Poverty and Discrimination Ps1

6)         The Economics of Happiness is a six-part series that describes Wolfers and Stevenson’s research on the correlation between economic wellbeing and happiness. Traditionally, the Easterlin Paradox has been considered the governing finding on the matter. It argued that while rich people tend to be happier than poor people, this relationship does not carry through to the larger context of societies and countries.

        In the first part of the series, Wolfers refutes this paradox by arguing that a closer look at the data shows that this relationship does in fact carry through- rich people are happier than poor people; richer countries are happier than poorer countries; and as countries get richer, they tend to get happier. The reason for the discrepancy between Wolfers and Stevenson’s assertions and those of the Easterlin Paradox is the accumulation of more comprehensive, accurate and reliable data, thus rendering the paradox invalid.

The second part of the series further argues the correlation between average income and average levels of happiness by presenting the relevant data. Perhaps the most striking revelation is the nearly linear relationship between happiness and log income. Although Wolfers argues that this is an argument in favor of foreign aid, he fails to recognize the reality that aid is most often inefficiently allocated, rendering different results.

The next installment in the series delves into the details of the discrepancies in the data sets. Wolfers argues that the reason the correlation remained hidden in the data is the inconsistency in the scales used. After consolidating the scales into comparable ones, the correlation becomes clear.

Part four of the series presents the relevant data that further asserts the relationship between income and happiness levels. Comparisons of rich and poor people yield very similar conclusions to comparisons of rich and poor countries, debunking a key claim of the Easterlin paradox.

Next, Wolfers examines parts of the data that are not quite so clear-cut. Despite the majority of the data being consistent with his previous assertions, there are a few exceptions. He offers several possible reasons for these exceptions such as economic downturn and income inequality.