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

Alpaslan Akay (), Olivier Bargain () and H. Xavier Jara
Additional contact information
Alpaslan Akay: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 Gothenburg, Sweden, http://www.economics.gu.se

No 611, Working Papers in Economics from University of Gothenburg, Department of Economics

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.

Keywords: decision utility; experienced utility; labor supply; subjective well being (search for similar items in EconPapers)
JEL-codes: C90 D63 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2015-02
New Economics Papers: this item is included in nep-hap and nep-upt
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Working Paper: Back to Bentham: should we? Large-scale comparison of decision versus experienced utility for income-leisure preferences (2015) Downloads
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