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Back To Bentham: Should We? LargeScale Comparison of Decision versus Experienced Utility for IncomeLeisure Preferences

Author

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  • Akay, Alpaslan

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Bargain, Olivier

    (AixMarseille University)

  • Jara, H. Xavier

    (University of Essex)

Abstract

Subjective wellbeing (SWB) is increasingly used as a way to measure individual wellbeing. Interpreted as "experienced utility", it has been compared to "decision utility" using specific experiments (Kahneman et al., 1997) or stated preferences(Benjamin et al. 2012). We suggest here an original largescale comparison between ordinal preferences elicited from SWB data and those inferred from actual choices(revealed preferences). Precisely, we focus on incomeleisure preferences, closely associated to redistributive policies. We compare indifference curves consistent with incomeleisure subjective satisfaction with those derived from actual labor supply choices, on the same panel of British households. Results show striking similarities between these measures on average, reflecting that overall, people’s decision are not inconsistent with SWB maximization. Yet, the shape of individual preferences differ across approaches when looking at specific subpopulations. We investigate these differences and test for potential explanatory channels, particularly the roles of constraints and of individual "errors" related to aspirations, expectations or focusing illusion. We draw implications of our results for welfare analysis and policy evaluation.

Suggested Citation

  • Akay, Alpaslan & Bargain, Olivier & Jara, H. Xavier, 2015. "Back To Bentham: Should We? LargeScale Comparison of Decision versus Experienced Utility for IncomeLeisure Preferences," Working Papers in Economics 611, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0611
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    File URL: https://gupea.ub.gu.se/handle/2077/38177
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    References listed on IDEAS

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    1. Alois Stutzer & Bruno S. Frey, 2008. "Stress that Doesn't Pay: The Commuting Paradox," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(2), pages 339-366, June.
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    3. Laurens Cherchye & Frederic Vermeulen, 2008. "Nonparametric Analysis of Household Labor Supply: Goodness of Fit and Power of the Unitary and the Collective Model," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 267-274, May.
    4. Fleurbaey, Marc & Blanchet, Didier, 2013. "Beyond GDP: Measuring Welfare and Assessing Sustainability," OUP Catalogue, Oxford University Press, number 9780199767199.
    5. Marc Fleurbaey, 2009. "Beyond GDP: The Quest for a Measure of Social Welfare," Journal of Economic Literature, American Economic Association, vol. 47(4), pages 1029-1075, December.
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    Cited by:

    1. Clark, Andrew E. & Senik, Claudia & Yamada, Katsunori, 2017. "When experienced and decision utility concur: The case of income comparisons," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 70(C), pages 1-9.
    2. Geraci, Andrea & L. Bryan, Mark, 2016. "Non-standard work: what’s it worth? Comparing alternative measures of workers’ marginal willingness to pay," ISER Working Paper Series 2016-12, Institute for Social and Economic Research.
    3. van Hoorn, Andr, 2016. "Reliability and validity of the happiness approach to measuring preferences," Research Report 16008-GEM, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    4. Alpaslan Akay & Olivier Bargain & H. Xavier Jara, 2020. "‘Fair’ welfare comparisons with heterogeneous tastes: subjective versus revealed preferences," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 55(1), pages 51-84, June.
    5. Daniel Gerszon Mahler & Xavier Ramos, 2017. "Equality of Opportunity for Well-Being," SOEPpapers on Multidisciplinary Panel Data Research 927, DIW Berlin, The German Socio-Economic Panel (SOEP).

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    More about this item

    Keywords

    decision utility; experienced utility; labor supply; subjective well being;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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