The debate between the fact that is it population that is increasing poverty or is it increasing poverty accompanied by the lack of education and civic amenities that justifies a poor persons status - is still need to be resolved along-with the policies to be formulated at the national level. But all this leads us to another query as to whatever the efforts are put forth by the governments in raising the level of GNP/GDP, is it really translating into the well being of an individual and enhancing the level of human development? Several studies find that happiness has some linkages to future economic success [Pollak, (1970); Eastern, (1974); Veenhoven, (1993); Clark and Oswald,(1994); Winkelmann and Winkelmann, (1998) and, Diener and Biswas-Diener, 1999)]. The reality is that life opportunities for a number of people are expanding. Unfortunately, at the same time there is considerably a large number of people who are still caught in the vicious circle of poverty and misery, ill health and lack of opportunities. Richard Easterlin (1974) was the first economist to make prominent use of happiness data when he reported that despite increases in personal income over time, people were not reporting an increasing level of happiness. The pattern of economic growth without increase in happiness would result also if people become accustomed over time to increases in income, as in the model of Pollak (1970). In Japan, income rose by a multiple of five between 1958 and 1987, and happiness remained stationary (Veenhoven, 1993).
Happiness seems to be based on relative income rather than absolute income and even adapts to changes in the level of income. Sometimes differences in happiness arise depending on which cohort or which ethnic group is followed over time (Blanchflower and Oswald, 2000, 2004). There appears to be transitory income effects that do not often translate into permanently different levels of happiness. Di Tella, MacCulloch and Oswald (2003) presented results, which were consistent with adaptation to income over time. Thus, while analyzing growth patterns for determining the level of well-being and happiness one should be very clear how a person’s current income should enter the utility function. In this connection, Easterlin (1974) explained “Happiness scores carry no meaning, they are not comparable across people, people redefines their happiness scores over time, happiness should depend on health, environment, leisure and variables other than income”. Happiness is more a qualitative and subjective matter; nevertheless, it is not absolutely impossible to translate it into quantitative terms. No doubt, it keeps on changing with time and perception. Luttmer (2004) has also mentioned that what people mean “happiness” might shift over time.
Infact, he uses measures of well-being like the incidence of depression, poor appetite and poor sleep that are less likely to be purely subjective and finds similar results as those obtained using standard subjective happiness data. Easterlin (2004) suggests that there is complete adaptation to income but incomplete adaptation to life’s events like marriage or disability. Being married has significant and positive effects on satisfaction with one’s economic situation, although these effects are much stronger on happiness. In this context of social dimensions, Brickman, Coates and Janoff-Bullman (1978) argued that individuals who had become paraplegic or quadriplegic within the previous year reported only slightly lower levels of life satisfaction than healthy individuals.
Regarding the variables associated with true utility like the levels of employment and unemployment, cross-sectional and panel studies reveal that unemployed individuals tend to report low happiness scores (Clark and Oswald, 1994; Winkelmann and Winkelmann, 1998). This outcome seems reasonable given that other odds like divorce; addiction, depression and violence are correlated with unemployment. But at the same time comparison is also valid regarding the effects on happiness for the workers of losing their safety net with the gains they accrue on account of lower rate of unemployment. Sometimes the rate of unemployment decreases when unemployment benefits fall. Di Tella, MacCulloch and Oswald (2003) show that in Europe, the happiness gap between employed and unemployed did not narrow with the increase in benefits during the period from 1975 to 1992. When unemployed people start taking up jobs because of lower level of benefits then they automatically become better off. On the contrary in this scenario, it is difficult to pass judgment on the level of welfare. This is because the remaining unemployed get lower level of welfare on account of the reduction in the level of benefits. Similarly, some of the unemployed get their welfare increases because the average duration of their unemployment spell declines. According to Di Tella, Haisken-de-New and MacCulloch (2005) there is a strong adaptation to income but no adaptation to job status. A natural explanation behind adaptation is that people adjust their desires – a phenomenon sometimes called “preference drifts” (van Praag and Kapteyn, 1973).
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