I’m not sure I fully understand your concern, but I think that one of your assumptions — that people have a kind of “aversion” to reporting their happiness accurately/truthfully at the extremes of the scale — does most of the work for your argument. If we don’t trust the self-reports from the surveys (and there are many reasons to be skeptical, not only at the extremes of the happiness scale, but at any point therein) then the survey measure is largely useless anyways. This is why such surveys are most helpful and robust when combined with other methods to triangulate on SWB (maybe more in depth interviews, brainscans, congruence with other behaviors, etc.).

However, if we are willing to take people at their word when they say, for example, that they are a “1″ on a SWB scale of 1-4, or an “8″ on a 1-10 scale, then your argument seems to lose force until the distribution becomes so skewed that everyone is (truthfully, by my assumption) at or around the maximum happiness levels. At that point, the inquiry either becomes uninformative or we are all just very happy!

To alleviate the problem, we could construct a scale with finer gradients — like 1.0, 1.1, 1.2….9.8, 9.9, 10 — to distinguish among the people even when we begin to approach the top (or bottom) portion of the scale. I know that this compounds the problem of quantifying happiness in a survey (and complicates comparisons across years, with less exacting scales), but it demonstrates, I think, that your concern is fundamentally about truth in reporting rather than anything else. After all, it would be even less informative if we constructed an unbounded happiness metric to match the unbounded income dimension — “Survey question 1: Report a number in between 0 and infinity that reflects your happiness…”

Does this make sense?

DED

What would happen if, instead, you asked people to rate their happiness on a scale of 0 to 100 billion where:

0 = the most miserable person in the world
100 billion = the happiest person in the world

But if you look at a cross-section, either intra- or inter-nationally, there’s plenty of variation (albeit also some negative skew, at least on a 1-10 scale). And comparing this to income shows that people at the bottom, in both cases, are clearly less satisfied than those at the top, and by some margin.

But because the relationship isn’t usually found to be linear (I know Layard’s team, for instance, are currently testing the idea that it is logarithhmic), many authors make the comparison as a means of asking two questions: at what point do diminishing returns start to bite? And then: why THAT point and not at some higher (or lower) income level?

As long as these are the questions being posed, the boundedness or otherwise of the happiness scale doesn’t seem to be a huge problem. Even making the strong assumption that the functional shape of the relationship is wholly the artefact of a methodological ceiling effect (and that happiness is, in fact, unbounded), that doesn’t explain where along the x-axis the change occurs - and in policy terms, at least, that’s the interesting bit.

But what, I think, will prevent everyone from ever reaching that happiness ceiling is that many of those things that seem to contribute to our happiness are what you could call scarce goods: e.g. not everyone will be able to be their own boss. Also, if the happiness that seems to be correlated to increased income is related to the possession and display of luxury/status goods (fancy cars, etc.) then that prestige would disappear if everyone had them: the happiness-benefit that they confer (if any) is reliant upon the fact that many other people will not possess them.

Just some thoughts.

(1) You’re willing to assume that happiness is in fact bounded, or that we can be “fully satisfied” with our lives. Clearly that’s not a testable assumption from the data, but it’s not a hugely implausible one either. (And people certainly seem to make sense of the “fully satisfied” category when it’s presented.) I think van Praag has argued for this explicitly, though perhaps not especially convincingly.

(2) As a matter of empirical fact, you think the distribution of responses is sufficiently far from the flatline that you don’t think it’s really making that much of a difference to your conclusions at this point in time. If there are people whose happiness flatlines below the highest category/ies, despite large increases in income, for example, this would suggest that it’s not boundedness driving the “money doesn’t buy happiness” result.

(3) You have sufficiently strong prioritarian tendencies that, even if there are people who are flatlining, you attitude to any particular distribution of happiness isn’t going to be much affected by it. (Though this is clearly a limited defence, and wouldn’t apply to other attempted uses of the survey data.)

P.S. “If growth is ongoing, and self-reported happiness rises with growth — even excruciatingly slowly — then it is just a logical necessity that there is some time in the future when everybody hits the ceiling of the scale.” This is being pedantic (and is irrelevant to the issue with happiness surveys) but with a continuous scale, it’s entirely possible to asymptote to the upper bound without ever reaching it.