Money can't buy you happiness, but it can buy you a yacht big enough to pull up right alongside it.
David Lee Roth
We all know that money doesn't buy happiness, don't we?
For years, many economists agreed, arguing that economic growth doesn't generate more well-being for ordinary folk, a conclusion which came to be known as Richard Easterlin's paradox, after the academic who first described it in the 1970s.
Yet it turns out that once again the economics establishment got it spectacularly wrong. Economic growth – and the higher gross domestic product (GDP) per person and improved wages that usually accompany it – does actually improve happiness and well-being, according to several recent papers by top economists, drawing on far more data than their predecessors ever had access to and using novel statistical techniques.
The truth, it turns out, is that the aspiring classes were right all along. The richer we are, the happier we are. It's (almost) that simple, and the evidence is now overwhelming.
One especially brilliant piece of research – by Daniel Sacks, Betsey Stevenson and Justin Wolfers, all US academics – demonstrates that happiness improves as incomes rise.
The paper shows that richer citizens report higher well-being than their poorer compatriots, at any given point as well as over time; that people in richer countries are happier than those in poorer countries; and that GDP growth boosts well-being.
These results are devastating to the anti-growth crowd, including many environmentalists, and to those who say that it is pointless, too stressful and unsustainable for countries to focus on boosting their GDP.