Greed Supports Economic Growth But Might Make Us More Miserable
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Date
2016-06
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Scientific Research
Abstract
Most economists, who refer to utility as representing wellbeing, do so under the assumption that
utility increases with consumption. In contrast, lately researchers have found evidence that individuals'
wellbeing is by far a more complicated matter than to be represented solely by their consumption
choices. Adopting a broader approach to human wellbeing, we have modified the traditional
theory to include income aspirations. Following this new line of thinking, this paper assumes
that individuals seek to minimize the gap between their consumption aspirations and their
consumption desires, namely minimizing their frustration. We present an overlapping generation
model and assume that desires increase with current and lag consumption. Our theoretical results
show that in an economy with agents minimizing frustration, as greed increases, the steady state
level of capital might be higher while people would certainly be more miserable.
Description
Keywords
Frustration, Desires, Equilibrium, Two Period Consumption Model
Citation
Theoretical Economics Letters, 2016, 6, 494-506