Income and Happiness: a Reinterpretation of ’Easterlin Paradox’

This thesis is trying to give a reinterpretation of ‘Easterlin Paradox’through the angleof views of Maslow’s Hierarchy of Needs Theory, and it supports for the view thatincome is important for personal happiness or household happiness, so there is noparadox between income and happiness, that’s to say there is no so-called ‘EasterlinParadox’. On the basis of having made a full and detailed review of researches abouthappiness in Economics, especially about how the ‘Easterlin Paradox’was raised andthe following experimental and theoretical researches on it. So according to theMaslow’s hierarchy of needs, this thesis constructs a Maslow’s Hierarchy of NeedsModel of Income and Happiness, that is to say the kind of relation between incomeand happiness isn’t a simple proportional one, in the other words, there are two kindsof effects of income increases imposing on happiness, short-term effect and long-runeffect. At the same time, this thesis makes two different kinds of extensions in themodel:(1) On the basis of the model and the motive of the interpersonal comparisonsin the psychology, this thesis analyses how interpersonal comparisons affects thehappiness effects of income increases;(2) On the basis of the model taking intoaccount the leisure and household, what the relations between personal behavior andhousehold happiness will be. The two kinds of extensions just mentioned suggest thatthe existence of ‘Easterlin Paradox’ is due to failing to distinguish the complicatedrelations between income growth and happiness.