Why the Easterlin paradox? The Scitovsky hypothesis

Abstract

Starting from the mid-1970s and the mid-1990s, Richard Easterlin has provided three key contributions to the development of Happiness Economics. These regard: the existence of the paradox that takes his name, its explanation, and the use of psychological concepts in economics, like happiness and aspirations. Each of these issues is still unresolved. Tibor Scitovsky, working in the same years on the same issues, advanced an explanation of the paradox that endogenizes what are today the most widespread explanations, i.e. those based on adaptation and relative income. Confirmation of his hypothesis can be found in psychology and in economics that now use psychological concepts, like motivations and non-cognitive skills.