Working Paper: NBER ID: w24369
Authors: Angus Deaton
Abstract: I respond to Atkinson's plea to revive welfare economics, and to considering alternative ethical frameworks when making policy recommendations. I examine a measure of self-reported evaluative wellbeing, the Cantril Ladder, and use data from Gallup to examine wellbeing over the life-cycle. I assess the validity of the measure, and show that it is hard to reconcile with familiar theories of intertemporal choice. I find a worldwide optimism about the future; in spite of repeated evidence to the contrary, people consistently but irrationally predict they will be better off five years from now. The gap between future and current wellbeing diminishes with age, and in rich countries, is negative among the elderly. I also use the measure to think about income transfers by age and sex. Policies that give priority those with low incomes favor the young and the old, while utilitarian policies favor the middle aged, and men over women.
Keywords: self-reported wellbeing; lifecycle theory; welfare economics; policy recommendations
JEL Codes: E21; H2; H31; H55; I3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| self-reported evaluative wellbeing (I31) | pattern of optimism about future wellbeing (I31) |
| age (J14) | pattern of optimism about future wellbeing (I31) |
| cognitive bias (D91) | consumption and savings behavior (E21) |
| income (E25) | self-reported wellbeing (I31) |
| gender and age interaction (J16) | welfare policies (I38) |