Richard Easterlin et. al. have a new working paper, "The Happiness-Income Paradox Revisited." Note first the rare scholarly modesty here: it is of course "The Easterlin paradox" that we are talking about : the paradox that consists in the fact that happiness increases with income in the cross-section while it is unaffected by income over the long run (see below) in the time series. It presents new support for the paradox as well as a response to some of the recent self-styled refutations from the likes especially of Stevenson and Wolpers. Some of the criticism, they claim, presents the cross-sectional positive association (across countries) as a refutation, which it is nothing of the sort, since that relationship is one plank of the paradox itself! Wolpers and Stevenson, they claim, are looking at short time series and picking up - what has been known for some time - the short run positive association over the business cycle between the two. I liked the paper and found it pretty convincing.
There is no theory in the piece, but they pithily sum up the most plausible explanations of the paradox: " the escalation of material aspirations with economic growth, reflecting the impact of social comparison and hedonic adaptation."
Readers of The Theory of Moral Sentiments will know that Adam Smith would not have been at all surprised by the paradox. On the contrary - remember his description of the poor man striving all his life to become rich who, when he finally succeeds, finds he is no happier than he began? But for Smith - and I agree - the paradox is in itself no critique of economic growth, as it has been wielded in contemporary debate: Smith thinks it a good thing (I'm paraphrasing, my TMS is in the office 20 miles down the road) that we Nature (I think it's capital N Nature, or it may be capital P Providence) deludes us in to thinking that more income will make us happier, because all this striving under this delusion has produced, well, Civilization! "Turned mighty ocean into a broad highway" and such - you know the passage. The larger point, though is this: why should happiness or utility be the desideratum of economic growth? Just as they had an objective, rather than a subjective, theory of value, The Classical economists generally, I suggest, had an objective rather than a subjective theory of well-being. In Senian terms, economic growth increases our capabilities. What we do with them is another thing.
By the way, in this last point I am echoing to some extent Deirdre McCloskey, whose latest book, Bourgeois Dignity, may well be her best. I was not a fan of its predecessor, Bourgeois Virtue, but any economist concerned with explaining the explosive nature of modern growth ( the famous hockey-stick) need to read this book. It is mostly an attack on all the explanations that have been offered so far. Later work will make her positive case that it was a change in ideology, not in itself explicable by material conditions, to wit, the change in the valuation of innovation and the bourgeoisie generally, the giving of dignity to such activity that occurs in the Netherlands and England 1650-1800 that explains the industrial revolution and the break-out form the Malthusian trap. The take-down of Gregory Clark's "eugenic materialism" is alone worth the price of the book. If you've read any of her work, you know that she is a wonderful and astonishingly erudite writer - even when you disagree with her. Highly Recommended!
Finally, along with all of you I am sure, I am confident that the medicine The Republicans and - say it isn't so - Obama, are preparing for the sick Economy, LEECHES, will work as it always has. Sad beyond words -