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On the Common Claim that Happiness Equations Demonstrate Diminishing Marginal Utility of Income

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  • Oswald, Andrew J.

    (University of Warwick)

Abstract

It is commonly claimed in the recent happiness literature in psychology and economics that we have proved diminishing marginal utility of income. This paper suggests that we have not. It draws a distinction between concavity of the utility function and concavity of the reporting function.

Suggested Citation

  • Oswald, Andrew J., 2005. "On the Common Claim that Happiness Equations Demonstrate Diminishing Marginal Utility of Income," IZA Discussion Papers 1781, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1781
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    File URL: https://docs.iza.org/dp1781.pdf
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    References listed on IDEAS

    as
    1. Frey, Bruno S & Stutzer, Alois, 2000. "Happiness, Economy and Institutions," Economic Journal, Royal Economic Society, vol. 110(466), pages 918-938, October.
    2. Bruno S. Frey, 2018. "Economics of Happiness," SpringerBriefs in Economics, Springer, number 978-3-319-75807-7, June.
    3. Richard Easterlin, "undated". "Diminishing Marginal Utility of Income? A Caveat," University of Southern California Legal Working Paper Series usclwps-1004, University of Southern California Law School.
    4. Richard Easterlin, 2005. "Diminishing Marginal Utility of Income? Caveat Emptor," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 70(3), pages 243-255, February.
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    Cited by:

    1. Oswald, Andrew J. & Powdthavee, Nattavudh, 2008. "Does happiness adapt? A longitudinal study of disability with implications for economists and judges," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1061-1077, June.
    2. Jerod Coker & Jean-Manuel Izaret, 2021. "Progressive Pricing: The Ethical Case for Price Personalization," Journal of Business Ethics, Springer, vol. 173(2), pages 387-398, October.
    3. Oswald, Andrew J., 2008. "On the curvature of the reporting function from objective reality to subjective feelings," Economics Letters, Elsevier, vol. 100(3), pages 369-372, September.
    4. Layard, R. & Mayraz, G. & Nickell, S., 2008. "The marginal utility of income," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1846-1857, August.
    5. Gardner, Jonathan & Oswald, Andrew J., 2007. "Money and mental wellbeing: A longitudinal study of medium-sized lottery wins," Journal of Health Economics, Elsevier, vol. 26(1), pages 49-60, January.
    6. Molina, José Alberto & Navarro Paniagua, Maria & Walker, Ian, 2007. "Mums and Their Sons, Dads and Their Daughters: Panel Data Evidence of Interdependent Marginal Utilities across 14 EU Countries," IZA Discussion Papers 2734, Institute of Labor Economics (IZA).
    7. Jose Alberto Molina & Maria Navarro & Ian Walker, 2007. "Mums and their sons; Dads and their daughters: Panel Data Evidence of Parental Altruism across 14 EU Countries," Working Papers 200721, Geary Institute, University College Dublin.
    8. Paul Read & Janet Stanley & Dianne Vella-Brodrick & Dave Griggs, 2013. "Towards a contraction and convergence target based on population life expectancies since 1960," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 15(5), pages 1173-1187, October.
    9. Vendrik, M.C.M. & Woltjer, G.B., 2006. "Happiness and loss aversion: when social participation dominates comparison," Research Memorandum 027, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    10. Vendrik, Maarten C.M. & Woltjer, Geert B., 2007. "Happiness and loss aversion: Is utility concave or convex in relative income?," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1423-1448, August.
    11. Stephan Klasen, 2008. "The Efficiency of Equity," Review of Political Economy, Taylor & Francis Journals, vol. 20(2), pages 257-274.

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    More about this item

    Keywords

    happiness; money; marginal utility; curvature; concave;
    All these keywords.

    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • D1 - Microeconomics - - Household Behavior

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