For decades, we’ve been told a simple story.
Get richer → get happier.
At an individual level, that story is mostly true.
At a national level, it turns out to be… complicated.
In 1974, economist Richard Easterlin spotted something odd that still unsettles economists today. It became known as the Easterlin Paradox.
The paradox, simply stated
At any given moment, richer people are happier than poorer people
But as entire countries get richer over time, they do not reliably get happier
The United States was the original case study — and fifty years on, that pattern largely still holds
Easterin – Happiness & Wellbein…
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But is this just an American quirk? Or something more fundamental?
What newer global data tells us
More recent research using Gallup World Poll data from 150+ countries (2009–2019) allows us to test the paradox more systematically.
Crucially, this research controls for things GDP often stands in for, but doesn’t actually measure:
Social support
Health and life expectancy
Freedom to make life choices
Generosity
Corruption and trust
Once you separate income from social conditions, a clearer picture emerges.
What actually happens as countries grow richer
Low-income countries
Here, money really does matter.
Rising income is strongly linked to rising happiness
Both directly (meeting basic needs)
And indirectly (better health, safety, institutions)
This is Maslow’s lower levels in action — food, shelter, healthcare, security.
Middle-income countries
This is the transition zone.
Richer middle-income countries are not happier than poorer ones once social factors are included
But over time, income growth does still correlate with rising happiness
Growth still helps — but it’s no longer sufficient on its own.
High-income countries
This is where the paradox bites hardest.
Once social conditions are accounted for, richer rich countries are not happier
Over time, income growth shows no meaningful link to happiness growth
In other words:
Money keeps moving. Happiness largely plateaus.
This strongly supports Easterlin’s original claim — at least for wealthy societies.
Why money stops “working”
Three mechanisms show up again and again in the data:
Diminishing returns
Once basic needs are met, each extra pound buys less wellbeing.Relative comparison
We compare ourselves to others. If everyone’s income rises together, nobody feels better off.Adaptation
Yesterday’s luxury becomes today’s baseline. The bar keeps moving.
Meanwhile, factors that matter more for wellbeing — health, trust, autonomy, social connection — do not automatically improve with GDP.
But hasn’t happiness increased over time?
Yes — and this is where the story gets more nuanced.
Long-run data (especially in Europe and the US) shows:
Small but real increases in average happiness
Large increases in “Happy Life Years” — people living longer and reasonably happier lives
So progress has happened. Just not in the way GDP headlines suggest.
So… is happiness all about the money?
A better summary might be:
In poor societies: money is foundational
In rich societies: money is secondary
Everywhere: social conditions do the heavy lifting
Or more bluntly:
Money builds the floor.
It doesn’t raise the ceiling.
That’s an uncomfortable conclusion for organisations, governments, and leaders who default to financial incentives as their primary lever.
But it’s also a hopeful one — because it points to things we can actually design for:
Health
Trust
Autonomy
Fairness
Social connection
And those don’t require infinite growth.