The role of natural capital in supporting national income and social welfare

Using life satisfaction as a proxy for social welfare, this study contributes to the extant literature by empirically demonstrating that natural capital contributes to social welfare, functioning in part through increasing national income and in part through its direct effect on life satisfaction; the direct effect is approximately 40% greater than the indirect effect. This suggests that the true welfare benefits of natural capital may not be adequately reflected in conventional economic data and, therefore, studies seeking to evaluate the contribution of natural capital to human well-being should consider employing data sets that capture subjective elements of welfare. The magnitudes of the reported marginal effects of natural capital on social welfare, however, are small. This is perhaps due to the fact that (1) there are shortcomings in the measure of natural capital; (2) life satisfaction effects are unlikely to reflect the poorly understood benefits that natural capital provides; and (3) keystone species (such as mosquitoes) and integral ecosystems (such as wetlands) may be negatively associated with life satisfaction, even though such components of natural capital are vitally important to sustaining ecosystems and human life     

Estimating worldwide life satisfaction

Whilst studies of life satisfaction are becoming more common-place, their global coverage is far from complete. This paper develops a new database of life satisfaction scores for 178 countries, bringing together subjective well-being data from four surveys and using stepwise regression to estimate scores for nations where no subjective data are available. In doing so, we explore various factors that predict between-nation variation in subjective life satisfaction, building on Vemuri and Costanza's (Vemuri, A.W., & Costanza, R., 2006. The role of human, social, built, and natural capital in explaining life satisfaction at the country level: toward a National Well-Being Index (NWI). Ecological Economics, 58:119-133.) four capitals model. The main regression model explains 76% of variation in existing subjective scores; importantly, this includes poorer nations that had proven problematic in Vemuri and Costanza's (Vemuri, A.W., & Costanza, R., 2006. The role of human, social, built, and natural capital in explaining life satisfaction at the country level: toward a National Well-Being Index (NWI). Ecological Economics, 58:119-133.) study. Natural, human and socio-political capitals are all found to be strong predictors of life satisfaction. Built capital, operationalised as GDP, did not enter our regression model, being overshadowed by the human capital and socio-political capital factors that it inter-correlates with. The final database presents a stop-gap resource that, until robust surveys are carried out worldwide, allows comparisons of subjective life satisfaction between nations to be made with reasonable confidence.     

Maximising Happiness?

The measurement of individual happiness challenges the notion that revealed preferences only reliably and empirically reflect individual utility. Reported subjective well-being is a broader concept than traditional decision utility; it also includes concepts like experience and procedural utility. Micro- and macroeconometric happiness functions offer new insights on determinants of life satisfaction. However, one should not leap to the conclusion that happiness should be maximized, as was suggested for social welfare function maximization. In contrast, happiness research strengthens the validity of an institutional approach, such as reflected in the theory of democratic economic policy.     

Some empirics of the bivariate relationship between average subjective well-being and the sustainable wealth of nations

The World Bank's Millennium Capital Assessment (MCA) has provided per capita estimates of total wealth and its major subcategories for a large number of countries. In this article, these macro-level estimates are used to explore bivariate cross-country ‘wealth–happiness’ relationships, focussing on issues of appropriate functional form, parameter stability and outliers. For comparative purposes, ‘income–happiness’ relationships are also explored. Total wealth turns out to be strongly related to Gross National Income (GNI) per capita, due to the importance of produced and intangible capital, but not to natural capital. In contrast, when the most natural capital intensive countries are excluded as outliers, a strong relationship emerges between Subjective Well-Being (SWB) and natural capital, especially amongst high income countries. In these countries, natural capital seems to be an important wealth correlate of SWB, despite accounting for only a very small proportion of total wealth.     

Who benefits from big government? A life satisfaction approach

Which impact does government size have on life satisfaction, and how do effects of bigger government differ between income groups in society? Previous studies typically employed country averages and thus neglected possibly heterogeneous happiness effects between income groups. This paper addresses empirically the effects of government spending on subjective well-being of individuals belonging to different income groups. Our analysis is based on individual data from 25 European countries participating in the European Social Survey. In contrast to most previous studies we take account of the endogeneity between relative income position and reported life satisfaction by an instrumental variable approach. Our results suggest, first, that most government spending categories, including social protection, are on average negatively related to individual well-being. Secondly, estimated marginal effects of health, education and social protection spending at different income levels show that spending increases always have a stronger negative effect on high income groups’ well-being than on low income groups’ life satisfaction. For all government spending categories, marginal happiness effects of higher public spending are clearly negative for income groups at the top.     

Wealth,Natural Capital,and Sustainable Development: Contrasting Examples from Botswana and Namibia

Theoretical work has demonstrated that sustainable development requires non-declining per capita wealth, where wealth is defined to include produced, natural, human and social capital. Several studies have attempted to measure total national wealth or changes in wealth, but have been seriously hampered by a lack of data, especially for natural and human capital. To address this problem, the UN and other international statistical agencies developed a standardized framework for environmental accounts, the System of integrated Environmental and Economic Accounts (SEEA). Using the newly available asset accounts for natural capital, national wealth accounts are constructed and used to assess the contrasting development paths of Botswana and Namibia. Botswana, with an explicit policy of reinvestment of resource rents, has roughly tripled per capita wealth and national income over the past two decades. Namibia, with no explicit policy to use natural capita to build wealth, has seen per capita wealth and income decline.     

Income comparison,gender roles and life satisfaction

This article uses data from the German Socio-Economic Panel to analyse the effect of within household income comparison on individual life satisfaction. Our within couple and individual fixed-effects panel estimates suggest that gender roles influence subjective well-being (SWB). A primary breadwinner wife decreases a couple’s individual happiness by eight per cent. The article adds to the findings on interdependence of SWB and hints at negative consequences of traditional gender identity norms for individual happiness.     

The Consumption of a Finite Planet: Well-Being, Convergence, Divergence and the Nascent Green Economy

A variety of global metrics indicate the Earth has overshot its capacity to supply source and sink resources without substantial negative feedback. Here the relationship between consumption indicators (oil, freshwater, vehicle and meat consumption, GDP, $\mathrm{CO }_{2}$ CO 2 emissions) and well-being is analysed latitudinally across 189 countries and longitudinally over 60 years within three affluent countries. All latitudinal analyses show the characteristic “consumption cliff and affluent uplands” shape: e.g. at low per capita GDP, life satisfaction increases sharply up the cliff with rising GDP; after a threshold, well-being is independent of GDP across the affluent uplands. Longitudinal analyses of Japan, UK and USA since the 1950s show per capita GDP has grown between 3- and 8-fold, but mean levels of well-being remained unchanged. Consumption patterns are now converging on those typical in affluent countries. Indicators for seven baskets of countries: Affluent North America–Europe–Oceania, Affluent Asia, fast developing BRICs and CIVETS, high income Resource Extractors, Poor with Green Peaks, and the Poorest show the factors of consumption between the poorest and affluent (5- to 100-fold) and the fast developing and affluent (2- to 10-fold). A finite planet cannot resource such convergence. One indicator, climate change, grows more of a concern as evidence emerges, yet denial remains strong. A priority is to create opportunities for divergent ways of living. Although material culture has been sought as the means to meet personal well-being, it has failed both the affluent and poorest. A green economy will require human attachments to both place and possessions, thus reducing disposal and damage. Such entanglement produces high affiliation that improves life satisfaction, as does much non-material consumption. As yet, most political and economic systems are far from recognising these imperatives, though there have been notable policy innovations. A shift to a green economy is inevitable. It is simply whether it occurs before or after the world becomes locked into severe climate change and other consequences of harm to natural capital.     

Happiness, geography and the environment

In recent years, economists have been using socio-economic and socio-demographic characteristics to explain self-reported individual happiness or satisfaction with life. Using Geographical Information Systems (GIS), we employ data disaggregated at the individual and local level to show that while these variables are important, consideration of amenities such as climate, environmental and urban conditions is critical when analyzing subjective well-being. Location-specific factors are shown to have a direct impact on life satisfaction. Most importantly, however, the explanatory power of our happiness function substantially increases when the spatial variables are included, highlighting the importance of the role of the spatial dimension in determining well-being.     

Happiness,income and poverty

There is considerable evidence from a variety of sources to suggest that well-being is a function of relative income. These findings have been used to explain the Easterlin Paradox, whereby a rise in income for all does not lead to a rise in average happiness in a country (even though the cross section relationship between income and happiness is positive). This relativity of utility has led to calls for policy to focus away from GDP. I here first discuss some of the evidence that well-being is indeed relative in income, but then consider two relatively little-analysed issues to suggest that there may continue to be a role for GDP per capita in happiness-based policy: the inequality of subjective well-being, and the specific case of those in income poverty.     

Extreme bounds of subjective well-being: economic development and micro determinants of life satisfaction

This article presents a global sensitivity analysis of micro determinants of life satisfaction (LS), a subjective well-being (SWB) measure of quality of life, as it relates to economic development. We test 53 micro variables using extreme bound analysis on a pooled cross-section data from the World Value Survey representing 98 countries between 1989 and 2014. Several standard variables frequently included in SWB regressions are controlled for. The test variables are broadly categorized as demographic, personal–economic, individual traits and values, social attitudes and collectivism, social relationships and perceptions of control. We find subjective health status, household income rank, family savings, religiosity, most perceptions of control and several social attitudes and collectivism measures to be universal LS determinants. Generally, the determinants of LS vary by a country’s level of economic development. In particular, we provide suggestive evidence that as countries develop, certain needs are satisfied and stop being important contributors to LS while others take their place.     

International inequality in subjective well‐being: An exploration with the Gallup World Poll

In this paper we compute inequality measures over the distribution of a subjective well‐being variable constructed from a life satisfaction question included in the Gallup World Poll in almost all countries in the world. We argue that inequality in subjective well‐being may be a better proxy for the degree of unfairness in a society than income inequality. We find evidence that inequality in subjective well‐being has an inverse‐U relationship with per capita GDP , but it is monotonically decreasing with respect to mean subjective well‐being. We argue that this difference might be associated to inequality aversion in the space of utility.     

What are we learning from the life satisfaction literature?

The recent availability of cross-sectional and longitudinal survey data on life satisfaction in a large number of countries gives us the opportunity to verify empirically (and not just to assume) what matters for individuals and what economists and policymakers should take into account when trying to promote personal and societal well-being. We now have ample evidence, generally robust to different cultural backgrounds, on the effects of some important happiness drivers (income, health, unemployment, marital status, etc.) which can be considered “quasi-stylized facts” of happiness. If economic policies, for many obvious reasons, cannot maximize self-declared life satisfaction as such, we are nonetheless learning a lot from these findings. In particular, results on the relevance of relational goods, on the inflation/unemployment trade-off in terms of welfare and, more in general, on the measurement of the shadow value of non-market goods obtained with life satisfaction estimates are conveying relevant information about individual preferences and what is behind utility functions. Such findings suggest that the anthropological reductionism characterizing most economic models can be misleading and that target indicators of economic policies have to be refocused if we want to minimize the distance between economic development and human progress.     

Social capital, innovation and growth: Evidence from Europe

This paper investigates the interplay between social capital, innovation and per capita income growth in the European Union. We model and identify innovation as an important mechanism that transforms social capital into higher income levels. In an empirical investigation of 102 European regions in the period 1990-2002, we show that higher innovation performance is conducive to per capita income growth and that social capital affects this growth indirectly by fostering innovation. Our estimates suggest that there is no direct role for social capital to foster per capita income growth in our sample of European Union countries.     

Well-being and/or quality of life in EU countries through a multidimensional index of sustainability

The aim of my paper is to demonstrate that Sen's theory of well-being can be applied to make the concept of sustainable human development operational through the building of a multidimensional index of sustainability which takes into account, at the same time, economic, social and environmental variables. This index may be considered an alternative to the current measures of welfare/sustainability since not only conventional measures such as GDP, but also multi-attribute indices, such as Human Development Index (HDI), Genuine Savings, Index of Sustainable Economic Welfare (ISEW) etc., are found to be inadequate to make the concept of sustainable development operational. Therefore, the limitations of these measures of welfare/sustainability justify the search for a new index of sustainability. This index will show, at the operational level, how Sen's theory of well-being can be useful to sustainable development. It was applied to EU countries using the standardised deviation methodology being the closest and most suitable methodology to be adopted for building multidimensional indices. The factor analysis methodology will also be used in my paper. Lastly, the comparison between Sen's trend of sustainability and GDP trend index number-which are both of them applied to Italy-will show how much the criticisms and the limitations directed towards the indicator of GDP are founded.     

信用卡支付如何影响主观幸福感?——基于萨缪尔森幸福公式的研究

信用卡是一项功能性金融基础设施,现有研究多数止步于信用卡的消费溢价效应,尚未关注其终极福祉效应.文章基于萨缪尔森幸福公式,分析了信用卡支付影响主观幸福感的作用机理,阐述了其并联机制和串联机制.在此基础上,文章运用条件混合过程模型评估了信用卡支付对主观幸福感的影响,采用因果中介效应分析方法识别了其作用机制.研究发现,信用卡支付显著侵蚀了持卡人的主观幸福感,幸福侵蚀效应是通过串联机制而非并联机制传导的.具体来说,信用卡支付经由欲望膨胀渠道和消费实现渠道所构成的串联机制,降低了持卡人的主观幸福感.另外,信用卡支付的幸福侵蚀效应会因使用动机、家中地位以及城乡和地区差异而表现出异质性.     

Oil prices and life satisfaction: asymmetries between oil exporting and oil importing countries

In spite of general consensus on the importance of oil prices for objective measures of economic well-being across countries, almost no research has been carried out to analyse the effects of oil prices on subjective well-being internationally. Using the World Values Survey (2009 World Values Survey 1981–2008 Official Aggregate v.20090901. (2009) World Values Survey Association, Aggregate File Producer: ASEP/JDS, Madrid. Available at www.worldvaluessurvey.org (accessed September 2010). [Google Scholar]), we help fill this gap by studying the effects of oil prices on life satisfaction for two groups of countries, oil importers and oil exporters. Although some previous studies have shown negative effects of oil prices on subjective well-being of one oil importing country the United States, since it is an outlier in terms of dependence on automobiles and in gasoline consumption per capita, these findings may not be representative of other oil importing countries. Our results show that, in fact, oil prices have quite strong negative effects on life satisfaction in a sample of over 40 oil importing countries. By contrast, for oil exporting countries for which there have been virtually no previous quantitative studies, but theoretical analyses suggest the results could be ambiguous, we find strong positive effects on life satisfaction. Hence, our results reveal quite strong asymmetries in the effects of oil prices on life satisfaction between oil importers and oil exporters.     

AN EMPIRICAL ESTIMATE OF THE RELATION BETWEEN TWO MEASURES OF ECONOMIC WELFARE*

The main objective of this paper is to explore and quantify the difference between two measures of comparative economic welfare: (a) the more or less conventional measure of per capita national income, and (b) the capitalized value of expected future income per capita. The paper begins with a brief summary of the argument in favor of the present value of expected future income per capita as a measure of economic welfare. This is followed by an examination of the empirical relationship of the ratio of the suggested alternative measure to per capita income and an analysis of the variables used to compute the present value of expected income per capita. The main conclusion drawn from the calculations is that very substantial differences occur in the measurement of relative economic well-being depending on which measure is used. A final section discusses the implications of this finding for international comparisons of economic welfare.     

Measuring sustainable development — Nation by nation

Sustainable development represents a commitment to advancing human well-being, with the added constraint that this development needs to take place within the ecological limits of the biosphere. Progress in both these dimensions of sustainable development can be assessed: we use the UN Human Development Index (HDI) as an indicator of development and the Ecological Footprint as an indicator of human demand on the biosphere. We argue that an HDI of no less than 0.8 and a per capita Ecological Footprint less than the globally available biocapacity per person represent minimum requirements for sustainable development that is globally replicable. Despite growing global adoption of sustainable development as an explicit policy goal, we find that in the year 2003 only one of the 93 countries surveyed met both of these minimum requirements. We also find an overall trend in high-income countries over the past twenty five years that improvements to HDI come with disproportionately larger increases in Ecological Footprint, showing a movement away from sustainability. Some lower-income countries, however, have achieved higher levels of development without a corresponding increase in per capita demand on ecosystem resources.     

Capital income taxation in a growing world economy

This paper deals with dynamic adjustment in large economies to changes in the rate of capital income taxation or in the rate of investment tax credit in one country. The framework applied in the paper is a continuous-time, overlapping generations model with two countries. It features population growth and debt non-neutrality. We address impact and steady state effects of capital income tax and investment subsidy changes in the home country on consumption per capita, the capital intensity, and the per capita net foreign asset position in both countries. We also briefly consider individual welfare consequences of these policies.