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If you’re of a certain age, you may recall the boom years. House prices were going to rise for ever. Alan Greenspan, mastermind of the US economy, was a genius. The “international community” was liberating Iraq. And presiding over this nonstop party was the boom’s poster girl, Paris Hilton.

Those glory days may now be returning.

The British and US economies, in particular, are no longer dead. In fact, British manufacturers haven’t expressed such confidence since 1973. The recovery should bring happiness. But it will do significant damage too.

Almost all scholars of happiness agree that rising incomes make people happier, even in developed countries, says Claudia Senik, professor at the Paris School of Economics. Recoveries definitely increase happiness. “That’s also because growth is full of promises,” explains Senik. “Expectations are a very important element of happiness.”

Economists of happiness still debate the “Easterlin paradox”. Its author, Richard Easterlin, says self-reported “life satisfaction” in developed countries barely budges from generation to generation despite growing wealth. But many scholars now dispute his numbers. Even if Easterlin is technically right, says Senik, perhaps people just keep expecting higher levels of happiness over time. For our grandparents, avoiding death might have been enough; now we want total self-fulfilment. That means the person today who grades her “life satisfaction” as seven out of 10 is probably more satisfied than the person who said seven in 1960. In short, rising incomes really do seem to make us happier.

Now for the downsides to recovery:

The most consequential may be climate change. When the economic crisis struck, western manufacturing collapsed and so did carbon emissions. Quite unintentionally, we briefly got greener. Longer term, of course, emissions will just keep rising. We won’t avoid climate change. We aren’t even trying to. And yet temporary declines in emissions matter, because they buy us time to handle the fallout. The race now is to adapt: to build dykes, to plan hurricane relief, to improve technologies for solar power, carbon capture, etc. Perversely, every day of recession helps.

The recovery also has damaging effects on policy. Anyone who happens to be running things during the boom gets his reputation inflated – recall Greenspan, Tony Blair and all those miracle-making chief executives on magazine covers.

Boom-time politicians then often develop Messiah complexes. “If you are running the economy well, after a while it gets pretty boring to the political class,” says Jonathan Portes, director of the National Institute for Economic and Social Research. “So naturally they get inclined to do other things.” Moreover, he adds, during recoveries politicians tend to “stay in office longer, and get delusions of grandeur and start thinking they can reshape the world”. The Iraq war and Bill Clinton’s impeachment over Monica Lewinsky were classic boom-time follies.

Also, politicians usually waste the boom’s revenues. Portes says: “As soon as there’s an economic recovery, parties start falling over themselves to promise stupid things.” In the UK, he cites Conservative tax breaks for married people, Labour’s promised freeze of energy bills, and the Liberal Democrats’ dream of free school meals for middle-class children.

Values change during booms. Typically, veneration of money and consumption increases: think of the 1920s flappers. Elizabeth Currid-Halkett, author of Starstruck: The Business of Celebrity, cites Hilton as the lead celebrity of the last boom: “She captured the Zeitgeist: the flashness, the throwing around money. But that Zeitgeist has disappeared. I haven’t seen her in a magazine in like 112 years.” Nowadays magazine covers feature socially concerned types such as Angelina Jolie and George Clooney. That matters, because celebrities help shape values. During the crisis, chatter about shopping became widely frowned upon. Even mind-numbing conversations about house prices declined (except in London).

During downturns, society worries more about poverty and inequality. Thomas Piketty’s 700-page Capital In the Twenty-First Century recently entered American bestseller lists above the actor Rob Lowe’s memoir, Love Life. That wouldn’t happen during a boom. The poor will be forgotten amidst talk of rising tides lifting all boats, and how much the neighbour’s house went for. Meanwhile, the 1 per cent may hog the boom’s spoils anyway.

One last downside of the recovery: higher income may be losing its potency to make people happier. Historically, more money bought you more stuff and entertainment.

But we increasingly entertain ourselves for free online. Meanwhile, stuff keeps getting cheaper, thanks to robots and underpaid Vietnamese workers. Burglaries have declined partly because it’s no longer worth the burglar’s time to steal your things.

Our access to stuff and entertainment even during a crisis may help explain why in 2012, 64 per cent of Britons said they were “very satisfied” with their lives, up a percentage point since 2007, according to the Organisation for Economic Co-operation and Development.

The things that do keep rising in price are so-called “positional goods”: scarce items that act as status symbols, such as London flats, private-school places or brand-name yoga coaches. Those goods will remain the preserve of the elite, which – says Currid-Halkett – increasingly buys experiences instead of vulgar stuff.

The boom may disappoint.

simon.kuper@ft.com; Twitter @KuperSimon
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