Handbook on the Economics of Happiness
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Handbook on the Economics of Happiness

Edited by Luigino Bruni and Pier Luigi Porta

This book is a welcome consolidation and extension of the recent expanding debates on happiness and economics. Happiness and economics, as a new field for research, is now of pivotal interest particularly to welfare economists and psychologists. This Handbook provides an unprecedented forum for discussion of the economic issues relating to happiness. It reviews the more recent literature and offers the interested reader an insight into the vast scope of the field in terms of the theory, its applications and also experimental design. The Handbook also gives substantial indications as to the future direction of research in the field, with particular regard to policy applications and developing an economics of interpersonal relations which includes reciprocity and social interaction theory.
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Chapter 8: Well-being and Consumption: Towards a Theoretical Approach Based on Human Need Satisfaction

Monica Guillen Royo


8 Well-being and consumption: towards a theoretical approach based on human needs satisfaction Monica Guillen Royo 1. Introduction In the tradition of neoclassical economics, the study of consumption plays a central role. Yet its analysis has been based on rigid assumptions that limit its explanatory power. The assumptions, related to consumer sovereignty, exogeneity of preferences, rationality and insatiability, although challenged by several economists during the twentieth century, are still at the core of the conventional theory of consumer behaviour. Together they contribute theoretically to the commonly accepted view that consumption increases individual utility or well-being. In the utilitarian tradition, utility has two main meanings: desire fulfilment and happiness (Sen 1985), both of which are thought to be related to individual well-being. Therefore, consumption is considered either to fulfil consumers’ desires or to contribute to their happiness. Alternative approaches to well-being, such as the subjective well-being (SWB) and objective well-being (OWB) traditions, while rejecting most of the neoclassical assumptions, do not support the direct positive link between consumption and well-being. SWB studies analyse the correlation between income and people’s contentment, claiming that income is not satisfactorily correlated with subjective well-being measures. Consumption is hardly analysed as such, but results on income and SWB are taken as representing the effects of consumption. The best-known findings are related to the fact that although people in richer nations declare themselves to be on average happier than people in poorer nations (Diener and Biwas-Diener 2002), the causes appear not to be related...

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