nep-hap New Economics Papers
on Economics of Happiness
Issue of 2008‒01‒19
eight papers chosen by
Viviana Di Giovinazzo
University of Milano-Bicocca

  1. Measuring the warm glow: players’ behaviour self declared happiness in trust game experiments By BECCHETTI LEONARDO; DEGLI ANTONI GIACOMO
  2. Human capital, externalities and tourism: three unexplored sides of the impact of FT affiliation on primary producers By BECCHETTI LEONARDO; COSTANTINO MARCO; PORTALE ELISA
  3. Social Capital as Good Culture By Luigi Guiso; Paola Sapienza; Luigi Zingales
  4. Comparing Consumption: A Curse or a Blessing? By Strulik, Holger
  6. An Economist’s Plaidoyer for a Secular Ethics. The Moral Foundation and Social Role of Critical Rationalism By GORINI STEFANO
  7. Behavioural Decisions and Welfare By Dalton, Patricio; Ghosal, Sayantan
  8. The Poor, the Rich and the Enforcer: Institutional Choice and Growth By Thor Koeppl; Cyril Monnet; Erwan Quintin

    Abstract: We perform a standard trust game experiment in which questionnaires are alternatively administered to participants after the experiment and before even knowing the rules of the game. We find that self declared happiness is significantly affected by trustors’ contribution only when survey questions are answered after having played. This result contributes both to the empirical happiness and behavioural experimental literature. With respect to the first, we demonstrate that general questions on self declared life satisfaction evaluated over the entire life period are affected by most recent events. With respect to the second, we interpret our findings as supporting the existence of “warm glow” preferences. We think that our contribution has also important methodological consequences: warm glow preferences cannot just be tested with the standard approach inferring implied preference structures from players’ choices. Only when measuring ex post the effects on happiness of players’ contribution, net of the outcome of the game, we may conclude that their choice to contribute is due to altruistic and not to strategic motivations. Finally our finding is a confirmation of the importance of experience and not just procedural utility. In our experiment trustor happiness is not affected by the outcome of the game but by the specific pattern of chosen actions, irrespective of the final result.
    Date: 2007–12
    Abstract: We evaluate the impact of fair trade (FT) affiliation on a sample of around 250 producers from two different fair trade projects which widely differ in terms of average FT affiliation and local standard of living. On the descriptive side we find evidence of two types of externalities (FT affiliates have higher bargaining power also with local intermediaries and, in one project but not in the other, FT improves conditions also of local non FT affiliates). The FT price premium (difference between FT and traditional importers price) is substantial even though “ethical travelers” pay a price even higher than FT importers. On the econometric side we observe that, in both projects, producers’ income, weekly food consumption expenditure, the non food consumption share on total income, self evaluated relative standard of living and professional self esteem are significantly and positively correlated with affiliation years. Through its impact on consumption share and relative standard of living fair trade is also shown to have indirect significant effects on producers’ life satisfaction. We also find weaker but significant effects of fair trade affiliation on last year savings, while we do not observe significant differences between the treatment and control sample in terms of wealth proxies. Finally, with backast panel data we reconstruct farmers yearly decisions to send their children to school and find that FT affiliation has a significant and positive effect on them when children are between 15 and 18. The effect is stronger in the project in which producers have higher standard of living.
    Date: 2007–12
  3. By: Luigi Guiso; Paola Sapienza; Luigi Zingales
    Abstract: To explain the extremely long-term persistence (more than 500 years) of positive historical experiences of cooperation (Putnam 1993), we model the intergenerational transmission of priors about the trustworthiness of others. We show that this transmission tends to be biased toward excessively conservative priors. As a result, societies can be trapped in a low-trust equilibrium. In this context, a temporary shock to the return to trusting can have a permanent effect on the level of trust. We validate the model by testing its predictions on the World Values Survey data and the German Socio Economic Panel. We also present some anecdotal evidence that differences in priors across regions are reflected in the spirit of the novels that originate from those regions.
    JEL: E0
    Date: 2007–12
  4. By: Strulik, Holger
    Abstract: Does it make us unhappier when we compare our current consumption with that of the Joneses or our own past achievements? This paper tries an answer without recurring on interpersonal utility comparisons. It calibrates an economy under three different assumptions, non-comparing utility, and inward-looking and outward-looking habit formation. Using consumption equivalents it then calculates how much individual welfare is affected in each economy by unexpected losses and gains of wealth.
    Keywords: habit formation, happiness, welfare, economic growth
    JEL: D60 D91 E21 O40
    Date: 2008–01
  5. By: Bernarda Zamora (Universidad de Alicante)
    Abstract: This paper formally describes the Human Capital Theory as a Research Programme that fits into the classical economic Research Programmes. The fundamental ¿hard core¿ assumption which converts the Human Capital Theory into a Research Programme itself in Lakatosian terms is based upon the embodiment of the human capital in the person investing in it. The paper shows how the auxiliary ¿protective belt¿ assumptions and the empirical content of the theory are linked to and derived from the ¿hard core¿ assumptions in such a way that the Human Capital Theory satisfies the conditions to be considered a Scientific Research Programme.
    Keywords: Lakatos, Research Programme, Human Capital.
    JEL: B41 J24
    Date: 2007–12
    Abstract: This paper is an inquiry into the theoretical, ethical and social implications of the adoption of the rationalist attitude to the understanding of the world, aka critical rationalism. It is structured around four tightly connected claims. The first claim equates the distinction between morality and economics to the distinction between values and interests. The second claim relates the theoretical connotation of critical rationalism - a secular world-view - to its ethical connotation - the secular ethics of individual freedom, independence and responsibility commanded by the ‘belief’ in reason alone, showing them to be the two non-separable sides of a single way of conceiving human existence. The third claim highlights the crucial civic role of such secular ethics vis à vis the non-secular moral messages of religion and ideology, and the secular non-moral message of wellbeing, social success, and power. It holds a unique individual sentiment of social solidarity, as well as the requirement of a liberal social order without the slightest trace of fundamentalism. The fourth claim distinguishes moral from social justice. The former is only about values: the protection of the secular value of the individual sentiment of self-respect, or freedom-independence, and has nothing to do with the distribution of wellbeing among people. The latter is only about interests: the equality-inequality of such distribution, and has nothing to do with morality.
    Date: 2007–12
  7. By: Dalton, Patricio (Department of Economics, University of Warwick); Ghosal, Sayantan (Department of Economics, University of Warwick)
    Abstract: We study decision problems where (a) preference parameters are defined to include psychological/moral considerations and (b) there is a feedback effect from chosen actions to preference parameters. In a standard decision problem the chosen action is required to be optimal when the feedback effect from actions to preference parameters is fully taken into account. In a behavioural decision problem the chosen action is optimal taking preference parameters as given although chosen actions and preference parameters are required to be mutually consistent. Our framework unifes seemingly disconnected papers in the literature. We characterize the conditions under which behavioural and standard decisions problems are indistinguishable : in smooth settings, the two decision problems are generically distinguishable. We show that in general, revealed preferences cannot be used for making welfare judgements and we characterize the conditions under which they can inform welfare analysis. We provide an existence result for the case of incomplete preferences. We suggest novel implications for policy and welfare analysis.
    Keywords: Decisions ; psychology ; indistinguishability ; revealed preferences ; welfare ; existence ; aspirations
    JEL: D01 D62 C61 I30
    Date: 2008
  8. By: Thor Koeppl (Queen's University); Cyril Monnet (Federal Reserve Bank of Philadelphia); Erwan Quintin (Federal Reserve Bank of Dallas)
    Abstract: We study economies where improving the quality of institutions – modeled as improving contract enforcement – requires resources, but enables trade that raises output by reducing the dispersion of marginal products of capital. We find that in this type of environment it is optimal to combine institutional building with endowment redistribution, and that more ex-ante dispersion in marginal products increases the incentives to invest in enforcement. In addition, we show that institutional investments lead over time to a progressive reduction in inequality. Finally, the framework we describe enables us to formalize the hypothesis formulated by Engerman and Sokoloff (2002) that the initial concentration of human and physical capital can explain the divergence of different countries’ institutional history.
    Keywords: Enforcement as a Choice, Institutions, Inequality, Human and Physical Capital
    JEL: D31 D52 O11 O43
    Date: 2007–12

This nep-hap issue is ©2008 by Viviana Di Giovinazzo. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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