The most common misunderstanding among policymakers and populations around the world has been that higher gross domestic product and economic growth lead to higher levels of well-being, life satisfaction and happiness. In fact, Diane Coyle, in her book “GDP, A Brief but Affectionate History,” states that “GDP as a measure of economic success has been increasingly challenged, not so much by politicians or economists as by people who see it as the primary symbol of what’s wrong with the capitalist market economy.” Furthermore, emphasis on growth ignores, for example, dangers from climate change, parents’ contributions to caring for the family, assistance provided by volunteers, income inequality and its consequences, as well as social well-being, life satisfaction and happiness of the population.

Using six categories of data, World Population Review reports that in 2023 the U.S. is ranked 15th from the top-ranked country, Finland, on a happiness index. The top seven countries on the index are mostly from Western Europe (https://worldpopulationreview.com). The U.S. is ranked seventh among the top seven countries in average annual dollar income, lower than Switzerland, Norway, Ireland and Israel (www.zippia.com, April 13, 2023). If we look at GDP per capita of countries around the world, the U.S. rank is even lower among the countries of the Western world. Utah is the top-ranked happiest state in 2023 (www.advisory.com). However, it ranks 29th in nominal GDP per capita (https://en.wikipedia.org). Therefore, the data raises questions about GDP and growth of income as the only source of people’s happiness and life satisfaction.

However, there are some rigorous, though contentious, empirical findings that show that there is a positive relationship between income growth, life satisfaction and happiness. The most detailed discussion on this issue can be found in the June 2022 study “Will faster economic growth make us happier? The relevance of the Easterlin Paradox to Progress Studies” by Michael Plant (www.happierlivesinstitute.org). Professor Richard Easterlin at USC is known for his paradox. Its relevance has been debated among economists since 1974. Using survey data in the study, the Easterlin Paradox shows that happiness is positively related to income at a point in time within a country as well as across countries (cross sectional analysis), but not over the course of time in the long run (time series analysis). A later study by Easterlin and O’Conner (2022) using World Value Survey data for 54 countries over 28 years shows that happiness and income relationship changes over the business cycles over the long run. There is a positive relationship in expansion-only countries, and no relationship when all included countries experience boom and bust cycles. It is recognized that this finding has to be further investigated over the longer term.

Easterlin and O’Conner resolve the Easterlin Paradox by arguing that, at a point in time, people who have higher incomes feel happier because they compare their incomes with those who have less income. However, over a period of time when incomes of higher-income people as well as that of comparison groups rise, it nullifies the effect of comparisons. Plant offers another reason for the paradox. In the long run, when growth with innovations brings many comforts of life to the people, people get used to those comforts. Hence any further improvement in growth, that is not long lasting, does not add to life satisfaction and happiness. Economists and psychologists realize that the data on life satisfaction and happiness is very subjective and hence subject to measurement errors. It needs further improvement.

Recent political and social conditions also shed light on the subjective views of Americans. Despite high positive economic indicators of the economy, such as lower inflation, low unemployment, high growth rate and higher wage rates, Americans rate the economy in a very bad state. Professor Paul Krugman provides the answer to this contradictory view in his column in The New York Times (Jan. 9, 2024). The rigorous statistical analysis of internet survey data by Civiqs (https://civiqs.com) shows that when all 940,787 registered voters of different political ideologies across all age groups are asked about the state of the economy, 34% to 41% rate it very bad. However, in many other polls, a majority of Americans claim that their personal lives are better. Civiqs’ analysis shows that partisanship among Republicans and Democrats is driving these irreconcilable opinions of 940,787 registered voters about the state of the economy. Most Republicans rate from fairly bad to very bad, while most Democrats rate from fairly good to very good.

Aside from partisan divide and future income insecurity, other social issues, such as homelessness, working class anguish, prevalence of depression among certain groups, complaints against educational institutions, influx of migrants, distrust of policymakers and political leaders, are creating unhappiness. Perhaps we should heed the advice of Dr. Victor Frankl, scholar and survivor of Nazi death camps: “Happiness cannot be pursued; it must ensue. One must have a reason to ‘be happy.'”

Vijay Mathur is former chair and professor in the Economics Department and now professor emeritus at Cleveland State University, Cleveland, Ohio. He resides in Ogden.

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