Subjective wellbeing as valuation system of environmental quality: an environmental social sciences approach

Neoclassical economic valuation of environmental quality is subject to rigorous assumptions, particularly utility-maximizing, stationary economic preferences, and capitalized environmental outcomes. These drawbacks can be overcome by the environmental social sciences approach based on subjective wellbeing and experienced utility. Firstly, the experienced utility method applies the notions of happiness or subjective wellbeing based on decision utility which capture environmental quality more comprehensively than capitalized environmental outcomes. Secondly, the environmental social sciences approach provides a conceptual framework which combines economic concepts with psychological and sociological variables to account for the combined economic and socio-psychological roots of environmental behavior. Thirdly, the notions of valuation, subjective wellbeing and happiness are multidimensional latent variables which can only be indirectly measured via observed indicators. The environmental social sciences approach allows a closer correspondence between the multidimensional theoretical notions and the observed indicators through the use of econometric approaches such as formative or reflective structural equation modelling.