TITLE:
Greed Supports Economic Growth But Might Make Us More Miserable
AUTHORS:
Ben David Nissim, Tavor Tchai, Winer Zvi
KEYWORDS:
Frustration, Desires, Equilibrium, Two Period Consumption Model
JOURNAL NAME:
Theoretical Economics Letters,
Vol.6 No.3,
June
9,
2016
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.