Status, Growth and the Environment: Goods As Symbols in Applied Welfare Economics

Economics has occasionally recognized, but usually ignored, the common sense truth that human well-being depends on many things other than absolute consumption of wealth. Key among these is the status gained from prosperity relative to others, which makes prosperity both a private benefit and a social cost. After carefully surveying social psychology and anthropology as well as economics, Brekke and Howarth conclude that at least a third of prosperity's effect on well-being comes from status. Armed with this number, they show how status effects dramatically alter the policy prescriptions of standard economic models of taxation, growth and the environment.