Chapter 38 — Key Takeaways

The Easterlin paradox

Above moderate income, more money → modest happiness gains. Hedonic adaptation: we get used to improvements and want more. Money helps. It doesn't transform.

Markets: strengths and limits

Do well: coordinate at scale, create innovation incentives, allocate efficiently (under conditions) Do poorly: distribute fairly, account for externalities, value the unmeasurable (friendship, meaning, dignity)

Efficiency vs. flourishing

Pareto efficiency is a useful benchmark but not a complete picture. Sen's capability approach: evaluate welfare by what people can do and be, not just what they consume.

The honest claim

Economics is powerful AND limited. Think economically AND morally, historically, ethically. Neither should crowd out the other. Economics done with humility is the most useful social science. Economics done with arrogance is dangerous.