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Choices, situations, and happiness

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  • Koszegi, Botond
  • Rabin, Matthew

Abstract

This article explores some conceptual issues in the study of well-being using the traditional economic approach of inferring preferences solely from choice behavior. We argue that choice behavior alone can never reveal which situations make people better off, even with unlimited data and under the maintained hypothesis of 100% rational choice. Ancillary assumptions or additional forms of data such as happiness measures are always needed. With such ancillary assumptions and additional data, however, the use of revealed preference to study well-being can be significantly improved, so that the choices people make can jointly identify preferences, mistakes, and well-being.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 92 (2008)
Issue (Month): 8-9 (August)
Pages: 1821-1832

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Handle: RePEc:eee:pubeco:v:92:y:2008:i:8-9:p:1821-1832

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Web page: http://www.elsevier.com/locate/inca/505578

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  1. Markus K. Brunnermeier & Jonathan A. Parker, 2002. "Optimal expectations," LSE Research Online Documents on Economics 24954, London School of Economics and Political Science, LSE Library.
  2. Sen, Amartya, 1993. "Internal Consistency of Choice," Econometrica, Econometric Society, vol. 61(3), pages 495-521, May.
  3. Charness, Gary B & Rabin, Matthew, 2001. "Understanding Social Preferences With Simple Tests," University of California at Santa Barbara, Economics Working Paper Series qt0dc3k4m5, Department of Economics, UC Santa Barbara.
  4. Faruk Gul & Wolfgang Pesendorfer, 2001. "Temptation and Self-Control," Econometrica, Econometric Society, vol. 69(6), pages 1403-1435, November.
  5. Bruno S. Frey & Alois Stutzer, 2001. "What Can Economists Learn from Happiness Research?," CESifo Working Paper Series 503, CESifo Group Munich.
  6. Erzo F.P. Luttmer, 2004. "Neighbors as Negatives: Relative Earnings and Well-Being," NBER Working Papers 10667, National Bureau of Economic Research, Inc.
  7. Andrew Caplin & John Leahy, 2001. "Psychological Expected Utility Theory And Anticipatory Feelings," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 55-79, February.
  8. Gruber Jonathan H & Mullainathan Sendhil, 2005. "Do Cigarette Taxes Make Smokers Happier," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-45, July.
  9. Oreopoulos, Philip, 2007. "Do dropouts drop out too soon? Wealth, health and happiness from compulsory schooling," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2213-2229, December.
  10. Tversky, Amos & Thaler, Richard H, 1990. "Anomalies: Preference Reversals," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 201-11, Spring.
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Citations

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Cited by:
  1. Yew-Kwang Ng, 2011. "Happiness Is Absolute, Universal, Ultimate, Unidimensional, Cardinally Measurable and Interpersonally Comparable: A Basis for the Environmentally Responsible Happy Nation Index," Development Research Unit Working Paper Series 16-11, Monash University, Department of Economics.
  2. Paul Frijters & Gigi Foster & David W. Johnston, 2012. "The triumph of hope over regret: A note on the utility value of good health expectations," Discussion Papers Series 451, School of Economics, University of Queensland, Australia.
  3. B. Douglas Bernheim, 2010. "Behavioral welfare economics," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 57(1), pages 1-22, March.
  4. FLEURBAEY, Marc & SCHOKKAERT, Erik, . "Behavioral welfare economics and redistribution," CORE Discussion Papers RP -2485, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Martin Binder & Leonhard K. Lades, 2013. "Autonomy-enhancing paternalism," Papers on Economics and Evolution 2013-04, Philipps University Marburg, Department of Geography.
  6. Christian Schubert, 2012. "Is novelty always a good thing? Towards an evolutionary welfare economics," Journal of Evolutionary Economics, Springer, vol. 22(3), pages 585-619, July.
  7. Robert Frank & Matthew Nagler, 2013. "On the rationalizability of observed consumers’ choices when preferences depend on budget sets: comment," Journal of Economics, Springer, vol. 110(2), pages 187-198, October.
  8. Odermatt, Reto & Stutzer, Alois, 2013. "Smoking Bans, Cigarette Prices and Life Satisfaction," IZA Discussion Papers 7177, Institute for the Study of Labor (IZA).
  9. Marc Fleurbaey & Erik Schokkaert, 2012. "Behavioral Fair Social Choice," Working Papers 2012-012, Human Capital and Economic Opportunity Working Group.
  10. Foster, Gigi & Frijters, Paul & Johnston, David W., 2012. "The triumph of hope over disappointment: A note on the utility value of good health expectations," Journal of Economic Psychology, Elsevier, vol. 33(1), pages 206-214.

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