I'd strongly suggest that anyone looking into this kind of issues explored more the current research on how wealth distribution affects wellbeing. I recommend The Spirit Level by Wilkinson and Pickett as a point to start, is the single most relevant book I've read in my whole psychology curriculum.
Countries hardly find themselves better off due to economic growth and GDP alone, what matters the most is how this increased wealth is distributed, and economic growth is getting more and more decoupled with people finances.
A separated problem is that people seem to be pretty bad at finding an anchor against which to evaluate their happiness level. I'd be pretty skeptical of any program that tried to improve the quality of life and used the people subjective reports of happiness as a measurement.
I read The Spirit Level a few years back. Some notes:
a) The writers point out that even though western countries have had a dramatic rise in economic productivity, technological development, and wages, there haven't been a corresponding rise in happiness among westerners. People are richer, not happier.
b) They hypothesize that economic growth was important up to a certain point (maybe around the 1940s for the US, I'm writing from memory here), but after that it doesn't actually help people. Rising standards of living can not help people live better.
c) And!, the writers also say that economic growth has actually led to an increase in depressions and other social ills, in rich countries.
d) Their main argument is however that equality/inequality is one of the most important factors that determines how happy people are in rich countries - and that it strongly influences the outcome of various social ills (such as the prevalence of violence, mental illness, and teenage pregnancy). Rising inequality has resulted in a broken society.
e) The core of the book are some cross-sectional studies of (i) some rich countries that fit certain criteria and (ii) the fifty states of the US, where they compare how well some social measurement (e.g. thefts per capita) correlate with the average wage and some inequality measure.
f) The writers do not present any numbers on how these variables correlate.
g) Instead, the writers produce a graph, for say "mental illness per capita", with one axis saying how prevalent the problem is ("many" vs "few") and the other axis measuring either the wage-level or the inequality level ("high" or "low"). And they also produce a line that is supposed to measure the strength of the correlation. (I didn't note at the time what exactly kind of regression analysis they did, but, again, they didn't produce any numbers).
h) Usually, they say that variable X wasn't correlated with the wage-level - but that it was correlated with the inequality-level.
i) Except for "health", they found a positive correlation between it and the wage-level.
j) Even though they found a correlation between social variable X and inequality, sometimes the most unequal society performed better than the most equal society (of the countries in the sample).
Some criticism of the book:
1) They state, but don't show that economic growth won't help people in the future - even if you accept their belief that it has had negligible or negative effects on people's happiness today.
2) The cross-sectional analysis has at least two problems. The first is that they don't tell you how correlated inequality is with some social ill. Maybe a 1% increase in inequality would increase the rate of teenage births by 2%, 20%, or 200%. Who knows?
(Furthermore, some writers say that they can not find these correlations, that they disappear if you include more countries, and that some social variables seems to be cherry picked (expenditure on Foreign Aid is used as a proxy for a virtuous society, but private expenditure to poor countries is not used). I haven't checked the validity of these claims, however.)
The second is that the writers don't show that the correlation (if it exists) really shows that higher inequality brings about the social ills they discuss. A relatively simple test they could have done would have been to see if a particular problem was correlated with inequality in a society through decades or centuries. That is, can inequality explain the rise and fall of, for instance, the homicide rate within a particular country? If you look at inequality as how much the 10% owns of GDP....then the historical record shows that it doesn't move in tandem with the homicide rate, for instance, for England & Wales, Sweden, and France. Inequality doesn't seem to influence the homicide rate at any visible level. And maybe some more thoughtful analysis will show its influence. ... Or it could be dwarfed by other factors. Or it has different effects depending upon what ideologies people have adopted.
Maybe there is something wrong with the way happiness is measured? Maybe the Chinese answer more in line with social expectations rather then how they really feel (as some do when asked 'How are you?') - and that there were higher expectations in the past that they should be happy? Or maybe it was considered rude or unpatriotic to let others know how sad you were?
A while back when I wrote about how China’s economic development might not have increased happiness there much, Scott Sumner wrote a really interesting response, Does Anything Matter?
He points out that it’s too easy to make this about exotic far-off Chinese. Much the same phenomenon occurs closer to home:
The obvious retort is – modern Chinese grew up when China was very poor. Why didn’t they calibrate themselves to poverty, such that sudden wealth seems good? What’s the difference between a Chinese person going from poverty to wealth, versus a Syrian going from stability to chaos? Might it be a shorter time course? A sudden shock is noticeable, a gradual thirty-year improvement in living standards isn’t?
Probably not. There seem to be a lot of cases where happiness of large groups does change gradually in response to social trends less dramatic than a world war.
First, consider African-Americans. The New York Times calls the increase in black happiness over the past forty years “one of the most dramatic gains in the happiness data that you’ll see”. This is not just about poverty; in 1970, blacks who earned more than 75% of whites were only in the tenth percentile of white happiness. Today, those blacks would be in the fiftieth percentile; they’re still doing worse than would be expected based on income, but not nearly as much worse. This is a very sensible and predictable thing to find. Black people face a lot less racism and discrimination today than in 1970 [citation needed], so assuming that was really unpleasant we shouldn’t be surprised that they’re happier. But notice that this is a time course very similar to the rise of China! It doesn’t look like black people picked a happiness level to calibrate on and then never bothered to adjust. It looks like they adjusted exactly like we would expect them to, even over the course of a multi-decade change.
Second, consider women. In 1970, US women were generally happier than US men. Today, the reverse is true. There seems to be a general pattern around the world of women being happier than men in traditional societies and less happy than men in modern societies (though see Language Log for a contrary perspective). I don’t think of this as a weird paradox. It seems perfectly reasonable to me that having to work outside the home makes people less happy, getting to spend time with their family makes them more happy, and having to work outside the home but also being expected to take care of your family at the same time makes them least happy of all. In any case, the point is that the numbers are changing. Men and women aren’t just fixating on some level of happiness and staying there, they’re altering their happiness level based on real trends, just like African-Americans did (but apparently unlike Chinese).
Third, I was finally able to find a paper that had really good data on change in happiness in different countries, and it supports the idea that happiness can change significantly on a countrywide level.
This is change in happiness in a bunch of countries between about 1990 and 2010 (the years were slightly different in each country). There are other graphs for related concepts like life satisfaction and subjective well-being that look about the same.
The most striking finding is that most countries got happier between those two years – sometimes a lot happier. In Mexico, the percent of people saying they were very happy increased by 25 percentage points!
Just eyeballing the graph, there’s not an obvious relationship between happiness and economic growth – China is still near the bottom like we talked about before, and France – a country that’s been First World since forever – is near the top. Even Japan, which is famous for its decades of stagnation, has done pretty well. But the authors tell us that after doing their statistical analyses, there is a strong relationship with economic growth. Okay, I guess.
They also say there’s a dramatic relationship with freedom and democracy. Mexico, the top country on the graph, went from a relatively closed to a relatively democratic government during this time. South Africa, number five, went from apartheid to no apartheid. Some of the ex-Communist countries like Poland and Ukraine also look pretty good here. On the other hand, other ex-Communist countries like Lithuania and Estonia are near the bottom. I wonder if this has to do with cutoff points – since every country started at a slightly different time, maybe they began sampling Poland during the worst parts of Soviet dictatorship and got Lithuania right in the first euphoria of independence? I don’t know. It all seems very noisy.
They also mention that the United States’ supposedly level happiness is kind of a misunderstanding. People say things like “Happiness in the US has been flat from 1950 to today”, but in fact it declined from 1950 to 1979 and increased from 1980 to today. They attribute this to the 1950s being unusually happy; then the 60s and 70s being unusually conflict-prone, and the Reagan Revolution and Clinton years were back to being optimistic. They don’t have data that stretches too long after that.
(This is pretty neat for Reagan and Clinton. When I die, I’ll consider my life a success if people attribute a spike on national happiness graphs to my influence.)
So apparently population happiness levels do change in response to relevant social changes, even on multi-decade timescales. Which brings us back to asking – what’s up with China?
The graph above shows India as doing okay – not great, but okay. But a similar graph on subjective well-being – which should be another way of looking at the same thing – shows India as doing pretty poorly, right down there with China – even though its GDP per capita quadrupled during the period of study.
I see a lot of conflicting perspectives about whether economic growth increases national happiness. It may, but the effect isn’t as big as you’d expect, and is usually overpowered by other factors. Maybe it isn’t even direct, but has something to do with development increasing democracy, liberalism, rule of law, and stability. China got the development, but its happiness genuinely didn’t increase because of country-specific factors that have something to do with how it developed (inequality? pollution? authoritarianism?).
This matches the race and gender data. Blacks saw a big happiness boost during a time when their feeling of freedom (but not their income) increased relative to whites. Women saw a small happiness drop during a time when their income (but not their feeling of freedom) increased relative to men.
So it looks like happiness can change. It just didn’t change in China over the past thirty years. The apparent paradox of improving economic situation and stable/decreasing happiness is genuinely paradoxical. Intangibles are probably just way more important than money, even amounts of money big enough to raise whole countries out of poverty.