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What Happiness Research Can Tell Us About Self-Control Problems and Utility Misprediction

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Author Info

  • Stutzer, Alois

    ()
    (University of Basel)

  • Frey, Bruno S.

    ()
    (University of Zurich)

Abstract

Neoclassical economic theory rules out systematic errors in consumption choice. According to the basic view, individuals know what they choose. They are able to predict how much utility an activity or a good produces for them now and in the future and they can maximize their utility. This implies that behavior reveals consistent preferences. This approach makes it impossible to detect and understand sub-optimal consumption decisions, due to problems of self-control and the misprediction of utility. We propose the economics of happiness as a methodological approach to study these phenomena. Based on proxy measures for experienced utility, it is, in principle, possible to directly address whether some observed behavior is sub-optimal and is therefore reducing a person’s well-being. We discuss recent evidence on smoking and eating habits, TV viewing and commuting choice.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1952.

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Length: 29 pages
Date of creation: Jan 2006
Date of revision:
Publication status: published in: Bruno S. Frey and Alois Stutzer (eds.), Economics and Psychology. A Promising New Cross-Disciplinary Field, Cambridge: MIT Press, 2007, 169-195
Handle: RePEc:iza:izadps:dp1952

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Related research

Keywords: utility misprediction; individual decision-making; revealed preference; self-control; adaptation; subjective well-being;

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  1. B. Douglas Bernheim & Antonio Rangel, 2004. "Addiction and Cue-Triggered Decision Processes," American Economic Review, American Economic Association, American Economic Association, vol. 94(5), pages 1558-1590, December.
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Cited by:
  1. Bruno S. Frey & Susanne Neckermann, 2008. "Academics Appreciate Awards. A New Aspect of Incentives in Research," CREMA Working Paper Series 2008-32, Center for Research in Economics, Management and the Arts (CREMA).
  2. Christian Schubert, 2009. "Is Novelty always a good thing? Towards an Evolutionary Welfare Economics," Papers on Economics and Evolution 2009-03, Philipps University Marburg, Department of Geography.
  3. Neckermann, Susanne & Frey, Bruno S., 2013. "And the winner is…? The motivating power of employee awards," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 46(C), pages 66-77.

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