Does More Money Make You Happier? Why so much Debate?

Easterlin’s famous paradox questioned standard economic assumptions about a fundamental relationship in economics: that between
happiness and income. In recent years there has been renewed debate about the paradox. In this essay, I highlight some of
the methodological issues and challenges underlying that debate. I focus on the sensitivity of the results to the method selected,
the choice of micro or macro data, and the way that happiness questions are defined and framed, all of which result in divergent
conclusions. I also note the mediating role of the pace and nature of economic growth, institutional frameworks, and inequality.
What is most notable is the remarkable consistency in the determinants of individual happiness – including income – within countries of diverse income levels and, at the same time, how happiness is affected by cross-country differences that are related to average per-capita income levels, such as political freedom and public goods. Income clearly
plays a role in determining both individual and country level happiness. Still, assessing its role relative to other more
difficult to measure factors as countries develop in new ways and at different rates will remain a challenge for the foreseeable
future.