Some Lessons from Happiness Economics for Environmental Sustainability

Abstract

Survey data on happiness are increasingly being used in economics. Such data are useful because happiness (or life satisfaction) provides an empirical proxy for utility. The use of such data permits the testing of fundamental assumptions of conventional utility and choice theory and the use of the results for welfare analysis and benefit-cost studies. As discussed in this chapter, the economic research on happiness has considerable implications for the study of environmental sustainability. A major finding from happiness research is that people evaluate their consumption levels relative to other people's consumption and to their own consumption in the past. This gives rise to negative consumption externalities and to adaptation, the latter being largely unforeseen in the process of consumer choice. Negative consumption externalities and unanticipated adaptation to consumption levels imply distortions away from the optimal environmental quality in addition to the familiar distortions stemming from environmental externalities. Socially optimal environmental quality targets may therefore be more ambitious than implied by the standard model of environmental economics. (PsycINFO Database Record (c) 2016 APA, all rights reserved)