Stefano Bartolini

Environmental and social degradation as the engine of economic growth

Abstract In this paper, a commonly owned resource (an environmental or social asset) and a private good are substitutes in consumption. The households can buy the private good on the market, while the resource is available for free. The resource is renewable, but its ability to regenerate declines with the level of aggregate production: each single firm producing the private good has only a negligible impact on the resource, but the impact caused by the entire population of firms is considerable. In the face of a decrease in the stock of the resource, households are induced to increase their participation in market activities in order to raise their income and buy more private goods. Hence, each household contributes to a further increase in aggregate production, thus causing additional damage to the resources ability to regenerate and feeding the growth process. Given the presence of negative externalities, multiple equilibrium paths are possible. In this situation, social conventions may guide individuals to coordinate expectations and behavior toward a particular steady state: one can speculate that the dominance of cultural values favorable to a lifestyle based on a mix of high consumption and hard work leads the economy to converge on a Pareto-inferior steady-state.

Did the Decline in Social Capital Depress Americans' Happiness?

Most popular explanations cannot fully account for the declining trend of U.S. reported well-being during the last thirty years. We test the hypothesis that the relationship between social capital and happiness at the individual level accounts for what is left unexplained by previous research. We provide three main findings. First, several indicators of social capital are significantly correlated with reported happiness. Second, social capital indicators for the period 1975-2004 show a declining trend. Finally, the trend of happiness can be largely accounted for by the increasing trend of income, the increasing trend of reference income and the declining trend of social capital – in particular by the decline of its relational and non-instrumental components

Negative externalities, defensive expenditures and labour supply in an evolutionary context

In this model, well-being depends on leisure, on an environmental renewable resource, and on a non-storable output, which can substitute for the environmental resource or can satisfy needs different from those satisfied by the resource. Individuals have free access to the environmental resource, which is subject to negative externalities: that is, is depleted by the production and consumption of the output. Individuals react to negative externalities by increasing their labour supply in order to produce substitutes for the diminishing resource. The increase in production and consumption that ensues generates further deterioration of the future quality or quantity of the free resource, thus giving rise to a self-reinforcing process. Multiple equilibria and ‘critical mass effects’ are consistent with the functioning of this economy and the resulting level of aggregate production may be higher than is socially desirable.

Undesirable growth in a model with capital accumulation and environmental assets

The expansion of private production erodes the quality of commonly owned assets, thereby forcing individuals to rely increasingly on private goods to satisfy their needs. In the face of this deterioration, households increase their work effort and accumulate more capital in order to buy more consumer goods both in the present and in the future. By so doing, each household contributes to an increase in production and thus has a detrimental—though negligible—impact on commonly owned assets. Hence, the economy converges to a long-run equilibrium level of production that is higher than the level associated with the Pareto-efficient path.

Why are People so Unhappy? Why do They Strive so Hard for Money? Competing Explanations of the Broken Promises of Economic Growth

This book is a welcome consolidation and extension of the recent expanding debates on happiness and economics. Happiness and economics, as a new field for research, is now of pivotal interest particularly to welfare economists and psychologists. This Handbook provides an unprecedented forum for discussion of the economic issues relating to happiness. It reviews the more recent literature and offers the interested reader an insight into the vast scope of the field in terms of the theory, its applications and also experimental design. The Handbook also gives substantial indications as to the future direction of research in the field, with particular regard to policy applications and developing an economics of interpersonal relations which includes reciprocity and social interaction theory.

Predicting the Trend of Well-Being in Germany: How Much Do Comparisons, Adaptation and Sociability Matter?

Using longitudinal data from the German Socio-Economic Panel, we estimate the variation of subjective well-being experienced by Germans over the last two decades testing the role of some of the major correlates of people’s well-being. Our results suggest that the variation of Germans’ well-being between 1996 and 2007 is well predicted by changes over time of income, demographics and social capital. The increase in social capital predicts the largest positive change in subjective well-being. Income growth, also predicts a substantial change in subjective well-being, but it is compensated for about three fourths by the joint negative predictions due to income comparison and income adaptation. Finally, we find that aging of the population predicts the largest negative change in subjective well-being. This result appears to hinge on the large loss of satisfaction experienced by individuals in old age.

Building sustainability through greater happiness

The current unsustainable growth of the world economy is largely a consequence of the crisis of social capital experienced by much of the world’s population. Declining social capital leads economies towards excessive growth, because people seek, in economic affluence, compensation for emotional distress and loss of resources caused by scarce social and affective relationships. To slow down economic growth requires an increase in social capital that is a fundamental contributor to happiness. From a wide range of possible approaches to increasing present happiness, this article suggests policies that would shift the economy to a more sustainable path. It focuses on a more politically sustainable set of proposals for a green ‘new deal’ than some of those currently under discussion.

Buying alone: how the decreasing American happiness turned into the current economic crisis

This book will broaden the public and policy discourse on the importance of well-being by examining psychological, social, environmental, economic, organizational, institutional and political determinants of individual well-being.

Growth and Accumulation as Coordination Failures

We show that accumulation and growth can be fed by negative externalities. We modify a growth model a la Solow-Ramsey, in which the labor\leisure choice has been included, in three ways: i) the welfare of agents also depends on a common; ii) the latter is deteriorated by the production of the output; iii) the output can be used as a substitute for the common besides satisfying needs different from those satisfied by the common. We show that the reaction of agents to negative externalities is an increase in their labor supply and accumulation aimed at raising their (present and future) production and consumption of the output, in order to off-set the decline of their well-being. By doing so they feed back the deterioration of the common, generating a self-reinforcing mechanism in which growth causes negative externalities and negative externalities cause growth. The main motivation behind the construction of a model based on this mechanism is to provide a formal structure for the enormous quantity of literature and knowledge (a) on the environmental, social and cultural fractures generated by growth, and (b) on the fact that these cleavages are, paradoxically a necessary condition for growth. By interpreting the resource as the capacity of the natural and social environment to provide welfare to the agents, we refer to a knowledge that has traversed two centuries of industrial history.

Social Assets, Technical Progress and Long-Run Welfare

The scope of this chapter is to confute the idea that technical progress is necessarily welfare increasing. Indeed, we show that policies stimulating technical progress that augments the efficiency of the inputs used in the production of market goods can lead to an acceleration of output growth, but they may depress long-run individual well-being. At the root of this undesirable effect of growth-enhancing policies, we identify the detrimental impact of higher levels of consumption on social and environmental assets constituting important sources of people’s welfare. In turn, the decline in the quantity and quality of these common property resources may feed the growth process by inducing the economic agents to intensify both the accumulation of private assets and the work effort, so as to have access to more market goods as substitutes for the declining quality of social and environmental assets. Conversely, we demonstrate that policies creating incentives for a more sober lifestyle improve long-run welfare, but they tend to depress productivity and output growth by inducing the economic agents to allocate less efforts and resources to enhance the production of market goods. Finally, we consider policies aimed at reducing the negative effects of consumers’ activities on social and environmental assets, and we show that in the long run they lead to a lower rate of output growth and to a higher level of individual well-being.