The Renminbi Blues

Imagine that in 20 years you’re four times richer than you are today. Given that U.S. incomes have increased only slightly since the early 1990s, you’d probably be pretty happy, right? Not quite. The truth is that happiness is relative: It largely depends not on your own good fortune, but on how much richer people around you are.

Economist Richard Easterlin, now at the University of Southern California, has been trying to crack the happiness code for decades. In the 1970s, he developed the theory that has become known as the "Easterlin paradox," which argues that although people with higher incomes tend to report higher levels of life satisfaction, countries don’t become generally more satisfied as they become richer. Now, a group of economists led by Easterlin has tested his hypothesis on the most dramatic example of economic development in recent history: China’s post-liberalization boom. Both per capita GDP and average consumption in China increased at least fourfold in real dollar terms between 1990 and 2009. Surely, then, Easterlin asks, the Chinese must be feeling at least a little better about life?

Nope. Looking at a variety of data from the World Values Survey, Pew, Gallup, and others, Easterlin and his team found that life satisfaction in China actually declined from 1990 through the mid-2000s, according to their recent paper in the journal of the National Academy of Sciences. It has since rebounded a bit but still appears slightly down from 1990.

This trend mirrors the experience of the post-communist countries in Eastern Europe, but Easterlin says that even he was surprised to see the Chinese parallel. "The results show that cultural factors are overridden by economic development," he says. And the doldrums may be permanent. "None of these countries are likely to exceed pre-transition levels" of happiness, he warns. Easterlin thinks that China’s yawning inequality is likely behind the slow growth in life satisfaction. "People make comparisons of their living levels with those around them," he says. Never mind that tens of millions of Chinese families have progressed from owning bikes to cars — if the guy down the block is driving a Lamborghini, it’s likely to leave you wanting. It seems like true happiness is still all about keeping up with the Jiangs next door.