The Easterlin paradox: explained?

Why have Americans become unhappier since the 1970s, despite rising incomes? This new paper (pdf) reckons it has an answer:

If social capital had remained at its 1975 level, our estimates predict that happiness would have increased, and not decreased as it actually did.

Higher incomes, they estimate, do indeed make us happier, even allowing for the fact that others' incomes make us unhappy.
Instead, happiness has fallen because of falls in marriage, lower membership of voluntary groups, less socialization with neighbours, and declining trust in major organizations.
The authors estimate that if social capital had remained at its 1975 level, then the happiness of Americans today would have been obtained even if household income  had fallen by 20%.
This raises the questions. Has the decline in social capital been exogenous? Or has it instead been partly the result of economic growth - say because geographical and  social mobility have reduced people's ability to meet and make friends and partners?

Comments

[JH]

I would suspect that - as you imply - the decline in social capital is not exogenous to the growth path experienced by the US since the 70s.

Existing literature on sustainable development often adopts a 'constant capital rule' which suggests that the total stock of capital (human, man-made, natural and social) should be non-declining in order for growth to be 'sustainable'.

There is of course much theoretical debate about the elasticity of substitution between different forms of capital, but I would personally suspect that there are viable 'sustainable' growth paths which include both an increase in material well being and (at the least) a smaller decline in social capital which would together increase total happiness/utility.

A great problem with trying to pursue such growth paths in practice is that we do not commonly account for non-market forms of capital in our national accounts (although this is starting to change in relation to environmental factors/natural capital).

[Debs]

This calls to mind Robert Putnam's book 'Bowling Alone: the collapse and revival of American community'. I think he addresses this point, but I've only skim read bits of it so I can't be totally sure.

[The Sage King]

Quite obvious really, Take GDP for example, if you divorce you need another household (house, washing machine, ect) that drives up overall GDP, thus the GDP works into wages (higher economic activity) and you are richer but poorer.

Maybe there is a way of measuring positive and negative gdp?

[gaddeswarup]

Recently I read two papers, the first by K.Srinivasulu about the caste conflicts with some reference to the effects of new wealth in coastal Andhra:
http://www.odi.org.uk/publications/working_papers/wp179.pdf
and the second by Glenn Loury on "Why so many Americans are in prison?":
http://hiddenmysteries.net/geeklog/article.php?story=20070806200138916
Both indicate that new wealth and increase in inequality may decrease social capital.

[dearieme]

"because geographical and social mobility have reduced people's ability to meet and make friends .." Dearieshe likes to say that when you move from one city to another you don't lose friends - you lose acquaintances. A shrewd observation, in my view.

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