Subjective reports of wellbeing or ‘happiness’ are increasingly influential in policy. While past research has found that making comparisons with those on higher incomes can make people unhappy, Laura Kudrna illustrates that this ‘relative income’ effect may not be as straightforward as previously thought, with the structure of society having an impact on how people feel and think about their lives.

In happiness research, the 'relative income effect'typically refers to the finding that the higher the income of one’s neighbours or peers, the less happy one feels as a result. A leading explanation is that people compare upwards to those who are doing better than them, and then they feel worse about themselves as a result of looking up to those who appear to have achieved more. Such a result suggests that economic growth can have costs for happiness, especially when it is not evenly distributed.

Detractors might argue that people should stop making comparisons to others, and simply ‘get over it’. Psychological research is clear that it is not so simple. People make comparisons automatically and unconsciously – that is, it is difficult not to make comparisons to what others have, and this can impact how people feel regardless of whether or not they stop and think about the fact they are making a comparison. Income is used to proxy consumption in this literature, and much consumption is visible, thus, there are ample opportunities to compare to how well others are doing and to feel worse when we don’t measure up.

• Read the full article on the LSE USAPP blog: http://bit.ly/37wnQud 

18 February 2020

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