Happiness, Equivalent Incomes and Respect for Individual Preferences

Koen Decancq, Marc Fleurbaey and Erik Schokkaert

Economica, 2015, vol. 82, 1082-1106

Abstract: type="main" xml:id="ecca12152-abs-0001">

In this paper, we study interpersonal comparisons of wellbeing. We show that using subjective wellbeing (SWB) levels can be in conflict with individuals' judgments about their own lives. We propose therefore an alternative wellbeing measure in terms of equivalent incomes that respects individual preferences. We show how SWB surveys can be used to derive the ordinal information about preferences needed to calculate equivalent incomes. We illustrate our approach with Russian panel data (RLMS-HSE) for the period 1995–2003 and compare it to standard wellbeing measures such as expenditures and SWB. We find that different groups are identified as worst off.

For nothing is more certain, than that despair has almost the same effect on us with enjoyment, and that we are no sooner acquainted with the impossibility of satisfying any desire, than the desire itself vanishes. David Hume, A Treatise of Human Nature

Date: 2015
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