  7. 7.

    See, for example, Rojas (2007).

  8. 8.

    Scitovsky further adds that human relationships give opportunities to “exchange […] information and ideas” (Scitovsky 1976, p. 236), so that they are “probably the main sources of human satisfaction” (Scitovsky 1986, p. 19) in the form of stimulation and challenge (Scitovsky 1976, p. 83).

  9. 9.

    It should be recalled that Scitovsky is also well-known for his seminal article on externalities (Scitovsky 1954).

  10. 10.

    Edward Deci and Richard Ryan define “intrinsically motivated activities as those that individuals find interesting and would do in the absence of operationally separable consequences” (Deci and Ryan 2000, p. 233). Scitovsky referred to Deci and intrinsic motivations in Scitovsky (1986, ch. 14).

  11. 11.

    In a survey, Huta (2015) observes that the links of life satisfaction with eudaimonia and with hedonism are rather sensitive to the measures used.

  12. 12.

    Similar patterns have been identified by Nikolaev (2016). An even more surprising result is found by estimating the probability of enjoying both high eudemonia and low life satisfaction in a European sample. The age related pattern becomes inverted U-shaped, with the peak at 45 (Clark and Senik 2012, Tab. 6).

  13. 13.

    The statement used in the survey to measure ‘attachment’ is as follows: “It is easy for me to become emotionally close to others. I am comfortable depending on others and having others depend on me. I don’t worry about being alone or having others not accept me.”

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Authors and Affiliations

  1. Department of Economics and Law, University of Cassino, Cassino, Italy

    Maurizio Pugno

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  1. Maurizio Pugno
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Correspondence to Maurizio Pugno .

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  1. FLACSO-México & UPAEP, Tlalpan, Ciudad de México, Mexico

    Mariano Rojas

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Pugno, M. (2019). Why the Easterlin Paradox? The Scitovsky Hypothesis. In: Rojas, M. (eds) The Economics of Happiness. Springer, Cham. https://doi.org/10.1007/978-3-030-15835-4_7

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