relative income and happiness

The latest coming from the field of happiness economics is saying relative income does make a difference in the overall levels of satisfaction in the long term (lifetime) view. For years I have been arguing that poverty is a relative issue. We have poor in the United States that are considerably better off than say the poor in Africa/South America/Latin America/Asia/Middle East if you look at the bundle of goods/services available to them. Even with adjustments like PPP, the comparisons are misinformative as they rarely take into account psycological effects which can be just as much as a trap as poor growth.

Although I’m no fan of the happiness index, these results shouldn’t be too suprising. If what you encounter on a daily/weekly/monthly basis is your neighborhood of experience, then obviously it would only really matter where you sat in relation to that environment.

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