What Happiness Research Can Tell Us AboutSelf-Control Problems And Utility Misprediction

Neoclassical economic theory rules out systematic errors in consumptionchoice. According to the basic view, individuals know what they choose. They areable to predict how much utility an activity or a good produces for them now and inthe future and they can maximize their utility. This implies that behavior revealsconsistent preferences. This approach makes it impossible to detect and understandsub-optimal consumption decisions, due to problems of self-control and themisprediction of utility. We propose the economics of happiness as a methodologicalapproach to study these phenomena. Based on proxy measures for experiencedutility, it is, in principle, possible to directly address whether some observed behavioris sub-optimal and is therefore reducing a person’s well-being. We discuss recentevidence on smoking and eating habits, TV viewing and commuting choice.