Experienced versus Decision Utility of Income: Relative or Absolute Happiness
Type
conference paper
Date Issued
2003-03-21
Author(s)
Vendrik, Maarten
;
Hirata, Johannes
Abstract (De)
A central finding in happiness research is low correlations between income and happiness. This is paradoxical since most people seem to attach a high value to a rise in their income. The various versions of this paradox can be explained in terms of rising aspirations (Easterlin 2001) and positional externalities (Frank 1997). However, econometric / statistical studies which test these explanations on the level of individual cross-sections are rare and have produced mixed results. A careful analysis of the results of such studies leads to the conclusion that there seems to be considerable support for the explanations mentioned. On the other hand, these explanations seem only partial and do not take into account top-down relations between life satisfaction and aspiration levels as implied by some studies. Therefore, an alternative explanation of the above paradox in terms of the intrinsic / extrinsic-goals distinction of Kasser and Ryan (1993) is investigated. This ap-proach points to a second kind of discrepancy between decision utility and experienced utility of income and implies that life satisfaction depends on absolute rather than relative income. It has some potential, but, in its present stage, it yields less specific predictions with respect to the paradoxes than the theories of aspirations and positional externalities. On the other hand, in the case of top-down relations between life satisfaction and aspiration levels, the intrinsic / extrinsic-goals explanation seems to be more fundamental.
Language
German
HSG Classification
contribution to scientific community
Refereed
No
Event Title
International conference "The Paradoxes of Happiness in Economics"
Event Location
Milan
Event Date
21.-22.03.2003
Subject(s)
Division(s)
Eprints ID
17837
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Vendrik&Hirata+-+Experienced+versus+Decision+Utility+of+Income.pdf
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194.77 KB
Format
Adobe PDF
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