Although one cannot equate prosperity with happiness, we note a positive correlation between real living standards and life satisfaction.
Prosperity (or economic welfare) relates to the command over material goods and services to satisfy wants.
Prosperity ensures access not only to purely material satisfactions, but also to cultural and spiritual fulfillment, health care, old-age provision and other ingredients of securing a comfortable, enjoyable life.
As a first approximation, the attainment of prosperity is measured by real per-capita incomes and wealth. In addition, the security of prosperity Opens in new window over time, such as by the control of inflation and a measure of stability Opens in new window of income flows and asset values, is also part of what people aspire to under the rubric of material welfare.
Prosperity has gained greater priority in the minds of many around the world in recent times with the decline of fatalism, the spread of modernity and the economy growth experience.
For many, prosperity now appears to have taken even a pre-eminent position, comparable to the pursuit of religious and spiritual salvation in medieval Europe, or in parts of present-day India and the Middle East. As already noted, complementarities and trade-offs exist between security and the aspiration of most to economic welfare.
Prosperity, in particular when it gives people a buffer of wealth against contingencies, promotes individual security and enables communities to shore up their security.
After all, insurance, the defense (defence) of future freedom against external or domestic aggression and security-building institutions cost scarce resources. As we have seen, there is, however, also a potential conflict when demands for security dominate, endangering future prosperity.
Fortunately, other fundamental values Opens in new window, such as freedom Opens in new window, justice Opens in new window and peace Opens in new window, tend on the whole to be promoted by better material conditions. This does of course not mean that economic prosperity can be equated to happiness, only that it is seen as desirable by large numbers of people throughout the world.
Observers critical of the modern world have said much about the empirical question whether income and wealth go along with greater happiness. Recent research, based on detailed survey data for 126 countries with decent income statistics and over considerable time periods, supports the conclusion that there is a positive correlation between real income and satisfaction with life (Sacks et al., 2010).
Alternatively, one might quote the saying: “Money does not make you happy, but it makes misery so much more acceptable.”
Sometimes, analyst look at a wider definition of economic welfare, rather than only prosperity in the sense of real wealth and income.
They then often include price-level stability (average of all prices), a high rate of employment of those willing to work at prevailing labor (labour) market conditions, external balance (a sustainable balance between imports and exports of goods and services) and stability of aggregate demand in line with a more or less steadily growing supply potential.
These macroeconomic statistics may indeed serve as guideposts for day-to-day economic policy. However, turning these into policy goals has resulted in much policy activism, which has prejudiced long-term prosperity.