This book deals with satisfaction analysis, the way humans evaluate many aspects of their situation. It focuses on that which precedes decision taking, i.e., judgements and evaluations, likes and dislikes, and from which preference orderings originate. Although written by two economists, the book is intended for social scientists with the aim of promoting discussion between the two disciplines. It presents methodology by which satisfaction can be analysed along the lines similar to those used by econometricians to analyse ‘objective’ variables.
Introduction
1. This introductory chapter begins with a discussion of the measurement of satisfaction. It defines satisfaction questions, the income-evaluation question, domain satisfactions and general satisfaction.
The Analysis Of Income Satisfaction With An Application To Family Equivalence Scales
2. This chapter examines income satisfaction based on empirical results derived from German and British data. It is shown that the results derived from the financial-satisfaction question and those from the income-evaluation question developed by Van Praag and Kapteyn are nearly identical. These results are used to define family equivalence scales. The preference-drift phenomenon is also discussed.
Domain Satisfactions
3. This chapter applies the methodology introduced for analysing financial satisfaction to various other domains of life such health, job, housing, and marriage. The analysis is based on data from the German Socio-Economic Panel Survey and British Household Panel Survey. It is argued that domain satisfactions may be dealt with as normal discretely observable variables.
4. The Aggregation Of Satisfactions: General Satisfaction As An Aggregate.
This chapter focuses on the development of the satisfaction aggregation model. Satisfaction with life as a whole or general satisfaction is analysed as a weighted aggregate of the domain satisfactions. It is shown that various domain levels can be distinguished, leading to a two- or three-layer model. The model is applied to job satisfaction for the British data set; the job is broken down into sub-domains such as salary, safety, permanence, etc. The employee then evaluates his/her job based on these. It is argued that various satisfactions can be dealt with as observed numerical variables, which can be used in econometric one- and multiple-equation(s) models.
5. Political Satisfaction.
This chapter applies the three-layer model of job satisfaction discussed in Chapter 4 to political satisfactions. A survey of political satisfaction in the Netherlands is studied, wherein an individual’s satisfaction with government policy is considered analogous to life as a whole, and satisfaction with policies on health, employment, migration, income, etc. is analogous to the breakdown with respect to life domains. It is shown that political satisfaction may be broken down into a number of satisfactions with political aspects, i.e., political-sub-domains. Political satisfaction is a significant component of general satisfaction with life as a whole.
6. Males, Females, and Households.
This chapter examines gender differences in satisfactions, based on surveys of British and German household panels. It is shown that differences in answers to subjective questions are very similar between males and females in the same household. This is particularly true for satisfactions with respect to health, leisure, and jobs. Error correlations between husbands and wives are not very strong. It is also argued that the unobservable characteristics that influence one domain satisfaction are correlated with the ones that influence another domain satisfaction.
7. The Impact Of Past And Future On Present Satisfaction.
This chapter examines the theory that the individual’s current satisfaction will depend on his or her own past experience and expected future. The study assumes that both the past and the future have an effect, and that the impact distribution is described by a mass-density function on the time axis. Estimations of the function showed that it varies its position and shape depending on age and other individual variables. The young and elderly place more weight on the past, while those in mid-life give more weight to the future.
8. The Influence Of The Reference Group On Our Norms.
This chapter examines the premise that in addition to lifetime experiences, an individual’s reference group will have an impact on his or her norms and behaviour. Two cases are considered. In the first case, the person’s reference group is known, such as people of the same age, education and job type. In the second case, the person’s reference group is not known beforehand, and the reference group is estimated based on the person’s norms on income. The reference group is described by a social-filter model, which assigns much weight to persons who are ‘nearby’ and less to those ‘far away’, socially speaking.
9. Health And Subjective Well‐Being.
This chapter examines the possibility of measuring the effects of specific diseases on health and quality of life. Two methods have made this possible. The first is the satisfaction model developed in Chapter 4, which allows the assessment of money values equivalent to the losses in well-being caused by illness. The second method is a new quality adjusted life year concept, which provides an intuitively plausible concept that is easy and cheap to collect the basic data for.
10. The Effects Of Climate On Welfare And Well‐Being—External Effects.
This chapter examines the effects of climate on welfare and well-being. Climate is shown to be a multidimensional phenomenon with complex effects on financial satisfaction and general satisfaction. This case is considered a particular instance of a more general problem: how to estimate the effect of an externality in terms of satisfaction and monetary compensation to neutralize externality differences. Most external effects are neither completely internalised nor completely non-compensated through market income and prices. This method makes it possible to assess how far the externality is compensated, and the size of residual effects.
11. How To Find Compensations For Aircraft Noise Nuisance.
This chapter examines the monetary compensation needed to neutralize aircraft noise for households living around the Amsterdam airport. Two cases are considered. In the first case, houses with a noisy environment are cheaper than houses in a quiet environment, while there is no price adaptation in the second case. It is shown that Amsterdam housing costs do not depend on the noise, meaning the housing prices and rents do not appear to internalise the external effect completely.
12. Taxation and Well‐being.
This chapter examines the feasibility of a lump-sum tax based ‘ability’, defined as a function of IQ and education. Empirical research on a Dutch database shows that shifting from income-based to an ability-based taxation would not have devastating effects on short-term net income positions. Although individuals with low IQs will have to pay extra taxes while those with the highest IQs mostly gain, this effect is restricted to a gain or loss of roughly just 10% of net monthly income. These small effects are attributed to the equitable tax rates in the Netherlands, and the limitation of the study to full-time employees.
13. Subjective Income Inequalities.
This chapter presents a concept of subjective income inequality based on an extension of the objective income concept. Income satisfaction inequality differs from established measures of inequality using individual perceptions as the basis for making incomes comparable. Traditional measures of inequality introduce subjectivism via intuition by for instance, imposing family equivalence scales or by introspection in choosing concrete welfare function specification. The introduction of income satisfaction does not imply that the objective measurement should be replaced by subjective concepts, but only that each measure has a different role to play.
14. A Generalized Approach to Subjective Inequalities.
This chapter applies the subjective income inequality concept developed in Chapter 13 to analyse inequality in domains of life other than finance such as health, job, marriage, etc. It is shown that if satisfaction vector inequality is defined as a variance-covariance matrix of a vector of individual satisfactions, those satisfaction dimensions are highly correlated. The inequality of satisfaction with life as a whole can be defined as an aggregate of several domain satisfactions, which is a more important index to evaluating the distribution of well-being in a population than inequality with respect to one domain.
15. Poverty.
This chapter explores the poverty phenomenon, distinguishing between the status of objective poverty and the subjective feeling of poverty. It is argued that defining objective poverty in terms of a minimum income or ‘basic needs’ runs the risk that some people who are officially declared to be ‘poor’ feel ‘non-poor’ and vice versa. A multidimensional poverty concept is presented, conforming to the approach to multidimensional inequality.
16. Epilogue.
This chapter synthesises the findings presented in the book. It highlights the success in developing a methodology that can analyse satisfaction along the lines similar to those used by econometricians to analyse ‘objective’ variables. Future research should focus on developing methods that can estimate decision-utility functions for other domains, the relevance of the neoclassical equilibrium assumption, and the importance of collaborating with sister disciplines.
End Matter.
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