We see this correlation between well-being and higher earnings. What’s important is that whatever’s contributing to that ability to earn higher earnings, that ability for the country to be richer, is, in some way, contributing to higher well-being to the population.
And so people who say what they care about is higher well-being do have to be concerned with economic growth. Now, that said, it’s also important to be concerned with distribution. Because if I’m telling you that income matters for well-being, then it matters that some people are getting very little of the gains from economic growth.
And in fact, what we find is that your well-being increases with the log of income, which means that the richer you are, the more money it costs to get a little bit of a boost in well-being or happiness. And in fact, if I take a dollar from a rich person and I give that dollar to a person with low income, what I’ll find is that the person who’s richer does lose something. I think it’s important to acknowledge that. They become less happy, have less well-being. But to a much smaller extent than the gain that the person with the low income just got.
Put together, that transfer makes the world better off. But I think that it’s easier to do that kind of redistribution if we also do acknowledge that there are costs to the people we’re taking it from. It’s just that those costs are smaller than the gains to the people who are lower income.
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