What Happiness Research Can Tell Us About Self-Control Problems and Utility Misprediction

IZA Discussion Paper No. 1952

Institute for Empirical Research in Economics Working Paper No. 267

29 Pages Posted: 26 Jan 2006

See all articles by Alois Stutzer

Alois Stutzer

University of Basel - Faculty of Business and Economics; IZA Institute of Labor Economics

Bruno S. Frey

CREMA; University of Basel

Date Written: January 2006

Abstract

Neoclassical economic theory rules out systematic errors in consumption choice. According to the basic view, individuals know what they choose. They are able to predict how much utility an activity or a good produces for them now and in the future and they can maximize their utility. This implies that behavior reveals consistent preferences. This approach makes it impossible to detect and understand sub-optimal consumption decisions, due to problems of self-control and the misprediction of utility. We propose the economics of happiness as a methodological approach to study these phenomena. Based on proxy measures for experienced utility, it is, in principle, possible to directly address whether some observed behavior is sub-optimal and is therefore reducing a person's well-being. We discuss recent evidence on smoking and eating habits, TV viewing and commuting choice.

Keywords: adaptation, individual decision-making, revealed preference, self-control, subjective well-being, utility misprediction

JEL Classification: D00, D11, D12, D84, D91, I12, I31

Suggested Citation

Stutzer, Alois and Frey, Bruno S., What Happiness Research Can Tell Us About Self-Control Problems and Utility Misprediction (January 2006). ; Institute for Empirical Research in Economics Working Paper No. 267. Available at SSRN: https://ssrn.com/abstract=878085

Alois Stutzer (Contact Author)

University of Basel - Faculty of Business and Economics ( email )

Peter Merian-Weg 6
4002 Basel
Switzerland
0041 61 267 3361 (Phone)
0041 61 267 3340 (Fax)

HOME PAGE: http://www.wwz.unibas.ch/stutzer/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Bruno S. Frey

CREMA ( email )

Südstrasse 11
Zurich, CH 8008
Switzerland
+41 44 380 00 78 (Phone)

University of Basel ( email )

Peter Merian-Weg 6
Basel, 4002
Switzerland

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