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Knowing what is good for you. Empirical analysis of personal preferences and the “objective good”

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Orsolya Lelkes

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Abstract

The paper argues that there is a cherishable overlap between “objective good” and people’s preferences in measures of well-being. Firstly, using recent survey data from twenty European countries I analyse the determinants of individual’s “experienced utility”. The proxy for utility is overall life satisfaction. The results indicate that various measures of well-being which are normally used for assessing people’s quality of life do indeed significantly influence people’s utility. The estimated micro-econometric life satisfaction equations suggest that an individual’s labour market situation, housing conditions and social relations significantly contribute to his overall life satisfaction, over and above the level of his income. The findings also imply that the use of non-income measures in standard analyses of well-being is justified on the grounds that these measures do have intrinsic value for the people over and above their incomes. In the second part of the paper, the stability of the relationship is tested using survey data from Hungary from the 1990s. The results show that there was only very limited change in this relationship despite the landslide of societal and economic transformation. Entrepreneurs have become more satisfied, but there is no change in the relationship of income and life satisfaction, ceteris paribus. Overall, thus the relationship between basic measures of objective well-being and people’s preferences seems to be stable.

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Paper provided by EconWPA in its series Others with number 0410010.

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Length: 32 pages
Date of creation: 29 Oct 2004
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Handle: RePEc:wpa:wuwpot:0410010

Note: Type of Document - pdf; pages: 32
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Web page: http://129.3.20.41

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Find related papers by JEL classification:
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
I31 - Health, Education, and Welfare - - Welfare and Poverty - - - General Welfare

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References listed on IDEAS
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  1. David G. Blanchflower & Andrew J. Oswald, 2000. "Well-Being Over Time in Britain and the USA," NBER Working Papers 7487, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Andrew E. Clark & Yannis Georgellis, 2002. "Unemployment Alters the Set-Point for Life Satisfaction," Economics and Finance Discussion Papers 02-16, Economics and Finance Section, School of Social Sciences, Brunel University. [Downloadable!]
    Other versions:
  3. Matthew Rabin, 1998. "Psychology and Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 11-46, March. [Downloadable!] (restricted)
  4. Bernard M.S. van Praag & Paul Frijters, 1999. "The measurement of welfare and well-being; the Leyden approach," Paul Frijters Discussion Papers 1999, School of Economics and Finance, Queensland University of Technology. [Downloadable!]
  5. John C. Harsanyi, 1996. "Utilities, preferences, and substantive goods," Social Choice and Welfare, Springer, vol. 14(1), pages 129-145. [Downloadable!] (restricted)
    Other versions:
  6. Kornai Janos, 1994. "Transformational Recession: The Main Causes," Journal of Comparative Economics, Elsevier, vol. 19(1), pages 39-63, August. [Downloadable!] (restricted)
  7. repec:cep:sticas:059 is not listed on IDEAS
  8. Andrew E. Clark, 2003. "Unemployment as a Social Norm: Psychological Evidence from Panel Data," Journal of Labor Economics, University of Chicago Press, vol. 21(2), pages 289-322, April. [Downloadable!]
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  9. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
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  10. Kahneman, Daniel & Wakker, Peter P & Sarin, Rakesh, 1997. "Back to Bentham? Explorations of Experienced Utility," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 375-405, May.
  11. Andrew Clark & Ed Diener & Yannis Georgellis & Richard E. Lucas, 2003. "Lags and Leads in Life Satisfaction: A Test of the Baseline Hypothesis," DELTA Working Papers 2003-14, DELTA (Ecole normale supérieure). [Downloadable!]
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  12. Bernd Hayo, 2004. "Happiness in Eastern Europe," Marburg Working Papers on Economics 200412, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung). [Downloadable!]
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  13. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March. [Downloadable!] (restricted)
  14. Rafael Di Tella & Robert J. MacCulloch & Andrew J. Oswald, 2001. "Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness," American Economic Review, American Economic Association, vol. 91(1), pages 335-341, March. [Downloadable!] (restricted)
  15. David G. Blanchflower & Richard Freeman, 1997. "The attitudinal legacy of Communist labor relations," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 50(3), pages 438-459, April.
  16. Hayo, Bernd & Seifert, Wolfgang, 2003. "Subjective economic well-being in Eastern Europe," Journal of Economic Psychology, Elsevier, vol. 24(3), pages 329-348, June. [Downloadable!] (restricted)
    Other versions:
  17. Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 997-1019, June. [Downloadable!] (restricted)
  18. Winkelmann, Liliana & Winkelmann, Rainer, 1998. "Why Are the Unemployed So Unhappy? Evidence from Panel Data," Economica, London School of Economics and Political Science, vol. 65(257), pages 1-15, February. [Downloadable!] (restricted)
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  20. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May. [Downloadable!] (restricted)
  21. Carol Graham & Stefano Pettinato, 2002. "Frustrated achievers: winners, losers and subjective well-being in new market economies," The Journal of Development Studies, Taylor and Francis Journals, vol. 38(4), pages 100-140, April. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jan S. Kowalski & Axel J. Schaffer, 2005. "The Part-Time-Society's Activity and Mobility Patterns," ERSA conference papers ersa05p150, European Regional Science Association. [Downloadable!]
  2. Simon Christopher Moore, 2006. "The value of reducing fear: an analysis using the European Social Survey," Applied Economics, Taylor and Francis Journals, vol. 38(1), pages 115-117, January. [Downloadable!] (restricted)
  3. Orsolya Lelkes, 2006. "Bernard van Praag, Ada Ferrer-i-Carbonell: Happiness quantified. A satisfaction calculus approach, Oxford University Press: Oxford, 2004," Journal of Economic Inequality, Springer, vol. 4(3), pages 391-395, December. [Downloadable!] (restricted)
  4. Claudia Biancotti, 2006. "A Dual-Regime Utility Model for Poverty Analysis," Temi di discussione (Economic working papers) 603, Bank of Italy, Economic Research Department. [Downloadable!]
  5. Lelkes, Orsolya, 2008. "Happiness over the life cycle: exploring age-specific preferences," MPRA Paper 7302, University Library of Munich, Germany. [Downloadable!]
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