Robert Frank has an excellent column on happiness, well-being, and economic growth in today's New York Times. Frank rightly notes that the fact that self-reported life satisfaction does not increase with economic growth does not imply that growth is optional.
Many critics of economic growth interpret this finding to imply that continued economic growth should no longer be a policy goal in developed countries. They argue that if money buys happiness, it is relative, not absolute, income that matters. As incomes grow, people quickly adapt to their new circumstances, showing no enduring gains in measured happiness. Growth makes the poor happier in low-income countries, critics concede, but not in developed countries, where those at the bottom continue to experience relative deprivation.
All true. But these statements do not imply that economic growth no longer matters in wealthy countries. The reason, in a nutshell, is that happiness and welfare, though related, are very different things. Growth enables us to expand medical research and other activities that clearly enhance human welfare but have little effect on measured happiness levels.
Frank is right. Happiness is a component of welfare or well-being, but well-being includes much more than happiness. Health, longevity, opportunity, the realization of potential, and meaningful work are aspects of well-being that go beyond how good we feel. Growth promotes all those things. But there is also some decent evidence, which I report in this Prospect article, that economic growth has about as strong a positive correlation with self-reported happiness as anything else. Furthermore, I say:
The fact that average self-reported happiness has not risen with average incomes does not imply that there is no point in becoming richer. A steady rate of growth may be necessary to keep happiness and other good things at a high stable level. (Imagine a guillotine, on which a kitten is strapped, connected to a bicycle that must be pedalled ever more quickly to keep the blade aloft. Slow down, and the kitten gets it.) In The Moral Consequences of Economic Growth, Harvard economist Benjamin Friedman argues that steady economic growth "fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness and dedication to democracy"—a list I doubt any politician would come out against.
Frank also mentions Friedman in this regard, to good effect. In short, the evidence clearly points to the fact that economic growth is incredibly good for well-being, as Frank explains so well, and that it correlates positively with happiness as strongly as almost any other variable. (Life-expectancy or economic freedom look even better, depending on the study you consult.) There is no good happiness-based case against growth, and there is an exceedingly strong well-being-based case for growth.