GMAT Reading Comprehension - Some Economists Cite the Easterlin Paradox to Justify Redistribution

Reading Passage Question

Some economists cite the Easterlin paradox to justify redistribution of wealth from higher earners to programs designed to benefit disadvantaged individuals and thus improve the standard of living in the nation as a whole. Easterlin noticed that, when surveyed for international studies designed to objectively measure and compare the happiness levels of nations, citizens of several developed countries, but most notably the United States, report that as income increases, their happiness level does not commensurately increase. Therefore, these economists argue, rather than pursuing improvements in gross national product (GNP) per person, governments of developed nations should divert funds to social projects that have the potential to reduce inequality.

Worst all disagrees, arguing that, after basic needs are met, individuals’ levels of satisfaction are affected by the prosperity of those around them and the overall trend of their nation’s economy, and so higher levels of per capita GNP remain a worthy goal. He suggests that happiness is correlated with the direction and rate of change in a nation's GNP, not with its absolute size.

Weimann, Knabe, and Schob criticize Easterlin's methodology, citing Deaton’s observations that the disproportionate number of wealthy countries, the inclusion of many countries with historically unstable governments and economies, and the limitation of survey respondents to the wealthy citizens of poorer countries distort Easterlin’s data. These economists also point to Stevenson and Wolfer's research, which indicates that the exact wording of the questions in Easterlin's survey changed across the years; respondents who had the same overall satisfaction received lower survey scores in later years due solely to differences in the questions.

“Some economists cite the Easterlin paradox to justify redistribution"- is a GMAT reading comprehension passage with answers. Candidates need a strong knowledge of English GMAT reading comprehension. This GMAT Reading Comprehension consists of 3 comprehension questions. The GMAT Reading Comprehension questions are designed for the purpose of testing candidates’ abilities in understanding, analyzing, and applying information or concepts. Candidates can actively prepare with the help of GMAT Reading Comprehension Practice Questions.

Solution and Explanation

1.  The author of the passage states that Weimann, Knabe, and Schdéb believe Easterlin incorrectly

1. attributed measures of greater happiness to a rising trend in GNP
2. included too many developing nations with low per capita GNP levels in his survey
3. used the results of his research to advocate for greater redistribution of wealth in more developed countries
4. included citizens of too many countries that do not have settled political systems
5. overrepresented the views of wealthy people in poorer nations by surveying only literate citizens

2. Which of the following research results would most support the view of the economists mentioned in the first paragraph?

1. A wealthy nation with a modestly growing economy reports a similar level of happiness as a war-torn country with less developed infrastructure.
2. A wealthy nation with a growing economy reports levels of happiness that correlate well with increases in per capita GNP.
3. A wealthy nation with a growing economy reports a similar level of happiness as a neighboring country with a similar positive trend in per capita GNP.
4. A country that has experienced setbacks in its efforts to establish a democratically “elected government reports increasing levels of happiness.
5. A developing country with a growing economy but a corrupt government reports levels of happiness that correlate well with increases in per capita GNP.

3. Which of the following statements about Stevenson and Wolfer's study can be inferred from information in the passage?

1. Stevenson and Wolfer's reason for undertaking their research was to undermine Easterlin's analysis of life satisfaction statistics.
2. Stevenson and Wolfer's results invalidate Easterlin's analysis of life satisfaction statistics.
3. Stevenson and Wolfer found Easterlin’s data to be untrustworthy.
4. Stevenson and Wolfer conclude that, even though the questions in Easterlin's survey had changed, measures of happiness were constant across the years.
5. Stevenson and Wolfer uncovered a bias in Easterlin's research toward wealthier respondents in undeveloped countries.

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