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Daniel Kahneman’s Underappreciated Last Published Paper: Empirical Implications for Benefit-Cost Analysis and a Chat Session Discussion with Bots

Author

Listed:
  • Capra, C. Monica

    (Claremont Graduate University)

  • Kniesner, Thomas J.

    (Claremont Graduate University)

Abstract

Nobel Prize winner Daniel Kahneman's last published paper is an adversarial collaboration in which he and Matthew Killingsworth reconcile conflicting empirical results from their previous research on income and reported happiness, with Barbara Mellers as a facilitator. The empirical results use quantile regression to allow for measured income heterogeneity effects that include notch points in the estimated marginal utilities of income. Our analysis examines Kahneman's last paper's conceptual innovations and challenges to assumptions about diminishing marginal utility of income. We review his contributions to emotional well-being measurement and employ a novel AI-simulated dialogue between the late Amos Tversky and Sir Angus Deaton to explore interdisciplinary perspectives on the findings. Our paper demonstrates how Kahneman's final research undermines recent arguments for incorporating income redistribution simply into benefit-cost analysis, suggesting that such objectives remain better addressed through fiscal policy rather than regulatory interventions. His final published work exemplifies Kahneman's commitment to empirical precision and theoretical flexibility, even when contradicting his earlier conclusions.

Suggested Citation

  • Capra, C. Monica & Kniesner, Thomas J., 2025. "Daniel Kahneman’s Underappreciated Last Published Paper: Empirical Implications for Benefit-Cost Analysis and a Chat Session Discussion with Bots," IZA Discussion Papers 17841, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp17841
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    File URL: https://docs.iza.org/dp17841.pdf
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    References listed on IDEAS

    as
    1. Daniel Kahneman & Robert Sugden, 2005. "Experienced Utility as a Standard of Policy Evaluation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(1), pages 161-181, September.
    2. Adler, Matthew D., 2016. "Behavioral Economics, Happiness Surveys, and Public Policy1," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 7(1), pages 196-219, April.
    3. John J. Horton, 2023. "Large Language Models as Simulated Economic Agents: What Can We Learn from Homo Silicus?," NBER Working Papers 31122, National Bureau of Economic Research, Inc.
    4. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
    5. Liscow, Zachary & Sunstein, Cass R., 2024. "Efficiency vs. Welfare in Benefit–Cost Analysis: The Case of Government Funding," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 15(2), pages 224-251, July.
    6. John J. Horton, 2023. "Large Language Models as Simulated Economic Agents: What Can We Learn from Homo Silicus?," Papers 2301.07543, arXiv.org.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    simulated dialogue with AI; social welfare weights; income satiation; well-being; adversarial collaboration; quantile regression; marginal utility;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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