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Public Policy Implications of Behavioral Economics and Happiness Studies

In: Happiness and Public Policy

Author

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  • Yew-Kwang Ng

Abstract

More than 10 years ago, I was in a session of the American Economic Association Annual Meetings. The speaker made some remark to the effect that it is desirable to have a small positive rate of inflation around 2 to 5%. In a growing and changing economy, resources including labor have to be reallocated from shrinking to expanding industries. It is necessary to have the real wage rates in declining industries to decline by a few percents a year to motivate people to transfer to the expanding industries. With a positive rate of inflation, this could be achieved without having to resort to the lowering of the nominal wage rates which is more painful and is resisted more by the relevant workers. participant commented that this is impossible as the same consumption possibility set is entailed by reducing the real wages by the same x% either by lowering the nominal wage rates with no inflation or by keeping the nominal wage rates but with some positive inflation.

Suggested Citation

  • Yew-Kwang Ng, 2006. "Public Policy Implications of Behavioral Economics and Happiness Studies," Palgrave Macmillan Books, in: Yew-Kwang Ng & Lok Sang Ho (ed.), Happiness and Public Policy, chapter 12, pages 237-252, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-28802-7_12
    DOI: 10.1057/9780230288027_12
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    Cited by:

    1. Scarborough, Helen, 2011. "Intergenerational equity and the social discount rate," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 55(2), pages 1-14.
    2. Christian Schubert, 2014. "“Generalized Darwinism” and the quest for an evolutionary theory of policy-making," Journal of Evolutionary Economics, Springer, vol. 24(3), pages 479-513, July.
    3. Christian Schubert, 2009. "Darwinism in Economics and the Evolutionary Theory of Policy-Making," Papers on Economics and Evolution 2009-10, Philipps University Marburg, Department of Geography.

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