By Aaron Ordower
In last week’s NY Times David Leonhardt discusses a new study published by the Brookings Institute which refutes the Easterlin Paradox which stated that money doesn’t necessarily lead to more satisfaction. See Arnav’s earlier post for more on this perspective.
The study’s authors looked at a number of new studies in the past 34 years which allowed for a more comprehensive look at the question, and they decided that in fact, income does matter.
But what I thought was really interesting was when the NY Times wrote,
Economic growth, by itself, certainly isn’t enough to guarantee people’s well-being — which is Mr. Easterlin’s great contribution to economics. In this country, for instance, some big health care problems, like poor basic treatment of heart disease, don’t stem from a lack of sufficient resources. Recent research has also found that some of the things that make people happiest — short commutes, time spent with friends — have little to do with higher incomes. [link]
An interesting parallel comes from the world of psychology where Maslow’s hierarchy of needs shows that people have a pyramid of needs to be filled, starting with the physiological, safety, love, all the way up to self-actualization. The higher up on that pyramid, the happier people are.
Now take a look at the map plotting GDP and happiness. There is largely a positive relationship between the two, which is to say that GDP and happiness are obviously related in some way. However, the countries with the highest levels of happiness are those with the most socialized governments with plenty of services provided by the state.
Not surprising, the Scandinavians ranked highest on this chart, but look at Canada and even Venezuela, which rank higher than the United States in terms of happiness. Canada, demographically and economically very similar to the US ranks higher, which I argue is because Canadians do not have to worry about those lowest levels of Maslow’s hierarchy. In a number of areas, the Canadian government takes care of its citizens’ needs (healthcare, education) so the average Canadian is not concerned by these issues which are essential to achieving higher levels of personal satisfaction, according to Maslow. It also doesn’t hurt that Canadians, by and large, are really nice people. Looking at psychological or sociological factors such as these tell that while Americans have more worries, our neighbors to the north are comfortable because they have the security blanket of a welfare state.