EconStor >
Forschungsinstitut zur Zukunft der Arbeit (IZA), Bonn >
IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA) >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/20411
  
Title:Building a Better Theory of Well-Being PDF Logo
Authors:Easterlin, Richard A.
Issue Date:2003
Series/Report no.:IZA Discussion paper series 742
Abstract:What do social surveys of life cycle experience tell us about the determinants of subjective well-being? First, that the psychologists? setpoint model is wrong. Life events in the nonpecuniary domain, such as marriage, divorce, and physical disability, have a lasting effect on well-being, and do not simply deflect the average person temporarily above or below a setpoint given by genetics and personality. Second, mainstream economists? inference that in the pecuniary domain ?more is better,? based on revealed preference theory, is wrong. An increase in income, and thus in the goods at one?s disposal, does not bring with it a lasting increase in well-being, because of the negative effect on utility of hedonic adaptation and social comparison. The utility anticipated ex ante from an increase in consumption turns out ex post to be less than expected, as one adapts to the new level of living, and as the living levels of others improve correspondingly. A better theory of well-being builds on the evidence that adaptation and social comparison affect utility more in pecuniary than nonpecuniary domains. The failure of individuals to anticipate that these influences disproportionately undermine utility in the pecuniary domain leads to an excessive allocation of time to pecuniary goals at the expense of nonpecuniary goals, such as family life and health, and reduces well-being. There is need to devise policies that will yield better-informed individual preferences, and thereby increase individual and societal subjective well-being.
Subjects:subjective well-being
living level
health
marital status
aspirations
JEL:I31
J12
I10
D60
Z13
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

Files in This Item:
File Description SizeFormat
dp742.pdf910.26 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/20411

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.