Growth and the relativity of satisfaction

نویسنده

  • David de la Croix
چکیده

We extend Ramsey’s model to be in accordance with the facts that self-reported levels of satisfaction are almost unrelated to economic prosperity, both across countries and across time. We assume that things are judged by the extent to which they depart from social norms. Norms are based on the past experience of agents. A special case is when norms are built on the basis of the best previous experience. Agents do not internalize their own effect on social norms and the competitive equilibrium is sub-optimal. The dynamics display oscillations and a slow speed of adjustment or path dependency. An optimal solution can be decentralized by a planner by means of capital taxation along the adjustment path. Finally, fiscal policy is shown to display substantial transitory effects.  1998 Elsevier Science B.V. All rights reserved.

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تاریخ انتشار 1998