Measurement of Income with Time Use with Applications to Hedonic Indicators of Happiness and Misery

25 Pages Posted: 10 Jun 2009

See all articles by William D. Nordhaus

William D. Nordhaus

Yale University - Department of Economics; Cowles Foundation, Yale University; National Bureau of Economic Research (NBER)

Date Written: June 8, 2009

Abstract

The present paper examines several issues involved in expanding national economic accounts and quantitative social indicators to include the 'consumption' of time. The first part examines this question in the context of the standard national economic accounts. It derives equilibrium conditions for consumer behavior with market and non-market consumption along with intrinsic values of time in different activities. Using a standard index-number approach, it shows that the growth of real income can be approximated by a weighted average of productivity growth rates in market and non-market productivity and that the valuation of hours drops out of the formula. The second part of the paper examines the role of quantitative social indicators using the approach of hedonic psychology to value time in different activities. It concludes that hedonic measures do not meet the standards for a interpersonally cardinal variable that are required to construct a meaningful quantitative social indicator.

Keywords: time use, Hedonic measures, national accounts, index numbers

JEL Classification: J22, D1, D13, E01

Suggested Citation

Nordhaus, William D., Measurement of Income with Time Use with Applications to Hedonic Indicators of Happiness and Misery (June 8, 2009). Cowles Foundation Discussion Paper No. 1705. Available at SSRN: https://ssrn.com/abstract=1416092 or http://dx.doi.org/10.2139/ssrn.1416092

William D. Nordhaus (Contact Author)

Yale University - Department of Economics ( email )

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Cowles Foundation, Yale University ( email )

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