Justin Wolters and Robert Frank

Eastland Paradox – Raising levels of economic development does nothing for happiness challenged by Justin Wolters. Richer people are happier than poorer people. Richer societies are not happier than poorer societies. Give up on economic growth. No empirical data that a certain above a certain income does not increase happiness. As income goes up, people become happier at all income levels. Questions changed to indicate happiness did not increase in Japan. Eight out of nine European countries became richer and happier. Richer in the U.S. but not happier – Happiness rises with the log of income – economic growth has not gone equally to everyone – No surprise people are not getting happier.

Which world would you choose? World A: You and your family live in a neighborhood with 4000-square foot houses, others in neighborhoods with 6000 square foot houses. World B: You and your family live in a neighborhoods with 3000-square-foot houses, others in neighborhoods with 2000 square foot houses.

Real life experiment on the Mexican/U.S. border.

Enjoyment – richer is better Depression – richer countries have less Stress – More stress in richer countries Were you treated with respect – More respect in richer countries Good tasting food – Better tasting food in richer countries Smile or laugh allot – More laughter in richer countries More days like yesterday – More wishes for days like yesterday in richer countries Boredom – Wealth does not seem to banish boredom. Sad – Wealth does not seem to banish sadness. Well rested – Richer countries are better rested. Physical pain – richer equal lower than pain. Experience love – money cannot buy you love.

Economists measure GDP. Politicians are always focused on broader well-being agenda.

Self-interested individuals will be guided, as if by an invisible hand, to promote the common good. Adam Smith Daniel Kahneman and Amos Tversky focus on human mistakes. Artificial Intelligence versus Natural Stupidity. Traits that benefit individuals often works against group interests – Charles Darwin

Elks and antlers Hockey players and helmets People care about relative consumption more in some domains than in others. Such concerns lead to expenditure arms races focused on positional goods – those goods for which relative position matters most. Arms Races divert resources from nonpositional goods, causing large welfare loss.

Top earners spend more money because they have more money. Shifts frame of reference for people just below. And so on all the way down the line. Growth rates correlate with commute time, divorces, and bankruptcy.

Tax consumption not incomes creates disincentives against arms races. Relative position is everything – Out do everybody in that niche

Private Schools McMansions Intuitive argument is hard to reject, but empirical evidence is not available for this argument at this point in time. Logs compare percentage changes with relations to self – relative comparisons may justify progressive policies.

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