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Memory and Anticipation: New Empirical Support for an Old Theory of the Utility Function

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  • John Knight
  • Ramani Gunatilaka

Abstract

The paper contrasts early theories of the utility function (starting with Bentham and elaborated by Jevons) with the modern theory (laid down by Fisher and Samuelson). The former include in the utility function not only the sensation of current events but also the memory of past events and the anticipation of future events. The alternative hypotheses are tested by introducing both past and expected future income into the estimated subjective well-being function, using an appropriate data set for China. The tests favour the early theories. Implications are drawn.

Suggested Citation

  • John Knight & Ramani Gunatilaka, 2014. "Memory and Anticipation: New Empirical Support for an Old Theory of the Utility Function," Economics Series Working Papers 721, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:721
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    File URL: https://ora.ox.ac.uk/objects/uuid:c4c6feac-8add-4f6d-b904-b8b873742995
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    References listed on IDEAS

    as
    1. Knight, John & Ding, Sai, 2012. "China's Remarkable Economic Growth," OUP Catalogue, Oxford University Press, number 9780199698691.
    2. John Knight & Ramani Gunatilaka, 2011. "Does Economic Growth Raise Happiness in China?," Oxford Development Studies, Taylor & Francis Journals, vol. 39(1), pages 1-24.
    3. Appleton, Simon & Song, Lina, 2008. "Life Satisfaction in Urban China: Components and Determinants," World Development, Elsevier, vol. 36(11), pages 2325-2340, November.
    4. Loewenstein, George, 1987. "Anticipation and the Valuation of Delayed Consumption," Economic Journal, Royal Economic Society, vol. 97(387), pages 666-684, September.
    5. Frijters, Paul & Liu, Amy Y.C. & Meng, Xin, 2012. "Are optimistic expectations keeping the Chinese happy?," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 159-171.
    6. Paul A. Samuelson, 1937. "A Note on Measurement of Utility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 4(2), pages 155-161.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Anticipation; China; Discounted utility; Memory; Subjective well-being; Utility function;
    All these keywords.

    JEL classification:

    • B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian)
    • B21 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Microeconomics
    • D60 - Microeconomics - - Welfare Economics - - - General

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