nep-hap New Economics Papers
on Economics of Happiness
Issue of 2016‒09‒25
six papers chosen by

  1. Beyond the distinction between necessaries and luxuries By Pugno, Maurizio
  2. Towards a Theory of Life Satisfaction: Accounting for Stability, Change and Volatility in 25-Year Life Trajectories in Germany By Bruce Headey; Ruud Muffels
  3. A needs theory of governance By Sacchetti, Silvia; Tortia, Ermanno
  4. If Life Throws You Lemons, Try To Make Lemonade: Does Locus of Control Help People Cope with Unexpected Shocks? By Stillman, Steven; Velamuri, Malathi
  6. Du capital social à la soutenabilité sociale : enseignements d'une démarche locale de construction d'indicateurs de bien-être soutenable By Anne Le Roy; Fiona Ottaviani

  1. By: Pugno, Maurizio
    Abstract: The distinction made by the classical economists between necessaries and luxuries is weakened by two problems: how to draw the line between necessaries and luxuries in advanced modern economies; how to evaluate luxuries, whether positively for individual’s freedom and for the economy, or negatively because they appear unethical. This paper examines a possible way out of these problems that emerges both from Scitovsky’s approach to “human welfare” and from some overlooked insights of Marshall, Hawtrey, and Keynes, the Cambridge economists who inspired Scitovsky. The proposal is to split luxuries into two components, and to redefine them, together with necessaries, on the basis of people’s motivations and goals, as well as of the effects on well-being and on the economy.
    Keywords: necessaries, luxuries, Scitovsky, well-being, welfare, Marshall, Hawtrey, Keynes
    JEL: B20 D11 D60 I25 I31
    Date: 2016–07
  2. By: Bruce Headey; Ruud Muffels
    Abstract: An adequate theory of Life Satisfaction (LS) needs to take account of both factors that tend to stabilise LS and those that change it. The most widely accepted theory in the recent past – set-point theory – focussed solely on stability (Brickman and Campbell, 1971; Lykken and Tellegen, 1996). That theory is now regarded as inadequate by most researchers, given that national panel surveys in several Western countries show that substantial minorities of respondents have recorded large, long term changes in LS (Sheldon and Lucas, 2014). In this paper we set out a preliminary revised theory, based mainly on analysis of the LS trajectories of the 2473 respondents in the German Socio-Economic Panel who reported their LS for 25 consecutive years in 1990-2014. The theory entails three sets of propositions in which we attempt to account for stability, change and also volatility. First, it is proposed that stability is primarily due to stable personality traits, and also to parental influence on LS. The second set of propositions indicates that medium and long term changes are due to differences and changes in personal values/life priorities and behavioural choices. Differences in the priority given to pro-social values, family values and materialistic values affect LS, as do behavioural choices relating to one’s partner, physical exercise, social participation and networks, church attendance, and the balance between work and leisure. Changes in health and domain satisfactions can also substantially change LS. Medium term change is reinforced by two-way causation – positive feedback loops – between behavioural choices, domain satisfactions and LS. The third set of propositions breaks new ground in seeking to explain inter-individual differences in the volatility/variability of LS over time; why some individuals display high volatility and others low, even though their mean level of LS may change little over 25 years.
    Keywords: theory of LS change; trajectories of LS; set-point theory; medium and long term change; volatility of LS; German Socio-Economic Panel
    Date: 2016
  3. By: Sacchetti, Silvia (Associazione Italiana per la Cultura della Cooperazione e del Non Profit); Tortia, Ermanno (Associazione Italiana per la Cultura della Cooperazione e del Non Profit)
    Abstract: New-institutional economics hypothesizes imperfect rationality, self-seeking preferences, monetary-related needs, and opportunism as fundamental features of human behavior. Consistently, new-institutionalist models of governance highlight the efficiency and transaction costs minimizing features of control rights and governance. Differently, needs theory of governance, as here presented, hypothesizes imperfect rationality, multiple needs, and reciprocity, in which case opportunism is reduced to an exception to individual behavior. Consistently, it presents a theory that links production governance with the wellbeing of those partaking in production. Building on Maslow’s human psychology, the governance model suggested in this paper is aimed at evidencing the self-actualization potential of control rights, organizational structures and practices. The application of Maslow’s theory to the institutional structure of organizations suggests that the deepest organizational layers (control rights and governance) broadly correspond to the most basic needs in Maslow’s theory (survival, security and belonging), while the outer layers (managerial models and employment relations) correspond to the fulfillment of the highest needs (self-esteem and self-actualization). Cooperative firms are used as an illustration of governance solutions consistent with needs theory in human psychology.
    Keywords: new-institutional economics; opportunism; governance; needs theory; human psychology; self-fulfillment; cooperative firms; inclusive governance.
    JEL: H10
    Date: 2016–07–21
  4. By: Stillman, Steven (Free University of Bozen/Bolzano); Velamuri, Malathi
    Abstract: A number of recent papers have found that non-cognitive skills and in particular, locus of control (LoC), are important predictors of success in life in terms of both traditional labor market and socioeconomic outcomes, and measures of subjective wellbeing. Specifically, the literature has found a strong correlation between having an internal locus of control and standard measures of success and happiness. In this paper, we examine whether having an internal LoC also helps people manage the consequences of two mainly unanticipated negative shocks, being a crime victim and experiencing a serious illness or injury. We find that these events have large negative consequences on both subjective wellbeing and objective economic outcomes. For men, these shocks have smaller effects on subjective wellbeing when they are more internal but that the long-run effects on income are no smaller. On the other hand, for women with an internal LoC, we find some evidence that these shocks have larger impacts. We draw on the psychology literature to discuss the results.
    Keywords: locus of control, crime, illness, wellbeing, HILDA
    JEL: I31 J16
    Date: 2016–09
  5. By: Ocean, Neel (University of Warwick)
    Abstract: Recently, a novel attempt has been made to estimate priorities for the different aspects of subjective well-being, in order to understand where resources might best be allocated. However, the determinants of, and life cycle trends for prioritisation have yet to be studied. This paper - the first to study these issues - finds no consistent evidence of variation in priorities over the life cycle, unlike the ‘mid-life crisis’ observed for levels. Life satisfaction is the most valued aspect of well-being throughout life. However, people overestimate the value placed by others on happiness. Well-being priorities are strongly influenced by well-being levels, and individual fixed effects such as personality, health level, and smoking frequency. The separation of aspects into cognitive and affective factors may provide additional insight into how individuals generate priorities, and hence inform the optimal targeting of policy.Keywords: JEL Classification:
    Date: 2016
  6. By: Anne Le Roy (UGA - Université Grenoble Alpes, CREG - Centre de recherche en économie de Grenoble - UGA - Université Grenoble Alpes - UPMF - Université Pierre Mendès France - Grenoble 2); Fiona Ottaviani (CREG - Centre de recherche en économie de Grenoble - UGA - Université Grenoble Alpes - UPMF - Université Pierre Mendès France - Grenoble 2, UGA - Université Grenoble Alpes)
    Abstract: Based on the IBEST project, which focuses on the construction of sustainable territorial social indicators in the urban community of Grenoble, this communication questions the operationality and the quantification of social capital, two notions which are extensively used at the present time in the construction of alternative indicators. The analysis of the data emerging from Grenoble’s area research on institutional and interpersonal social connections provides valuable material for estimating the contribution of social capital to the apprehension and characterization of various forms of sociability. Since the approach of sociability in terms of “capital” is limited, we have instead decided to adopt a social sustainability approach which could be used to improve the understanding of territorial “realities” and solidarities. This stance led us to include in our research non-monetary resources that are part of the social dimension of well-being.
    Abstract: Cette communication, en s’appuyant sur l’expérimentation de construction d’indicateurs de bien-être soutenable territorialisés (IBEST) menée dans l’agglomération grenobloise, questionne l’opérationnalité et la mise en chiffre du capital social, notion aujourd’hui très usitée dans le cadre de la construction locale d’indicateurs alternatifs. L’analyse des données produites à l’échelle du territoire grenoblois sur les liens sociaux institutionnels et interpersonnels offre un matériau privilégié pour jauger de l’apport de la notion de capital social à l’appréhension et à la qualification des différentes formes de sociabilité structurant les territoires. Les limites associées à une appréhension en termes de « capital » des sociabilités, nous conduisent à soutenir la nécessité d’une approche locale de la sociabilité orientée vers la soutenabilité sociale pour mieux comprendre les « réalités » et les solidarités territoriales. Une telle position nous conduit à prendre en compte les ressources non monétaires pour mettre au jour l’importance de la dimension sociale pour le bien-être.
    Keywords: Social capital,Well-being,Indicator,Sustainability,capital social , bien , être , indicateur , soutenabilité
    Date: 2016–03–17

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.