Recently, I wrote about relative wealth and happiness. A new NBER paper, by Stevenson and Wolfers, seems to belie this view. It shows a sharp increase in happiness with increasing income:
But these data are consistent with the idea that relative wealth plays an important role in happiness. Americans are much wealthier now than they were, say, before World War II. But there has not been a commensurate increase in happiness. But at any point in time, wealthy people are happier, on average, than less wealthy ones. Relativity still matters.
