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May 16, 2024: Claudia Senik (Paris School of Economics)

”Raising the happiness of all”: is it even possible?

with Alberto Prati (UCL and Oxford University)

We revisit the Easterlin paradox about the flatness of the happiness trend over the long run, in spite of sustained economic development. With a bounded scale that explicitly refers to “the best possible life for you” and "the worst possible life for you", is it even possible to observe a rising trend in self-declared life satisfaction? We consider the possibility of rescaling, i.e. that the interpretation of the scale changes with the context in which respondents are placed. We propose a simple model of rescaling and reconstruct an index of latent happiness on the basis of retrospective reports included in unexploited archival data from the USA that we retrieved. We show that national well-being has substantially increased from the 1950s to the mid-2000s, on par with GDP, health and education. Using Gallup data from 120 countries, we also show that the happiness index generally rises with economic growth, and that it contracted during the Covid pandemic.