THE RELATIONSHIP BETWEEN ECONOMIC GROWTH AND HAPPINESS

Abstract

Purpose- The purpose of this study is to analyze the relationship between economic growth (or economic performance) and happiness (life satisfaction, well-being). Happiness economics is a very contemporary research field, attracting economists, sociologists, psychologists and other scientists to investigate it, yet there is many rooms for exploration. Money is not everything, so how much does it matter precisely? This debate has divided the researchers in two parties: the ones who are arguing that economic growth and happiness go hand in hand and the ones who say that there is no relationship between these two concepts and because of this fact the constant aspiration for economic growth lost its meaning, and does more harm than benefit. Methodology- We started by analyzing the accurate and detailed definition of the GDP and include information about it in order to better understand its function and applicability. In the following, we have analyzed the concept of happiness, the way it can be defined and measured. Then, we have analyzed the given economic theories which relate to these two concepts and describe a relationship between them. We analyzed four countries (Denmark, Costa Rica, Romania, and India) mostly based on their economic and well-being situation, and the available indicators which have an effect on well-being. We examined these countries because two of them had a very high level of wellbeing, one had a medium level and one had a low level of well-being. There were examples where the money had a good effect on happiness and also where not. In Denmark and Costa Rica money was not the only (or any reason) because for the high level of well-being, other factors, not really related to money, were high as well. In Romania, the GDP and happiness have increased at the same time. In India, the increasing GDP has brought in fact diminishing happiness. Findings- In our paper, we have found out that there are various theories built upon this question, as controversial studies and opinions. Some researchers say that GDP has no effect on the level of well-being. On the contrary, more recent studies generally prove the other side, that GDP and happiness go hand in hand. There was one common factor in almost every research: money has a diminishing marginal utility on happiness, for a very poor country additional income does bring a high level of happiness, but for a very rich country it is almost invisible. It needs to be mentioned that growth and development do not concern just quantitative increases in production, consumption, income, or any other measures. They generally also involve qualitative changes, like education, healthcare, or political freedom. These factors certainly develop the level of well-being in a country, and for their development, there is a need for economic growth. On the other hand, economic growth does not guarantee the development of these factors, as we can see in the example of India. In my opinion, the best approach is not to focus on economic growth anymore, but on the question, how could we use this growth in GDP in order to improve our conditions and make people happier? Conclusion- Meanwhile measuring happiness is much more complex, although we have many measures trying to assess it: Gross National Wellbeing, Happiness Index, Genuine Wealth Index Happy Planet Index, OECD Better Life Index, Human Development Index, Well-being index, Social Development Index, and many others, but they are not widely accepted because of their subjectivity and non-accuracy. Even more, it is much more difficult to improve these measures in a country because they depend on many factors, some of which are not even entirely clarified than to improve GDP, which relies on objective, strictly numerical measures. The starting point of nearly every happiness and welfare measure is self-reported happiness, which given its nature is very subjective. This fact again provokes skepticism and antipathy in many people’s minds and tends to state that these measures are not relevant and should not be based upon. Economic growth is one indicator that is widely used and analyzed, but happiness indicators are not so frequently discussed. On the other hand, we think there is a need to do it, that is why there is an emerging interest among researchers towards it

Keywords

• Economic growth
• GDP
• happiness
• well-being
• life satisfaction

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