Is the relationship between happiness and GDP non-linear? That’s been the contention of many in the anti-growth crowd. But it depends how you draw the graph. To the left, I’ve shown two graphs – one of GDP versus life satisfaction, and another of Log(GDP) versus life satisfaction.
If you think of growth in dollar terms, you’ll prefer GDP vs life satisfaction, and you’ll take the view from this graph that above a certain level, more money seems to buy us less happiness. If you think of growth in percentage terms, you ought to prefer Log GDP vs life satisfaction, which means you ought to take the view that a 1% increase in GDP buys about the same level of happiness for any economy.
Which approach is preferable? One way of answering that is to ask yourself this question: when was the last time you heard a commentator say "Australia’s GDP grew by 3% last year", and when was the last time you heard them say "Australia’s GDP per person grew by $700 last year"?