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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