Economic Growth and Happiness

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Professor
Couse
Date
Economic Growth and Happiness
The point of economics is finding ways of improving the living standards. Gross domestic product
(GDP) is used to estimate the economic growth of a country. GDP measures the output of the
economy that is valued at the economic prices. The more the society produces and earns, the well-
being of their material increases in a similar manner.
In explaining how people’s happiness in high-income economies decline over time even when
their countries grow richer, the law of diminishing value is relevant. The high-income economies
have enjoyed all the resources in comparison to the people in low-income economies. Low-income
economies mark a certain growth thus the people in it still seem happier. Results of a research by
the Gallup Organization revealed that most people in high-income areas like Japan, United States,
and Europe are happy while most people in low-income areas specifically Africa are not. Angus
Deaton of Princeton said this after evaluating the Gallup World poll: The very strong international
relationship between per capita GDP and life satisfaction suggest that, on average, people have a
good idea of how income, or the lack of it, affects their lives.” Over time, the countries do not
seem happier through the new generations are becoming richer. This is revealed in the United
States where the proportion of the happy people did not change over 60 years of economic growth
while in Japan, responses of happiness declined with increase in outcome over 50 years. According
to the law of Diminishing marginal utility, the marginal benefit of a product falls as the consumer
consumes more of it, thus the consumer is set to pay less. As the diminishing returns start, the
marginal product of each extra resource reduces. The marginal cost then increases when the
marginal product is divided by the constant price of each resource unit.
In conclusion, several official statisticians and economists accept GDP broadly a measure of living
standards. Generally, at a certain point, the law of diminishing marginal returns occurs where the
high-income economies never portray signs of happiness even when their countries economy
grows further. .
Cited Resource
Angus Deaton, “Income, Aging, Health, and Wellbeing Around the World: Evidence from the
Gallup World Poll,” Princeton Working Paper, (August 2007)

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