Social comparison and segregation reveal well-being traps

The Easterlin paradox suggests that while higher income correlates with greater subjective well-being (SWB) cross-sectionally, rising incomes over time fail to yield increased SWB. Traditional explanations, focused on social comparison and hedonic adaptation, often neglect individual variability and dynamic social structures. Using an agent-based model (ABM) that incorporates heterogeneity and social relationships, we uncover several key insights. We find that social comparison significantly hinders adaptation to economic shocks, with downward comparisons enhancing resilience and upward comparisons reducing long-term SWB while increasing instability. It also functions as a double-edged sword, amplifying long-term SWB changes during localised shocks, but buffering societal impacts when shocks are widespread. Furthermore, low-income individuals are particularly prone to low well-being traps, a vulnerability partially mitigated by segregated comparison groups. We show that social comparison's dual nature demands context-specific policies. By mitigating upward comparison risks in localised crises and leveraging downward comparisons during widespread shocks, policymakers can enhance societal resilience while addressing systemic inequities.