Index [assets.cambridge.org]assets.cambridge.org/97805218/56652/index/9780521856652_index.pdf · Index Aadland, D. 437 Aarhus, K. 386 ... fast and frugal heuristics 7, 518 income

Index

Aadland, D. 437Aarhus, K. 386Abbas, A. 191Abrahamse, W.L. 371acquisition race 286, 300actor networks 365, 367, 373actor–critic learning 467–72adaptation(s)

causal role in economic change 495different timescales of occurrence 494fast and frugal heuristics 7, 518income and happiness 207, 210, 211levels of 494and material norms 208–10new insights triggering behavioural 494past experience and 43, 49, 513toolbox analogy 7, 518see also hyper-adaptation

additive differences 235adjustment see anchoring and adjustmentAdmati, A. 162adolescents, development of saving behaviour

123–6advertisements

and identity 182, 185, 190, 192income and happiness 211

advertisingand the art of marketing 350car 388conditioning theory in 242and consumption technology 506, 509framing effects in 243matching with consumer decision-making

245to promote sustainable behaviour change 354,

367affect

and cognition 54, 76, 113–14, 116, 199influences on expectation formation 52–6information processing and 243, 244, 501measures of positive and negative 199

affect heuristic 53, 54affect referral 235affective forecasting 53, 54–5

Affective–Analytic choice model 243,244

agency, and social structure 351agenda setting 509aggressive tax planning 319, 321, 322agriculture, liberalization of European 267Ahmed, Eliza 308, 317Ahuvia, Aaron C. 6, 199–220, 343Ainslie, G. 109, 112Ajzen, I. 17, 51, 233, 437, 441, 442–5Akerlof, G.A. 16, 67, 69–71Al-Atawneh, Maged 214Alesina, A. 202, 289alienation, and tax evasion 308Allais paradox 73Alpert, M. 28altruism 282

economic behaviour and evolutionarypsychology 519–21

and environmentally significant behaviour366, 392, 409, 446

evidence in animal behaviour 496, 519and government services 271–2and government size 287–8, 300impure 410in primitive societies 496problem of tastes 520as a public good 290pure 409selfish 445and social norms 521‘strong reciprocity’ 521, 523see also kin altruism; reciprocal altruism

Alvarez, R.M. 270Amato, P.R. 149ambiguity, neural correlates of decisions under

464–5American Revolution 311amygdala 462, 463 (fig. 19.3), 464, 485anchoring and adjustment 50–1, 73, 258Andersson, P. 60Andreoni, James 308Andrews, Frank M. 212Angeletos, G.-M. 246

527

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528 Index

animal spirits 68, 71animals

altruism in 496, 519apparently rational behaviour 518commonalities with humans 513economic behaviour shared with 7immediate vs. delayed gratification 111innate behaviour 496learning by conditioning 242revealed preference theory and 11

ANOVA (analysis of variance) 29anterior cingulate cortex (ACC) 485anthropology 122, 341, 518, 523Antonides, Gerrit 6, 227–47anxiety, and happiness 205arbitrage 257

delayed 77limits to 65, 77–8opportunities and market efficiency 71, 77, 84synchronization risk 77

arbitrage pricing theory (APT) 66Aristotle 217, 219, 243Arnould, E.J. 186Arrow, Kenneth 433artificial intelligence 22, 484Ashby, K.J. 146, 150Asia, car ownership 384Asness, C. 86asset allocation, studies of 76asset prices

empirical methods in research 82expectations models 66, 68, 70–1mis-valuation 172resource allocation and investor biases 172

asset pricing theory 64, 81, 89Associative versus Rule-based system 243Atkinson, T. 143attention

role in evolutionary economic behaviour500–3

selective process 501, 502, 506attitude models in psychology, compared with

utility concept in economics 232attitude–behaviour models, of contingent

evaluation 430, 431, 437, 442–5attitudes

contingent valuation method (CVM) 442–7differentiated in theory of reasoned action 232national surveys 261origins of lay, about government 272–3policies and public 293to behaviour defined 443to money 522

attribution theory 29, 32and cognitive learning through insight 500and cultural differences 29success to skill and failure to chance 74, 171

auditing 158Australia

Eureka Stockade (1852) 311SRI funds under management 166

automobile see carautonomy, behavioural 411availability heuristic 44–5, 69, 171, 283

experience-based 44imagination-based 45memory-based 45

Avellar, S. 147avoidance products 186Ayduk, O. 113Ayres, I. 162

Baker, N. 81Ball, R. 79Bange, M.M. 76bank, children’s use of 124, 125Banks, J. 118Barber, B.M. 27Barberis, N.A. 48bargaining

gender differences in 137‘integrative’ 140in marital financial decisions 140

Barkema, Harry G. 415Barkow, J. 513Barlow, A. 134, 145Baron, J. 29, 257, 259, 260, 269, 272Barro, R. 67, 70Barth, M.E. 80base-rate fallacy, and representativeness 45–7,

74Basu, S. 79Bateman, I.J. 442, 446Baumeister, R.F. 114Bayes’ theorem 46, 67, 68, 72, 74Beaver, W. 87Becker, G.S. 30, 135, 305behaviour

contingent valuation method (CVM) 442–7cultural influences on 513the evolutionary psychology of economic

impacts on individual 521–3influence of evolutionary past on 514,

515irrational or anomalous 173, 267, 516multiple kinds of selection in 520as plastic 513sociobiological approach 496ultimate sources of 478, 481

behaviour changedifficulties in achieving sustainable 354, 356,

392fit between intervention and barriers to 372goal-setting process in 393






Index 529

model for pro-environmental behaviour 356,356 (fig. 14.5)

Behavioural CAPM, noise traders 46, 79behavioural economics 3, 67, 69, 245, 246, 300,

483, 516behavioural finance 5, 40

cognitive psychology in 53and experimental economics 458heuristics in 43and investor sentiment 89, 157, 171and irrational investor behaviour 155origins of 64, 68, 71and stock prices 64–90, 173

behavioural therapy, conditioning theory in 242behaviourism 4, 20, 513

and cognitive simplification 73costs and benefits 12economics of incentives 24–6and experimental economics 430and observation 217positivism and 498psychology and 24, 217rational in economics 10–13, 30‘shallow’ explanation 22

behaviourist theories, Lyons’ checklist foridentifying 11

beliefsabout ego 285–8about preferences 288, 288 (table 12.2),

288–90about probabilistic judgement 443about rationality 282–5and environmentally significant behaviour

366–7the importance of 288–9and intentions 232investor 16, 58, 67, 68, 77, 89, 171, 174as possessions 182rights-based vs. consequentialism 448see also ethical beliefs; lay thinking

Belk, Russell 5, 181–92, 211, 344Benabou, R. 26, 32beneficiary interests, and fiduciary duty 164, 165‘benefit debt’ 140benefits

overvaluing extrinsic and undervaluingintrinsic 215

tax assessment of 305, 307, 308–9, 321, 323Benos, A. 27Bentham, J. 497, 498, 517Benz, M. 274Benzion, U. 107, 108Berle, A.A. 158Berman, G. 290Bernstein, R. 86Berry, M.A. 84Berthoz, S. 20

Besley, Timothy 316Bettman, J.W. 31Biais, B. 21, 27, 29biases

in category rating 260and error 12, 74investor 157, 170, 171, 172, 173sources of 74

biases and heuristics see heuristicsBih, H.-D. 186biofeedback, conditioning theory in 242biological perspectives 7, 457–87, 493–509,

512–23biology, evolutionary 495biospheric values, in environmental issues 392,

445, 446births, outside wedlock 134, 145Biswas-Diener, Robert 203, 206BiTC report (1998) 161Blanchflower, David G. 199, 212Blume, L.E. 71, 78Blundell, R. 118body parts, as possessions 182Bolle, F. 520Bonsall, P. 384Bonsu, S.K. 184borrowing, government 294borrowing and saving 5, 105–27

expectations, uncertainty and time horizons117–22

inter-temporal choice 115–16bounded rationality 68, 71, 282, 394, 495,

517–19evolutionary explanation 519

Bowles, S. 521Boyd, R. 521Bradley, Cassie F. 311Brady, D.S. 122brain

adaptive changes during the Pleistocene era514

affective and cognitive systems in 116as ‘black box’ 458capabilities and constraints as natural

selection 493collectives and individual 14economic variables in the 461, 482evolutionary efficiency as inherently

economic 7functions of two hemispheres 7happiness and states of 200, 218how choices are made in 457–87impulsive ‘go system’ and cognitive ‘know

system’ 113–14locus of emotion in 7locus of language interpretation 7locus of speech production 7






530 Index

brain (cont.)neural computations in 457neural structures 485–7parts responsible for economic decision

making 7recombination activities 502

brain activity imaging 113brain functioning, economic rationality and see

neuroeconomicsBraithwaite, Valerie 6, 304–24brand

compared with product 348history of failures 349

brand community 182brand cults 182brand identity

and consuming counterfeits 189–91derived from personalities 190luxury goods 190marketing communication of characteristics

234measurement through personality inventories

190power of 190

brand loyalty 348Brand, Phil 315, 317Breiter, H.C. 18British Household Panel Survey, borrowing

118British Social Attitudes Survey 261, 269British Survey Attitudes (BSA) 293Broadbent, D. 22Brook, L. 272Brooks, L.D. 86Brookshire, David 430Brown, J. 28Brown, L.D. 88Brown, S. 118Browning, M. 119Brugiavini, A. 118Brumberg, R. 116Bruner, J. 22Brunnermeier, M.K. 80Buchanan, J.M. 294Buckmeister, D.A. 86budget, balancing government 255budget games 264Buller, D.J. 513Burchardt, Tania 207Burgess, J. 441Burgoyne, Carole 5, 26, 120, 120 (fig. 5.3), 122,

132–50Burns, M. 147Burt, C.D.B. 270Buscato, T. 26Bush, George W. 290

businessesexpectations of 49forecasts 56peaks and troughs in cycle and investor bias

173social responsibility 5

Buss, D.M. 513Buunk, B.P. 143

Calcutta, income and happiness study 203, 206CalPERS, shareholder activism study 162Calvin, Lyle D. 308, 310Camerer, C. 7, 12, 18, 26Cameron, Judy 415Campbell, Angus 209Canada, preference drift 210Canetti, E. 75Canova, L. 121capabilities 339, 340

in environmentally significant behaviour inthe home 368

capitalaccumulation and transformation of the

economy 493interrelated forms of 340, 341

capital gains tax 77capitalism, spending allocations 273Caplan, A.J. 437car design 388car ownership

as a determinant of car use 384economic and psychological determinants of

7, 383–98historical trends 383–4

car usedeterminants of 384–9economic factors 387–8economic and psychological determinants of

7, 383–98environmental and societal costs of 383, 389,

392, 397as a habit 389historical trends 383–4household reduction goal setting 394–5instrumental factors 385in-vehicle information systems 392policies to reduce or change 389–96, 397psychological factors 388–9, 397utilitarian tool-function 386value of driving 389

carbon emissionand climate change 336, 357taxes and environmental morale 418–19

Carbone, E. 247care-giving, and economic practices 133Carlsmith, J.M. 24, 25






Index 531

Carroll, C.D. 117, 118, 119Carroll, John S. 316Carson, R.T. 432, 436cathexis 188caudate 475, 475 (fig. 19.9), 476, 479,

486causal models 31

statistical methods for testing 28systems accounts of human behaviour 523

causal path analysis 29central banks, control of inflation 266cerebellum 467Chaiken, S. 243Chamberlain, Edward 227Chan, L. 81Charest, G. 65charitable giving 520

and attitudinal concerns 431government welfare provision and 290as zero-cost fund-raising 288

Chen, J. 77Chen, S. 243Chicago, immigrants’ perception of tax system

313children

delayed gratification in 112, 113, 124development of saving behaviour 121, 123–6policies to enhance well-being 132

China, car ownership 384Chirinko, R.S. 172choice

consumption and personality 183, 243,244

as created by natural selection 493economic behaviour and evolutionary

psychology 517–19framing effects in 493game theory of strategic 485‘informed’ 339microeconomic theory of 520modelling and characteristics 231, 482–5multi-attribute models 247neural correlates of 458and preferences 217role of alternatives in evolution 493social context 5, 355social nature of 5, 347under risk and ambiguity 458values and lifestyle in consumer 243, 349see also consumer choice; dynamic choice;

freedom of choice; inter-temporalchoice; multi-period choice underuncertainty; rational self-interest model

Chomsky, Noam 22, 513Chordia, T. 83Chuchinprakarn, S. 191

Cialdini, R.B. 51cingulate cortex 486

posterior 465social agency map 476, 477 (fig. 19.10)

Ciriacy-Wantrup, S. 430citizens

participation in decision making 413, 416satisfaction with government services 6tax compliance perspective 6, 304views of government economic activities

255–75citizenship

environmental 368tax compliance as good 290

civic virtue 416Clark, Andrew 207, 209Clark, J. 441Clarke, V. 143Claussen, E. 384climate change, and carbon emission 336, 355,

357Clinton, Bill 39Cochrane, J.H. 173co-evolution, genetic and cultural 515, 520,

523cognition

affect and 54, 76, 113–14, 199and affect systems in the brain 116as created by natural selection 493and economic behaviour 494, 500–3human compared with animal 513

cognitive biases 43, 257see also biases

cognitive dissonance 24, 313, 366cognitive evaluation theory

of intrinsic motivation 414and norm theories 411

cognitive explanation, the need for 20, 24–9cognitive motivations, in consumer behaviour

243cognitive processes

errors 43framing by 12realist models of 13

cognitive psychology 3, 5, 31, 39, 48, 283and Darwinism 513see also Gestalt psychology

cognitive schemata 73, 83cognitive science 523cognitive theories

and affect 243creating and testing in economics 20–2and experimental validation in psychology

24nativism 513the need for in economics 24–6






532 Index

Cognitive–Experiential model 243cohabitation 134, 145–7, 149

diverse forms 145, 146for tax and benefit purposes 146wills and property rights 146

coherence 23collectibles 184, 507collective identity, and possessions 186collective level 13

individuals and brains 14collectivism, and materialism 186‘combination goods’ 507, 509commodification 191, 338commodity fetishism 189, 522common sense, definitions of 283commons, management of 411communication strategies

disincentive schemes and 31for environmentally significant behaviour

370–3communications, government spending on

293communism, spending allocations 273community, erosion of 357Commuri, S. 191comparative advantage principle 267, 268compensation

and motivational crowding out 421and willingness to pay 438

competition, in primitive societies 496competitive markets, and happiness

maximization thesis 282compliance 75compromise, in household financial decisions

138compulsive consumption

and materialism 187–8and self-enhancement 188

computation, biological devices 458computer science 22

formalized multi-period choice problems 484concern for others see altruismconditioned reinforcement 494, 496, 499, 500,

506primary reinforcers 498, 499, 507secondary reinforcers 499, 506

conditioning, classical 242see also instrumental conditioning; learning

by conditioning; operant conditioning;Pavlovian conditioning

confidencedecision 74and hindsight 49

confirmatory bias 171conformism 75conjunction fallacy 46

conjunctive decision rule 235Connelly, N.A. 444consensus beliefs (CB) 72consequences

awareness of 446beliefs about probabilities of 443

consequentialism, vs. rights-based beliefs 448conservatism 47–8, 74

and human misaggregation of data 48and representativeness heuristic 48

conservative parties 396consistent planning 112conspicuous consumption 286consultation, and democratic deliberation on

taxation 322, 323consumer behaviour

assumption of rationality 228comparing models of 6, 227–47dual process models 243economic models 228–32, 245expectations in 118, 234, 245explanation of changes in 246, 505–8factors in 228, 246heuristics 235–7homeostasis in 243information processing 243integrated models 246interpersonal influence in 122intuitive, heuristic and emotion-based

model 6learning by conditioning 241–2, 246loss aversion 237–40, 245mixed type theories 243–5, 246motivations 243other psychological processes 242–3overview of models 228, 229 (table 10.1)in the private sector 5psychological models 232–4, 245psychophysics 241, 246in the public sector 6, 255–75, 281–300,

304–24rule-based, systematic and analytical model 6system I type models 234–43, 245system II type models 228–34, 245‘thrifty’, ‘precommiters’ and ‘spendthrifts’

112traditional family decision making 140–2use of cognitive models of persuasion 27, 31

consumer choicecost minimization and energy use 372and personality 183, 243, 244rational 335, 368

consumer culture, global 191consumer debt 338

and increased consumption 202consumer ethics, cross-cultural study 191






Index 533

consumer satisfactiondevelopment of consumer preferences 242measuring 234

consumer societypersonal and social strategies for a 219, 349structure of 336

consumer sovereignty, doctrine of 516consumer spending

and rise of ‘combination goods’ 507, 509and rise in per capita income 504, 507

consumer–citizen perspective, on tax compliance6, 304, 314, 321, 322, 323, 324

consumerism‘iron cage’ of 349–52replacement by high-tech gift economy 189and sustainable growth 345

consumers, defining actual preferences 504consumption

changing patterns 335, 342, 353, 508decreasing marginal utility of 106, 230of economic goods and services vs. material

resources 336efficient 336environmental and social impacts of 343,

504evolutionary economic approach 503–8, 509government role in creation of culture of 355,

357and identity 5, 181–92inconspicuous or ordinary 350and lifestyle 346materialism and compulsive 187–8patterns and habit 351patterns through groups 122relative and happiness 286role of culture in identity and 185–6seeking identity through 186–9specialization in 506, 509unsustainable 337vicarious 186wealth and happiness 6, 199–220see also conspicuous consumption; household

consumption; sustainable consumptionconsumption community 182consumption subculture 182consumption tax, proposal 219‘contingent’ theories 31contingent valuation method (CVM) 7, 429–48

attitudes, behaviour and ethical beliefs 430,442–7

bias in 430, 434–41as ‘dialogue-at-a-distance’ 436ethical beliefs in 430, 441, 442–7, 448of government activity 260, 271hypothetical bias 430, 435–7information bias 430, 439–41

measurement of option, existence and bequestvalues 429, 445

National Oceanic and AtmosphericAdministration (NOAA) guidelines 432,433, 439, 448

problems with 259and the psychological perspective 430–2reasons for surveys 447strategic bias 430, 434–5, 436survey design 430, 433–41, 447willingness to pay vs. willingness to accept

430, 437–9contract laws 282contrast and compromise effect 236contrastive explanation 16, 29control

explanation and prediction 14, 26formal mechanisms 158gender differences in marital decision making

141separation from ownership 158see also illusion of control

conventions 156defined 171influence on institutional investors 156, 168,

171, 174Converse, Philip E. 209Coon, G. 189Cooper, P. 446cooperation

conditions for successful environmental411–12

and free riding 411maintenance of 479problem in environmental issues 7, 407, 408,

423coordination problems 496Cornell, B. 89corporate conduct

expectations of acceptable 155institutional investors and 158

corporate environmental responsibility 423corporate governance 157

and corporate responsibility 161, 163responsibilities of institutional investors 156,

159standards 155

corporate performanceand the ‘bottom line’ 157effect of institutional corporate governance on

162and environmental, social and corporate

governance performance (ESG) 163good governance and responsibility 163improving 161

corporate reputation 163, 168, 169






534 Index

corporate social responsibility (CSR) 5, 155–74corporations

accountability 155, 159impact on developing countries 155monitoring of 158, 162transparency 155weakening of shareholder control 158

correspondence criterion, for decision making517

cosmetic surgery 185Cosmides, L. 46, 513, 518cost–benefit analysis, of public policy 432cost-minimizing principle 394, 395counterfactual reasoning 19counterfeit goods, consuming and brand identity

189–91couples

heterosexual cohabiting 145–7same sex 147–8see also marriage

Cowton, C.J. 156, 159, 167Cragg, J.G. 87Cramton, P. 162creative skills 502credit attribution, social modelling of 476crime, economic theory of 305Crisp, R. 159Croson, R. 10, 28, 29crowding effects 25, 410

in environmental policy 416–22crowding theory see motivational crowding

theorycrowding-in effect 413, 415, 416

to preserve nature 419–20crowding-out effect 412, 415, 416Crush, Jonathon 313Csikszentmihalyi, M. 183, 187Cullinane, K. 385Cullinane, S. 385, 387Cullis, John G. 6, 269, 281–300, 307cultural differences

and attribution theory 29investors 76in notions of identity 185

cultural evolution 515, 520culture

changing to happiness via economic growth214–15, 218

evolution of the capacity for 515obsessed with economic growth 6role in identity and consumption 181,

185–6stages in development 515

Cummings, R.G. 430, 437Cummins, Robert A. 203, 220Cunningham, I. 142

currencychange of 266lay opinions of government dealing with

265–7Cyert, R.M. 72

Damasio, A. 76Daniel, K. 27, 171, 172, 173Daniels, T. 122d’Arge, Ralph 430Darwinism 493, 494, 495, 512

and the altruism problem 519–21and cognitive psychology 513

dating relationships 189Davidson, S. 290Davis, E.P. 162Davis, H.L. 141, 142Daw, N.D. 472Dawkins, R. 512, 515, 520De Bondt, Werner 5, 27, 41, 58,

64–90de Quervain, D.J.F. 479death, and loss of identity 184, 185debt

policies to encourage avoidance of 132and unhappiness 202

Dechow, P.M. 85Deci, Edward L. 414, 415decision making

collective efficient 294contingent models of 31correspondence criterion for 517debiasing strategies 31deliberative 352in economics 457financial in the household 5information processing capacity 368limitations of human 517neural representations of dynamic sequential

458neuroeconomics and 458rational models 523rational models and happiness seeking 216,

220routine 351social nature of 5statis theories 493System I and System II 228–43under ambiguity 464–5under risk 74, 76, 464see also economic decision making; financial

decisions‘decision utility’ 217, 218decision weights 283decisions

delaying 235






Index 535

economic behaviour and evolutionarypsychology 517–19

government and private 255–7optimal decision rule 518

decoding, and encoding 441deduction, in economics 21, 30DeGroot, M.H. 72Del Guercio, D. 165demand

characteristics approach 231curves in animal welfare 519in developed countries 504operational hypotheses about behaviour in

terms of prices 498satiation–deprivation dynamics 504–8

demand theory 230–1characteristics approach 231

dematerializing 189democracy

and consent to rule of law 309and contingent valuation method 436direct 255, 274, 416direct and well-being 258, 295, 323economic prosperity and happiness 214,

293–6and government economic decisions 255, 256,

273representative 274and taxation 308, 312, 314valuing and tax compliance 308, 314, 322–3

democratic deliberation, and consultation ontaxation 322, 323

Denmark, income and happiness 212deprivation–satiation dynamics 498, 499, 504–8Dequervain, D. 19deregulation 338, 356, 396desires 16, 185developed countries

demand in 504income and reported well-being 343views on free trade 268vulnerabilities in 342

developing countriesimpact of corporations on 155poverty reduction in 340, 342views on free trade 268

deviation models 16, 30Devinney, T. 191Dholakia, R.R. 186Di Tella, Ravael 202, 213Diener, Carol 215, 220Diener, Ed 203, 205, 206, 212, 215, 220,

261Diener, Marissa 215Diether, K. 77Dietz, T. 392

difference, Mill’s method of 23directors

and shareholder engagement 167shift in decision-making from shareholders to

158disappointment, and regret 74disappointment aversion 247disaster preparedness 371discounted utility (DU) model

‘absolute magnitude effect’ 108assumptions 106, 107–9, 119, 122and children 125of inter-temporal choice 106–7‘sub-additive discounting’ 107and variability of subjective discount rates

107–9discounting

neural activity related to different systems465, 466 (fig. 19.4)

see also exponential discounting; hyperbolicdiscounting; subjective discounting

discrimination 47discursive elaboration 348disjunctive decision rule 235disposition effect 17, 19distributive justice, in the family 133Dittmar, H. 186, 188, 189division of labour, household 135, 148divorce laws 132, 134, 135, 143Dodd, D.L. 68, 70–1, 78Dohi, I. 184Dolman, V.A. 143Dominitz, J. 57donation see charitable giving; gift-givingdopamine neurons

of monkeys in Pavlovian conditioning 466in primates 468, 470 (fig. 19.7), 471

dopamine system in midbrain 114dorsal striatum 19, 464, 466, 467, 487dorsolateral prefrontal cortex (DLPFC) 465,

478, 487Douglas, M. 346downshifting 189, 335, 336, 353Drakopoulos, S.A. 209Dreman, D.N. 80, 84Duesenberry, J.S. 122Duncan, S. 134Dunlap, R.E. 444durability bias 206durables, tool function of 506Dutch Postbank Investor Barometer 58dynamic choice, neural representations of

466–73

earnings, right to own and control within thefamily 133, 148






536 Index

earnings per shareactual and predicted 65, 81, 86–9price momentum and price reversals 83, 85

Easley, D. 78Easterlin, Richard A. 202, 210, 212, 215Easterlin’s Paradox 210, 214Easterwood, J.C. 88Eckhardt, G.M. 186, 191ecology 344, 392, 519

and economy 516econometric studies, of crowding out 415economic behaviour

altruism and 519–21animals 7cognition and 494, 500–3culturally acquired 496and evolutionary psychology 514, 515,

516–21explanations of individual 516genetic endowment and 494, 495–7and innate non-cognitive learning

mechanisms 494, 497–500intra-household 132–50malleability of 508and psychology 3, 31psychometric scaling of 243role of human biological inheritance in 500,

509and self-control 111

economic change, causal role of behaviouraladaptations 495

economic decision making, parts of brain for 7economic decisions, lay perceptions of

government 255–75economic growth

culture obsessed with 6, 210and happiness debate 212–15, 218and inequality 213and optimism 219and standard of living 342, 343and subjective well-being (SWB) 214–15, 218

economic life-cycle model of consumerbehaviour 231–2

hyperbolic discounting 240Economic Psychological Realism 217–18economic psychology

and evolutionary psychology 7, 512–23of intra-household economic behaviour

132–50the role of evolutionary explanation in 515–16of the stock market 5, 39–60

economic rationality 4objective evidence of 4

economic systems, influence on individualhuman behaviour 515, 516, 521–3

economic welfare functions 247

economics 3, 457asymmetry with psychology 512behavioural characteristics of 10classical on happiness 217contribution to psychology 31creating and testing cognitive theories in 20–2as a deductive science 21, 30dependence on psychological assumptions 31lack of psychological realism 517levels of scientific question 14misunderstandings between psychology and 9and neuroscience 7, 457–87rational behaviourism in 10–13and regression analysis 29and sociobiology 523subdisciplines of 9theory and method in psychology and 4, 9–32see also evolutionary economics;

experimental economics; neoclassicaleconomics; New Welfare Economics

Economist, The, Intelligence Unit 345economists

indifference curves for theory preferences 13,13 (fig. 2.1)

use of psychology and neuroscience 13, 31use of subjective expectations data 57vs. environmentalists: value conflicts 441

economy 523and ecology 516transformation by evolutionary factors 493–5,

502Edgeworth 217Edmunds, A.M. 143education

conditioning theory in 242preference for government spending on 263,

293Edwards, Ward 47EEG, non-uniqueness of the inverse problem 458efficiency

neural computations 457, 458efficient market hypothesis 16, 17, 155

Fama’s taxonomy 68, 70and long-term responsible investment (LTRI)

170–1Miller–Modigliani model 66, 68, 70–1multifactor models 66rejection of 82, 173valuation models 65see also rational and efficient markets

effluent charges 414Egan, J. 388ego

beliefs about 285–8determinants of 286–7

egoism, and self-interest 281, 392, 445, 446






Index 537

Eichenberger, R. 283Einstein, Albert 220Eisenberger, Robert 415elaboration, discursive 348Elaboration Likelihood Model 243, 244Elder, H.W. 269elections see votingelectro-physiology 466Elffers, Henk 304Elizabeth, V. 146, 149, 150Elling, R.C. 261Ellsberg paradox 464Elton, E.J. 88embedding effect 431emotional responsiveness, and willingness to

take risks 76emotions

in consumer behaviour 243in finance 53and investment in the stock market 39, 47,

52–3, 171locus in the brain 7model of expectation formation 5and persuasion tactics in marriage 140social psychology studies 20surprises as 48

employmentas conversion of labour into money 522vs. free trade 267

encoding, and decoding 441endowment effects 12, 26, 188, 238, 283,

438energy

conservation programs (US) 354, 372liberalization of market 355organisms’ strategies to replenish 457

energy efficiency 338, 353housing 365interventions in the household 370–3investments in 372–3

energy use, in homes 369–70, 372Engel curves 230Englis, B.G. 186Enlightenment 11entertainment 508entrapment 239entrepreneurship 504–8

reward for 311environment 6–7, 335–58, 363–79, 383–98,

406–23, 429–48corporate responsibility and 157, 168direct or indirect influences of behaviour on

363–4monetary valuation of 429–48public good problem 407, 408–12sustainable consumption and lifestyle 335–58

Environment of Ecological Adaptation (EEA)514, 515, 518

environmental, social and corporate governanceperformance (ESG) 157

criteria 163, 165and the free-rider problem 163

environmental damage, and liberalization oftrade 338

environmental economics 406, 430environmental education 371, 419–20environmental goods, contingent valuation

259environmental issues, value conflicts 441, 448environmental morale

assumptions about 420importance of 406–8, 422institutional setting for 412meaning of 412model approaches to 409–11and motivation 7, 265, 406–23

environmental policycrowding effects in 416–22and environmental morale: motivational

crowding theory 412–22in the household 367, 369, 370–3instruments 406

environmental values 7, 366–7, 373, 406and human behaviour, contingent market

valuation 429–48orientations 392

environmentalism 363, 368, 396, 441environmentally significant behaviour

capabilities and constraints 367, 368, 373causal model 375, 376 (fig. 15.1),

377 (table 15.2)defined by impact or intent 363–4external or contextual forces 367–8habit or routine 365, 368–9, 373in the home 363–79influences on 364–9, 373–9personal motives and beliefs 365, 366–7predictors 364rational choice model 365, 375variables in 373, 374 (table 15.1)

epistemological problems 502Epstein, S. 243equality

in the household 133, 136, 143, 148,150

need or fairness 395equality of opportunity 289equilibrium

in game theory 485self-fulfilling 72states of the economy 494

equilibrium model (Smith) 15, 32






538 Index

equitycorporate holdings by G7 countries: statistics

159, 160 (table 7.1)in the household 133, 136, 149perceptions of 290and the tax system 312, 315

equity markets, influence of investor psychologyon 5, 67, 68, 89

equity prices, structure and dynamics of 64Ericsson, K.A. 60ethical beliefs, contingent valuation method

(CVM) 430, 441, 442–7, 448ethical investment 155, 156ethics

consumer 191financial performance and commitment to 163institutional codes of 157in service decisions 265tax 310

ethology 18eudaemonia 217, 219euro 265, 266

beliefs about 266resistance to the 266

Eurobarometer 261Europe

car ownership 384GDP per capita and happiness 202, 212,

213political feasibility of travel demand

management 396SRI funds under management 166

European Community, cohabitation statistics145

European Monetary Union 267Eurosif, size of SRI market 165, 166 (table 7.2)Eurostat, on car travel 384event triggers 84evolution 523

by natural selection 482concept in evolutionary economics compared

with evolutionary psychology 493Darwinian theory 493, 494, 495, 512, 513dual processes, genetic and cultural 515, 520,

523economic and role of human genetic

endowment 495–7efficiency as inherently economic 7, 457nature of behavioural drives 340

evolutionary economicsdefined 493–5example of consumption 503–8explanation in 502neo-Schumpeterian 495and psychology 7, 493–509, 516use of term 495

evolutionary psychologybroad sense of the term 513, 514characteristics 515definition 512–15and economic behaviour 516–21, 523and economic psychology 7, 493, 512–23narrow sense of the term 513, 514

excise tax 231exclusion 282executive control 465expectation formation model

of emotion 5, 52–6interview survey 56psychological for the stock market 40, 41–3rule of thumb 67, 70

expectationsassumption of rational 67–8, 70, 74confidence indexes and data 56consumer 234, 245false of future profitability 85income and happiness 207, 213intentional and contingent 42inter-temporal choice 117–22mathematical 39measurement of stock market 56–8psychological 39–60quantified in terms of probabilities 48revision of 500societal of acceptable corporate conduct 155in traditional family financial decisions 142see also extrapolative expectations

expected utility 247, 461–3, 482–3neural representations of 461–3rank dependent 247see also standard expected utility (SEU)

model; subjective expected utilitymodel

expected utility theory 13, 16, 73–7, 462, 482–3,485

expenditureanalysis of UK government 292 (table 12.3),

291–3discretionary spending 234government priorities on services 262–4social as percentage of GDP 296, 297 (table

12.5)see also spending behaviour

experience sampling methodology 199experience utility 218experimental economics 4, 9, 20, 246, 483

and behavioural finance 458and behavioural theories 430use of games 32, 271

experimental method 4, 10in economics and psychology 10, 12and scientific realism 27






Index 539

to test theory 23, 24see also quasi-experimental method

experimental psychology 4expert knowledge, of professional investors 159explanation 40

across two levels 17–20the autonomy of levels of 19cross-level 17‘deep’ 22depth of 9–24, 32in evolutionary economics 502hierarchical model 14instrumentalism vs. realism in explanation 12kinds of 13–17levels of 9–17, 32prediction and control 14, 26the role of evolutionary in economic

psychology 515–16‘shallow’ of behaviourism 22, 23within-level 16see also cognitive explanation; contrastive

explanation; generative explanationexploratory behaviour, brain regions in 473,

473 (fig. 19.8)exponential discounting 109, 465exposure avoidance 112externalities, and the environmental problem

406, 407externality problem 287extrapolative expectations 42, 44, 76, 84,

170extrinsic motivation 411

influence on intrinsic motivation 412, 417Exxon, use of contingent valuation method 431

Faber, R.J. 114, 187‘face work’ 186fairness 273

gender differences in neural correlates 480,481 (fig. 19.13)

neuroscience of 459, 478, 480perceptions of the tax system 312, 318perceptions of travel demand management

395reciprocal in environmental issues 407, 410or self-interest 481

Fama, E.F. 48, 64, 66, 68, 70familiarity bias 76family

alternative forms of 134, 149financial practices within 133generational transfer of saving behaviour 125influence on consumer behaviour 122, 126lone parent 132‘reconstituted’ 142rights and responsibilities in 149

the traditional 133, 135–45see also household

fashions 353Fechner, G. 241Fedorikhin, A. 114, 244feelings, and investment in the stock market

52–3Fehr, E. 5, 18, 19, 21, 22, 31, 478, 521Feinberg, R. 414Fenton-O’Creevy, M. 52Ferrari, L. 266Ferris, J.M. 263, 263 (table 11.1)Festinger, L. 24, 25, 209fiduciary duty 164

and long-term responsible investment (LTRI)164–5

Fiedler, K. 46, 47field studies, crowding theory 415Figlewski, S. 77, 78finance 5, 39–60, 64–90, 105–27, 132–50,

155–74modern 64, 65

financial decisions in the household 5, 132–50relative earning power and 148

financial marketseconomic theory of 39the individual investor and 39myopic behaviour in 170use of psychology in study of 40

fiscal approach, to promote sustainablebehaviour change 354

fiscal illusion 268, 294fiscal policy, benefits, justice and fairness of 6Fischbacher, U. 5, 18Fischhoff, B. 49, 50Fishbein, M. 17, 437, 442–5Fishburn, P.C. 106Fisher, I. 121, 522Fisher, S. 67, 70fitness 496

‘inclusive’ 496individual genetic 496in kin altruism 519

Fleming, R. 143focalism 55food industry, satiation problem 505Forbes, W. 88forecasting

analyst, management and time-series 87–9biases and errors in 74, 75, 88group mean (consensus) 75individual 75miscalculation in 75, 84, 88self-fulfilling 56statistical factors in 81see also affective forecasting






540 Index

Forest, Adam 318Forsyth, R. 14‘four armed bandit’ problem, neural correlates

of 472framing effects 74, 171, 493

in consumer decision-making 108–9, 126,243

in preference formation 429, 440–1and prospect theory 24in terms of reference point shifts 109

France, referendum on the European MonetaryUnion 267

Frank, Robert 219Frederick, S. 106, 107free trade 267

and the comparative advantage principle 267freedom of choice

consumer choice 335, 347, 357and cultures of happiness 214lack of in tax compliance 309and policy making 6

Freeman, R.E. 159free-rider problem 287

in contingent valuation 435and cooperation 411in environmental issues 407, 408, 423and long-term responsible investment (LTRI)

163and voluntary sector 288

French, K.R. 45, 66French Revolution (1789) 311frequencies, preferred to probabilities 46Freshfields 165Freud, Sigmund 243Frey, Bruno S. 7, 25, 26, 32, 203, 207, 210, 212,

215, 216, 217, 219, 258, 283, 290, 295,323, 406–23

Friedman, Douglas 200, 203Friedman, M. 116Friedman, R.D. 122Frijters, Paul 209, 210, 213, 215,

216Fromm, Erich 192frontal-polar cortex, bilateral 20, 473,

473 (fig. 19.8)fuel consumption 350Fuentes, Nicole 203Fujihara, T. 184functional magnetic resonance imaging (fMRI)

7, 114, 458of reward representations 459, 461

fund managementherding and 168and LTRI 167, 169and prudent person rule 164short-termism 167

Furnham, A. 123future

choices 112decisions about the 39–60generations and nature 406saving for the 117, 126

Gachter, S. 521gains and losses 108

contingent valuation 437, 439encoding 471neural representation of 20, 461

game theory 485equilibria in 485neural representation in 473–4strategic interaction 474

Garling, Tommy 7, 383–98Gasper, K. 53Gatersleben, B. 390GDP per capita

relationship with happiness 202, 204, 211,212, 213–14

and standard of living 342Gehring, W.J. 20Gemmell, N. 269gender

factor in household money management 148and overconfidence 27

gender differencesin bargaining 137consumption practices 188in financial preferences 148in marital spending decisions 137, 140–2

gender roles, social change 142, 143–5generalization 47generative explanation 14, 15, 22genes

and adaptation 494, 495–7and kin altruism 519selfish 481, 520

Gentry, J.W. 191Ger, Guliz 187, 188, 211German Socio-Economic Panel Study (GSEPS)

216Germany

Hundred Years War 311income and happiness 212, 213West and East differences in well-being 258

Gerson, K. 149Gestalt psychology 39, 41, 243, 502Ghana, Asante 184Gianotten, H.J. 118Giddens, Anthony 351gift economy

growth of 189high-tech replacing consumerism 189






Index 541

gift-giving 186, 188, 192, 519, 520‘warm glow’ effect 287, 290, 300, 410

Gigerenzer, G. 31, 46, 47, 517–18Gilbert, D.T. 54Gintis, H. 521Givoly, D. 65, 88Glimcher, P.W. 461, 468, 471Gneezy, U. 25goal setting

adaptation alternatives 394and attainment 393, 500conflicts in 396implementation intentions 394, 500

Gollwitzer, P. 185Gompers, P. 161, 162goods

‘language’ of 346with tool function 506, 507, 509see also ‘combination goods’; environmental

goods; primary goods; public goodsGordon growth model 87Gourinchas, P.-O. 117government

behavioural measures of value 256and consumer choice 335contingent valuation of economic activity

259costs of service provision 263, 270could it be improved? 273–5democratic compared with non-elected 273‘demonstration effect’ of action 290disillusionment in the West with 308gaining from the ‘nanny state’ 284,

284 (fig. 12.1)happiness-generating activity 290–6, 299ideal method of measuring value of economic

activity 260–1‘individual failure’ and the role of 282–5lay perceptions of economic activity 5,

255–75lay views on what it should do 261–2minimal 282, 291, 295 (table 12.4), 296motivation for 293optimum size 6, 286and perceptions of tax system 305, 308,

322and private decisions 255–7protection for investors 90psychology in decision making 255rating activity 260role in influencing consumer choice 6, 337services and altruism 271–2size debate 270, 281–300spending priorities on services 262–4and subjective well-being 255, 258–9trust in 295–6, 312, 322

valuing what it does 6, 255, 257–61welfare provision and charitable giving 290see also policy

government interventionand environmental morale and motivation 7,

416–22in markets 6, 283, 320for sustainable consumption 355, 357

government regulation 255, 262, 265, 367,416–17

institutional investment 164, 172Graham, B. 68, 70, 78, 80

The Intelligent Investor 79Graham, C. 208Grasmick, Harold G. 323gratification

brain locations for 114delayed 111, 114, 126

development of ability in 105, 112–14,123–6

immediate 114and long-term consequences 105, 111

Graves, S.B. 163‘greater fool theory’ 68, 71greed 520Green, C. 442Green, R. 142green parties 396Greenspan, Alan 66Griffin, Dale 48Groot, Wim 206Grossman, S.J. 65, 66, 67, 70group identity, and consumption of product

constellations 182group processes, social psychology of 14group selection 519, 520Guiso, L. 118Guyatt, Danyelle 5, 155–74

habitcar-use 389and consumption patterns 351, 357environmentally significant behaviour in the

home 365, 368–9, 373habituation 209, 212Hacking, I. 24Hagerty, Michael 212, 213, 214,

219Haigh, M. 166Hall, V.C. 414Hamilton, W.D. 519Hampel Report (1999) on role of shareholders

163Handy, S. 389Hanemann, W.M. 430, 431, 434, 438Hanley, N. 438






542 Index

happinessAristotle on 217, 219‘bottom-up’ versus ‘top-down’ theories of 205and brain states 200, 218cross-country comparison 202, 212–14,

295 (table 12.4), 296cross-country comparison of welfare states

and 297, 298 (table 12.6)‘cultures of’ 214, 215and economic growth debate 212–15, 218from additional consumption 286and GDP changes 212, 213–14government activity generating 290–6, 299and government sector size 281healthy, wealthy and wise 293for Homo economicus 282and income 200, 201 (fig. 9.1), 203, 204–10,

343marriage and 211and materialism 187, 205maximization and biases and heuristics

215–16maximization and competitive markets 282measurement 200, 217and money relationship 215–16, 219and multiple goals perspective 216, 219multiple happiness equilibria 298,

299 (fig. 12.2)and political participation 295–6and relative consumption 286self-report studies 199, 200, 220societal and national income 210–15socio-economic and political factors in 32subjectivity of 200, 218and utility 217–20variables in 202wealth and consumption 6, 199–220and welfare states 296–9and work 202see also subjective well-being (SWB)

Hardin, C.D. 44Harre, R. 15, 18Harris, C.J. 117Harris, R. 257, 270Harrison, C.M. 441Hartman, R.S. 239Haugen, R. 81Hayek, F.A. 14Hazelton, J. 166health services

funded through health insurance 264government priorities on expenditure 264–5lay preferences re provision 262, 263, 293state-funded 264UK government expenditure on 293

health-promoting behaviour 371

Heath, C. 52hedge funds, exposure to technology stocks 80hedonic editing hypothesis 239hedonic price functions 231, 247hedonic treadmill (adaptation) 206–8, 209, 210,

258, 344‘hedonometer’ 217Helliwell, John F. 202, 214herding 54

as gravitation to the ‘defensible’ 168of institutional investors 155, 160, 170, 171in mutual funds 170psychological factors in 174

Hertwig, R. 10, 12, 26, 49Hessing, Dick 304, 310Hesslow, G. 16heuristics 43, 68, 70, 235–7, 245, 493, 517

in decision rules 247fast and frugal as adaptive toolbox 7, 517–18and happiness maximization 215–16psychological 44simplification 50, 171, 235

Heuristic–Systematic Model 243Hey, J.D. 247higher-order functions, and neuroeconomics 458Hills, J. 293Hilton, Denis 4, 9–32hindsight

bias 49–50, 74, 171and sense-making process 55

hippocampus, left posterior 465Hirshleifer, D. 27Hite, Peggy A. 311, 312Hoch, S.J. 122, 123Hoffman, Betsy 430Hoffrage, U. 31, 46, 47, 49Hofmann, E. 142Hogarth, R.M. 12, 26, 74, 75home see householdHomo economicus 10, 11, 16, 40, 67, 69, 281,

285and competitive markets 282erosion of 30and Homo realitus 6, 287and market failure 282, 283, 285, 299representativeness questioned 282, 299, 300,

481Homo realitus 283, 300

described 282, 287and Homo economicus 6, 287and individual failure 285, 299neural underpinnings of 481

Hong, H. 85Hong Kong, car use 385, 387Hood, Christopher 311Hopkins, D.M. 191






Index 543

Horne, D. 185Horowitz, J. 108household

characteristics and car ownership 383characteristics and energy use 369consumption relative to income 117economic influences on 133embodied energy of equipment 368, 369energy use 369–70environmentally significant behaviour in 6,

363–79expenditures as a proportion of budgets 230financial decisions in 5, 132–50‘good home’ beliefs 365, 367heterogeneity of 133–4interpersonal and psychological factors in

energy use 370interventions to reduce energy consumption

370–3‘life cycle’ 365saving study 122traditional 135–45travel choices 393see also family

housingand environmentally significant behaviour

365, 369UK government expenditure on 293

Houston, M.J. 186Hsu, M. 464Huberman, G. 76Hubert, A.-C. 142Hudson, J. 271, 310Huetell, S.A. 464human capital, specialized in marriage 135human condition, universal aspects 339human nature

and the economy 523hypotheses about 15, 512, 514, 515, 517and income growth 344

human-environment science 374, 379humanist psychology 344Hundred Years War 311hyper-adaptation 208hyperbolic discounting 109, 112, 117, 125, 240,

245, 483hypothesis generation, and theory 23hypothetical bias, contingent valuation method

(CVM) 435–7

IBM supercomputers 457identity 181–3

car ownership and 388consumption and 5, 181–92cultural differences in notions of 185, 191and different taxpaying cultures 321

financial in marriage 144, 150narratives of lifestyle 347, 348 (fig. 14.3), 349,

351, 352 (fig. 14.4)non-verbal statements of 182and occupation 181play with alternative 183reconstruction among immigrants via

possessions 186reconstruction process after death 184role of culture in consumption and 181, 185–6seeking through consumption 186–9, 347as situational 183symbolic role of material goods in 184, 347see also self; selves

identity formationin infancy and possessions 184social-symbolic project of 347, 348 (fig. 14.3)

idioculture 182Ikeuchi, H. 184illusion of control 51–2illusions

‘positive’ 28see also money illusion

immigrants, possessions and identityreconstruction 186

immortality, sacrifice and 188impact bias 55imported goods, restriction of 268impulsive behaviour

not an irrational shift in preferences 111and self-control 114

impulsivity, and risk preference 464incentives

behaviourist economics of 24–6and learning debate 12overconfidence and statistical methodology

24–9paradoxical effects of 24, 26for sustainable behaviour 355see also reward

‘inclusive fitness’ 496income

adaptation and material norms 208–10average per capita across nations and

well-being 258, 343diminishing marginal utility for happiness

203, 204earmarking 237elasticities 230evaluation and levels 241expectations and 207and happiness 200, 201 (fig. 9.1), 204–10, 343level of basic needs and happiness 203, 206,

214loss of 207psychological variables 203






544 Index

income (cont.)relative compared with absolute levels in life

satisfaction 343rise in per capita and consumer spending 504savings and uncertainty of 117–22see also national income; relative income

hypothesisincome satisfaction

compared with objective income 206dispositional factors 205for the non-poor 204–6for the poor 206

income taxand indirect taxes 261–8, 269to reduce time spent in pursuit of income 286

incommensurability problem, values 437, 448Index of Consumer Sentiment (Katona) 56, 118indifference curves, economists and

psychologists 13, 13 (fig. 2.1)individual level 13

‘failure’ and the role of government 282–5,299

impact of economic systems on economicbehaviour 516

influence of adaptations on economictransformation process 496

individualismethic of expressive 149, 347and government size 296and happiness 211, 214, 215possessive 189saving and borrowing 105, 122

individualscollectives and brains 14as interdependent 305–7investors 39past experience 44–8theory and 285, 285 (table 12.1)

inductionhypothetico-deductive method 21in psychology 21

inductive reasoning, frequency or probability46

industrial revolution 228industrialization, and car ownership 384industries, privatization of 261, 291inequality

and economic growth 213intra-household 132, 136, 147perceptions of 289

inequality aversion 478inequity, meaning of 288infancy, symbolic role of possessions 184inference 217, 500

rules of 16see also ‘strong inference’

inferior frontal sulcus (IFS) 464inflation

government control of 266perception of 241, 265stress effects 266wage negotiations during 266

‘influence debt’ 140information

cascades of 47‘economics of’ 517new 41, 42, 43, 50–2, 83provision to promote sustainable behaviour

change 354, 371information bias, contingent valuation method

(CVM) 439–41information processing

and affective processing 244, 246biased approach 215–16capacity in decision making 368constraints in human 500consumer behaviour 243, 246economic behaviour and 502influences on 50–2mood influences 53motivation in 441selective attention in 44, 506simplified 235sources of effects in 54systems 22

‘informed choice’ 339Ingberman, D.E. 274inheritance 188

cultural as Lamarckian 521role of biological in economic behaviour 500,

509innovativeness, evolutionary explanation of

502insight 494, 500

learning by 241, 243instinct

in consumer behaviour 243for object play 523

institutional investmentgovernment regulations 164long-term responsible 5, 155–74size, power and influence 159–60

institutional investorscase for long-term responsible investment

(LTRI) 157–63herding/gravitation to the ‘defensible’ 168implementation of long-term responsible

investment (LTRI) 165–70influence of dominant conventions on 171role in corporate governance 159role in promotion of CSR 155–74short-termism 155, 160, 164, 167






Index 545

instrumental conditioning 494, 496, 499,500

role of the striatum in 467, 469 (fig. 19.6)instrumental learning see operant conditioninginstrumentalism, vs. realism in explanation 10,

12, 30insula 472, 478, 479 (fig. 19.11), 487insurance companies, value of assets 159intellectual property laws 182intelligence, evolution of 500Intelligent Transportation Systems (ITS) 392intentions

and actual behaviour 442, 444, 500and attitudes 232and goal achievement 500implementation 394

interdisciplinarity 374, 378interests, manipulation by social meanings

348interference techniques 23intergenerational issues, environmental

contingent valuation 439International Society for Quality of Life Studies

199international trade 338

lay opinions of government dealing with267–8

internet bubble 80, 172Interpersonal Behaviour, Theory of (Triandis)

366interpersonal relationships

and happiness 207perceived as supporting 413

inter-temporal choicebehavioural saving models 105, 116–17consistency of 109–11, 126discounted utility (DU) model 106–7economic model of 105, 106–7, 127neural representation of 458, 483psychology of 126–7saving and borrowing 115–16and saving by children and adolescents 123–6and self-control 105–12, 127social dimension 122–3use of term 105variability of subjective discount rates 107–9

interventions, perceived as controlling 413intra-parietal cortex, bilateral 473, 473 (fig. 19.8)intrinsic motivation 24

crowding-in effect 413influence of extrinsic motivation on 412and public goods 411

investmentmental accounting in 237sunk cost effect 239transaction costs 161, 168

see also ethical investment; institutionalinvestment; long-term responsibleinvestment (LTRI); responsibleinvestment; socially responsibleinvestment (SRI)

investment consultants 164investor psychology

as a determinant of stock prices 64, 173influence on dynamics of world equity

markets 5, 67, 68, 78investor reciprocity, defined 475investors

allocative implications of inefficiencies 172asymmetric risk preferences 238beliefs study 58, 67, 68, 77, 89, 174cultural differences 76defensive 79familiarity bias 76feelings and emotions 52–3, 67, 68, 71, 89individual differences 40, 58–60individual and institutional 39, 167information held by marginal 78informed rational 40, 59, 80mental frames 83naive 59, 80, 84natural selection among 78neuro-correlates of asset allocation decisions

472non-logical practices 76, 155, 170professional 59, 159really wealthy 59responsibility 156, 173segments of 40, 58–60speculating 59underestimation 43vulnerability of 90well-to-do 59see also expectations; institutional investors;

noise traders; overreaction; underreactionIsherwood, B. 346Israel, Bedouin women in 214Italy, income and happiness 212

Jackson, Tim 6, 335–58Jain, A.K. 186James, G. 134James, William 183Japan

income and happiness 212stock market boom (1980s) 172victims of earthquakes 184

Jappelli, T. 118Jarrow, R. 77Jegadeesh, N. 82, 85Jensen, M.C. 158job satisfaction 207






546 Index

Johnson, E.J. 31Jones, P. 390Jones, Philip R. 6, 271, 281–300Joy, A. 186judging series of events, peak-end rule 237Just Pensions 166justice

perceptions in tax system 304, 305, 307,310–13, 321, 323

see also procedural justice; restorative justice

Kagel, J.H. 11Kahneman, D.E. 4, 12, 17, 30, 40, 43, 44, 45, 49,

50, 67, 69, 76, 82, 217, 228, 258, 431,462, 471, 483, 517

Kapteyn, A. 123Karpoff, J. 162Kasparov, Gary 457Katona, George 41, 42, 56, 67, 69, 118, 120,

234, 512Kedem-Friedrich, Peri 214Kemp, Simon 6, 255–75Kenny 29Keren, G. 43, 48Keynes, John Maynard 42, 119

The General Theory 67, 68Kiell, G. 51kin altruism 519King-Casas, B. 475Kinsey, K. A. 304, 323Kirchler, Erich 5, 122, 132–50Kleinbolting, H. 31Kling, Arnold 218Knetsch, J.L. 12, 431, 438, 439knowledge

accumulation and transformation of theeconomy 493, 500–3

evolution of action 500–3, 508illusion of 52

knowledge economy, and value of information338

Knutson, B. 461, 472Koestner, Richard 415Kontnik, L.T. 191Kooreman, P. 237Kosfeld, M. 18Kotchen, M.J. 445Krych, R. 187Kuhnen, C.M. 472Kumar, A. 89, 386Kyoto Protocol 336

laboratory experimentscooperation studies 411motivational crowding theory 414operant psychology 518

Laibson, David 117, 246Lakonishok, J. 65, 84, 85, 88Landier 31Langer, E.J. 51language

evolutionary psychology of 513locus of interpretation in the brain 7

Latane, B. 14lateral intra-parietal region (LIP) 461,

487Latin America, car ownership 384Lave, C.A. 387law

coordinating function of 320expressive function of 416, 420loss of respect for 323perception of fairness and obedience 407and taxation 310

Law of Effect (Thorndike) 11, 24, 242law of small numbers 58lay explanations, of economic activity 6lay perceptions, of government economic

activity 255–75lay thinking

about government activity 261–8compared with economists’ thinking about

service provision 262origins of 272–3well-informedness 268–73

Layard, R. 281, 286Lazarus, R.S. 243Lea, Stephen 7, 125, 493, 512–23learning

algorithms 474computer models of 466and experience 74, 78habitual behaviour upgrading through 41, 42,

48and incentives debate 12innate non-cognitive mechanisms and

economic adaptation 7, 494, 497–500Markov decision problems (MDP) 484problem solving 241and reward contingencies 466self-control and planning strategies in

children 125sequential 481theories 241and transformation of the economy 493see also insight; social learning

learning by conditioning 241–2, 246, 498, 500,509

conditioned response (CR) 242conditioned stimulus (CS) 242unconditioned response (UR) 242unconditioned stimulus (US) 242






Index 547

LeBon, G. 75LeDoux, J. 76Lee, C.M. 86Lee, S. 29Leeson, Nick 239legal system 282legitimacy, of tax system and government 322Lehmann, A.C. 60lesbian and gay couples see couples, same sexlesion studies

decisions under ambiguity 464dissociable roles for dorsal and ventral

striatum 467ethical concerns 458

Levine, R.M. 124Levinson, D. 386Levitt, A. 90Lewin, Kurt 314Lewin, S.B. 10Lewis, A. 3–7, 124, 269, 290, 294, 304, 307lexicographic decision rule 235Leyden Approach 209liberal democracies 291liberalization of trade 338

and environmental damage 338life, saving or enhancing 265life-cycle hypothesis, of saving 116, 231life events, positive and negative and happiness

200, 206life expectancy, and Quality Adjusted Life Years

(QALYs) 264life goals 339, 340life satisfaction

and commute times 216global 199and government expenditure on social

security 298income and 203, 205, 209and lifestyle 342–5and living standards 258measures of 199‘paradox’ 344 (fig. 14.2), 343–5, 349

life space model, of tax perception 314–17, 318,320–2

lifestyleattitudes to sustainable options 351car ownership and 388, 397characterization of modern 337–9choice and habit 351and consumer behaviour 243consumer ‘lock-in’ 349–52, 353, 357and consumption 346and identity 182and life satisfaction 342–5as livelihood 339–42media images effect on happiness 206, 209

policies for changing to sustainable 352–6,357

rational choice model 354search for an authentic personalized 347segmentation and sector analysis 357as a set of social practices 351, 352,

352 (fig. 14.4)as ‘social conversation’ 345–9, 352social effects of institutional changes 338and sustainable consumption 6, 335–58

lifetime customer value 245lighting design, different cultures 346limbic system

chemicals 111, 114impulsive system in 465midbrain dopamine neurons projections in 465

linguistics 22Lipton 16List, J.A. 12Litman, T. 390livability theory 206livelihood

characterization and strategies 340,341 (fig. 14.1)

debates about 340defined 340lifestyle as 339–42sustainable framework 341

‘living apart together’ 145living standards

and economic development 342norms 209

loans, government for tertiary education 308locus of control, shift and self-determination

412, 416Loewenstein, G. 7, 18, 76, 106, 108, 109, 111,

122, 123Lohrenz, Terry 7, 457–87longevity 219long-term memory

action knowledge in 502meaning from 501

long-term responsible investment (LTRI) 156,157

advantages of 160–3, 173the agency problem 158–9behavioural insights 170–3the case against 163–5the case for among institutional investors

157–63defined 157implementation of 165–70, 173and the valuation framework 169

loss aversion 17, 237–40, 245and mental accounting 239and willingness to pay 438, 439






548 Index

lotteries 283expected utility theory 482

Loukopoulos, Peter 7, 383–98Louw, E. 390love

agapic 189disinterested to an enemy 520and economic practices 133and money 133

Lozza, E. 266Lubell, Mark 312Lusardi, A. 118, 119luxury goods 230

in Asian societies 186, 190brand identity 190as counterfeit 191cultural values and 190

Lydenberg, S. 159Lyons, J. 10

McAdam, Richard H. 320McCaffery, E.J. 257, 269, 270McClure, S.M. 114, 459, 465, 466MacCulloch, Robert 202, 213McGraw, A.P. 53McGraw, Kathleen M. 323machine learning 461, 467, 474McKenzie, C. 26macro-economics, rational source of 67, 69magic 185magnitude estimation 260Mahoney, M. 262Maital, S. 117, 283majority voting rule 294Makridakis, S. 75Malkiel, B.G. 87management, environmentally friendly

behaviour 423Manganelli Rattazzi, M. 121Manski, C.F. 57‘marker goods’ 182market

allocative efficiency 155, 172–3and changing consumption patterns 336discipline 447selection forces by competition 495system and service provision 262volatility 168, 170

market efficiency‘beat-the-market’ definition 170, 172and economic performance 173and long-term responsible investment 164see also efficient market hypothesis

market equilibria, for hypothetical goods study227

market failure

explaining anomalies through 16explaining through psychological

characteristics 17and government intervention 282, 283and Homo economicus 282, 283, 285, 299improving access to information 354and mergers and acquisitions 81

market research, and simplified judgements235

market segmentation, values and lifestyle 243market success, and self-interest 15marketing

the art of 350attribution of social value to products 349‘consume now, pay later’ offers 240individualized to break habits and build new

ones 392, 395‘raiding cool’ 353

marketing communication, and theory ofplanned behaviour 233, 245

marketsachieving rationality in 71–3‘adverse selection’ in 16asymmetric information 16contingent see contingent valuation method

(CVM)government intervention in 6rational expectations (RE) approach 67, 69short-term horizon 163, 168theory of rational and efficient 5, 67,

69–71see also rational and efficient markets

Markov decision problems (MDP) 484Marr, D. 17marriage

alternatives to 145–8beliefs about financial practice in 133, 137‘common-law’ 145‘deinstitutionalization’ and ‘individualization’

of 148economic socialization in 122effect on happiness 211gender differences in financial behaviour 136gender differences in spending decisions

140–2ideology 136model of financial interdependence 134money management in newly weds 143–5,

148money management in second 142–3money management in traditional 135–42persuasion and negotiation in money matters

138–40same sex 134as socio-economic status 147specialized human capital 135






Index 549

stereotypical model of male breadwinner andfemale carer 135

traditional division of labour 135, 148Marshall, T.H. 294Marx, Karl 522Mason, Robert 308, 310mass media, and social comparison 123matching law 461, 471material norms, and adaptation 208–10, 211,

215materialism

and collectivism 186and compulsive consumption 187–8, 335and growth of the gift economy 189and happiness 187, 205, 219positive instrumental 183, 187symbolic meanings in 346–9terminal 187

Mathews, Gordon 181maturation, and consumer learning 243Mauss, M. 189maximization

theory of constrained 508utility 230, 394

May, A.D. 390mean variance model 462, 483meaning

affective connotations 501attribution of 501, 502from long-term memory 501in life 199of possessions 186, 347, 348 (fig. 14.3)

Means, G.C. 158measurement

behaviourist approach to 11subjective techniques 257

measurement bias 430Meckling, W.H. 158media

expenditure on 508lifestyle images effect on happiness 206, 209,

211median voter model 256, 294

and government spending on services263

mediodorsal thalamic nucleus 463MEG, non-uniqueness of the inverse problem

458Mehta, R. 186Meier, K. 142Mellers, B.A. 55memory

attention and 501fallibility of 44, 49

mental accounting 108, 116, 171, 236loss aversion and 239

mental constructs 217mental frames 68, 70, 73, 83mental health 199‘mental organs’, or ‘modules’ 514mergers and acquisitions, market failure and 81Merton, R.C. 66meta-analytical studies, motivational crowding

theory 414meta-hypotheses 495meta-theory 496Metcalfe, J. 113method of difference (Mill’s) 23methods 3, 9–32

contingent valuation method 7, 429–48experimental method 4qualitative 3quantitative 3and theory in economics and psychology 4,

9–32Metrick, A. 161Mexico, income and happiness study 203Meyerhoff, J. 444Michalos, Alex C. 209, 210Michon, J.A. 390micro-economics

behavioural 285, 494, 498, 516,517

neoclassical 285, 288–9, 300welfare theory 429

midbrain 463dopamine neuron firing 465, 468

Mill, James 42Mill, John Stuart 23, 40Miller, E. 77Miller–Modigliani model 66, 68, 70Milliman, R.A. 74miscalibration 28Mischel, W. 112, 113Mishkin, F.S. 67, 69Misiolek, W.S. 269Mitchell, Wesley 67, 68, 432Mittal, B. 244mobility management 390Modarres, A. 386modernity 212

characterization of lifestyles 338, 349,357

critics of 345as search for identity 347

modernization 214and the life-satisfaction paradox 345

Modigliani, F. 116, 122‘modules’ 514Moisseinen, E. 444molecular biology 498‘momentum life cycle hypothesis’ 86






550 Index

moneyabstract and Greek philosophy 521as an example of the evolutionary psychology

of economic impacts on individualbehaviour 521–3

‘drug theories’ of motivation for 522and happiness relationship 206–8, 215–16,

219importance to the poor 203–4and love 133not regarded as a universally appropriate

measure of value 259and power in the household 132, 136, 149psychometric studies of attitudes to 522relational in intimate relationships 149‘taboo’ exchanges 522‘tool theories’ of motivation for 522vs. nature 437

money equivalence, of non-monetary events 241money illusion 171, 522money management

female whole wage system 135, 136in the household 132–50housekeeping allowance system 135, 147,

159independent 136, 143, 144, 144 (table 6.2),

147male whole wage system 135and marital status 147newly weds 144, 144 (table 6.2)ownership and financial systems 144,

145 (table 6.3a and table 6.3b)partial pooling 136, 144, 147pooling 136, 137, 143, 144, 145 (table 6.3a

and table 6.3b), 149systems in marriage 135

money tokens 522monkeys

decision-making in 461dopamine neurons in 466, 468, 471reward task 461

Monks, R.A.G. 159Montague, Read 7, 113, 457–87, 516mood

happiness measured by 297ratings 200

mood effects 53, 171, 216moral commitments 5moral dilemmas 448moral dimension

to investment 155to tax 306, 310

moral satisfaction, purchase of 431Morales, Alfonso 313Morgenstern, O. 474, 482Morison, V. 143motivation

car ownership and use 389, 396, 397conflicting 216consequentialist vs. rights-based 445–7in consumer behaviour 243, 342, 507and contingent valuation 442‘crowding out’ by external incentives 25for environmentally significant behaviour

363, 365, 366–7, 373, 406–23evolutionary approach to economic 493, 494,

497–503in finance 53framing of behaviour in terms of

goal-orientation 340for government 293in information processing 441multiple goals perspective 216in saving 120 (fig. 5.3), 119–22, 231sociobiological approaches 513stated and revealed preferences 437to obtain money 521to search for novelty 502, 503see also extrinsic motivation; intrinsic

motivationmotivational crowding theory, environmental

policy and environmental morale412–22

motivational spill-over effect 414Muehlbacher, S. 142multi-agent learning (MAL) 474multi-agent reinforcement learning models 474,

476, 481multi-period choice under uncertainty

483–5Multiple Discrepancy Theory (MDT) 209Murayen, M. 114Murphy, J.E., Jr 87Murphy, Kristina 308, 322Muth, J.F. 67, 69Mutsaers, W. 143mutual funds

herding in 170performance of socially responsible 163underperformance in 161value of assets 159

Myers, David G. 212

Nadler, Janice 320Nagel, S. 80names, and identity 181Nash Equilibria 474, 485National Consumer Council studies 351national income, and happy societies 202, 204,

210–15National Oceanic and Atmospheric

Administration (NOAA), guidelines oncontingent valuation method (CVM)432, 433, 439, 448






Index 551

National Research Council (US), Committee onthe Human Dimensions of GlobalChange 371

nationalism, and resistance to the euro 266natural resources, depletion of 343natural selection 482, 513

altruism problem 519analogy constructions to economic evolution

495and the correspondence criterion 517and genetic endowment 494and the human brain 493and reproductive success 496

naturecrowding-in effect to preserve 419–20money vs. 437rights of 406

nature–nurture debate 515necessary goods see primary goodsneed 339

equality or fairness 396in the household 133

negotiationand persuasion in marital money matters

138–40, 146of symbolic value 347

Nelson, R. R. 495neoclassical economics 11, 16, 228–32, 299, 430neo-Schumpeterianism 495Nesbitt, S. L. 162Netherlands, the 143

income and happiness study 206neuroanatomy 464, 485, 486 (fig. 19.14 and

fig. 19.15)neuroeconomics 4, 7, 17–20, 113, 457–87

defined 457economics perspective 457–8evolutionary approach 516and higher-order functions 458meso-scale structures in decision-making in

the brain 458, 459 (fig. 19.1)as social cognitive neuroscience 20

neuropsychology 246neuroscience

and economics 7, 18, 20, 457–87levels of scientific question 14mapping brains and psychological functions

14, 17, 113of social interaction 459, 474, 482

New Environmental Paradigm (NEP) 444, 445New Welfare Economics 217New Zealand 143, 269, 274

category rating of government services 264costs of government services estimated 270services for government or private supply 262

Newson, L. 516, 519Ng, Yew-Kwang 219

NIMBY (not in my backyard) problem 421noise traders 40, 59, 77, 78, 160

Behavioural CAPM 46models in finance 247

norm theories, and cognitive evaluation theory411

normsethical in environmental issues 448evolution of social and institutional 351, 353in individual choice 375, 376 (fig. 15.1),

377 (table 15.2)internalized and the public good 410, 411personal and reference groups 443social processes of enforcement 523and views about taxation 269, 310see also material norms; social norms;

subjective normsNorway 269, 270

car use 386novelty

how it is produced 502motivation to search for 502, 503satisficing hypothesis 503taste-for-novelty hypothesis 503

Nowak, A. 14nucleus accumbens (NAcc) 461, 487Nutt, S.R. 88Nyhus, Ellen K. 5, 105–27Nyman, C. 137, 149

Oates, W.E. 294observability problem 498observation, behaviourism and 217observational learning 494, 500, 508occupation, and identity 181Odean, T. 27, 28O’Doherty, J. 466, 467, 472O’Donoghue, T. 106OECD, equity holdings by country statistics

159Ofek, E. 77O’Guinn, T.C. 187Oishi, Shigehiro 205, 212Olander, 274old age, role of possessions in 184one-shot social interactions, neural correlates of

474, 479 (fig. 19.11), 477–81operant conditioning 242opinion formation 68, 71

and agenda setting 509Oppenheimer, H.R. 79optimism

consumer 56and economic growth 219over- 43personality factor in happiness and income

202






552 Index

optimism (cont.)and saving behaviour 118, 119, 126and spending behaviour 234and stock prices 77, 80, 84, 89

orbitofrontal cortex (OFC) 461, 464, 467,487

medial 465, 466 (fig. 19.4), 479,479 (fig. 19.12)

right lateral 465organ donation 188organizational behaviour 27

effects of modification on task performance415

environmentally significant 364path analysis in 29

Orleans, Sonya 304Ortmann, A. 10, 12, 26Orviska, Marta 310Ostrom, Elinor 411Oswald, Andrew J. 199, 209, 212, 258Otto, A.M.C. 124overconfidence 46, 51, 170, 171

and conservatism 48gender and 27illusion of control and 52incentives and statistical methodology 24–9kinds of 27–8

overreaction 48, 64, 67, 68, 80, 82, 84, 85, 86,170

ownershippsychological impact of 438separation from control 158

Pahl, J. 135, 136, 137, 146panic reactions 43paradigms (Kuhn) 21Pareto, Vilfredo 67, 68Pareto optimality 65, 294Park, A. 134Parker, J. 117past experience 41, 42, 44–8path analysis see causal path analysisPaul, K. 159Pavia, T. 185Pavlov, Ivan 242Pavlovian conditioning, TD-error signals in 466,

467, 476Payne, J. 31, 287, 431Peake, P.K. 113Peasants’ Revolt, England (1381) 311peer comparison, and consumer behaviour 122pension funds

herding in 170social responsibility of 159, 160underperformance in 161value of assets 159

perceived behavioural control 51–2, 233, 442,444, 448

perceptionGestalt concept of organization 41interpretation and subjective 500organization 41of probabilities 241refinement effect 506, 507visual and acoustic stimuli 501

personalitycar ownership and 388characteristics in consumer behaviour 243trait theory and consumption and identity 183type theory and consumption and identity 183

persuasionand negotiation in marital money matters

138–40tactics based on problem-solving 138tactics based on role segragation or social

norms 138, 139 (table 6.1), 140Peru, economic growth and happiness 208–10pessimism

and saving behaviour 118and spending behaviour 234and stock prices 77, 80, 84

PET, poor temporal resolution 458Pettinato, S. 208philosophy 344, 521philosophy of science 217Piaget, Jean 22Pierce, W. David 415Pindyck, R.S. 16Pinker, S. 513Piotroski, J.D. 86Planned Behaviour, Theory of (TPB) 51, 232–4,

245, 366, 437, 442, 444, 445, 448Plato, Republic 274Platt, J. 21Platt, M.L. 461play economy 124pleasure paradox hypothesis 55Pleistocene era, adaptive changes to the brain

during 514Plott, C. 21Poe, G.L. 446policy

and intra-household economic behaviour 132and marital model of financial

interdependence 134and public attitudes 293to reduce or change car use 389–96

policy instrumentscommunication and diffusion 371–2economic 372–3to reduce household energy consumption

370–3






Index 553

policy makingand freedom of choice 6for sustainable consumption 335, 337, 352–6,

357political economy, consumer opinion and choice

442political participation, and subjective well-being

295political rights, and happiness 294politics, and travel demand management 396poll tax 311, 316Pollay, R.W. 140polluter pays principle 418population biology 512population dynamics 495, 497Porter, G.E. 60portfolio selection, parameter uncertainty and

learning 484portfolio theory 157, 173positive feedback traders 76possessions

care of 186and collective identity 186cultural favourites 186and identity reconstruction among immigrants

186intangible 189meanings of 186role over the life course 184and selves 182, 183–5

possible selves 185posterior parietal cortex 114post-materialist values 338postmodern self 183Poterba, J.M. 45Pouget, S. 21Pouta, E. 444poverty

beliefs about 289and importance of money 203–4and income satisfaction 206, 211, 218policy and defining goods as necessary or

luxury 230reduction in developing countries 340, 342reported degree of 241

Powell, Enoch 281power

and manipulation of interests 349and money in the household 132, 136,

149practical consciousness (Giddens) 351precuneus and premotor cortex 464prediction

in behaviourism 23causes of diminishing predictability of

consumer behaviour 246

and experiment 21explanation and control 14, 26illusion of 52indicators 56possibility of 283of rational behaviour 282of stock market developments 56–8technical analysis in 56

prediction errorexpected value: neural activity 462reward 471, 472

‘preference drift’ 206, 209, 210, 213formation of individual 500–3

preferences 5altruism vs. self-interest in views of

government service provision 271beliefs about 288–90changes in compared with visceral factors 111and choices 217consumers’ actual 504culturally determined 286endogeneity 290, 300evolutionary approach to 497–500, 506,

509exogenous and constant assumption 282, 300as expression of ‘true values’ 434, 459formation in contingent valuation 440, 441framing effects in 429, 440–1gender differences in financial 148individual ordering 494, 498international differences in spending

allocations 273and meaning 501and median voter model 257modelling of order 247myopic consumer 232‘other-dependent’ 18, 21policy responsiveness to 294stability of 228, 440stable 110, 110 (fig. 5.1)stated vs. revealed 436, 437, 442statistical tests 28transitive 106when discount rates change as a function of

time 110, 110 (fig. 5.2)see also revealed preference theory;

subjective preference theoryprefrontal cortex (PFC) 462, 487

lateral 114, 464medial 465‘patient’ rational system in 465right ventrolateral 465

Prelec, D. 7, 18, 108, 109, 241Preston, Ian 316Preuschoff, K. 462, 472price effect 11






554 Index

price–earnings (PE) ratio anomaly 65, 78–81and overreaction effect 67, 68–9, 82, 84PE-based forecast model 87underreaction 83

pricesanimal responses to changes 518differentials to promote sustainable behaviour

change 354, 412during inflation 266and introduction of the euro 266irrational thinking about 266setting of public goods 231, 245

primary affective reaction 54primary goods 230primates

apparently rational behaviour in 518dopamine neurons in 468, 470 (fig. 19.7)expected utility neural representations in

461primitive societies, selection pressure and

economic behaviour 496principal–agent theory 32, 158, 413

communication and reciprocity 413prior commitment 112prisoner’s dilemma

acquisition race 286layered 272n-person 408repetitive inter-temporal 112‘sucker effect’ 420

private sector, consumer behaviour in 5, 181–92,199–220, 227–47

private sphereeconomic behaviour in 6environmentally significant behaviour 363–79

privatization 261, 291probabilities

frequencies preferred to 46perception of 241, 283, 443

probabilitybiases in subjective assessment 74, 246weighting functions 241, 246

problem solvinglearning by 241and transformation of the economy 493

procedural justice, and dialogue in tax systems322–3

product constellations, and group identity 182product design

and brand image 190characteristics approach 231

product disposition, and meaning 186production, environmental and social impacts of

343products

compared with brands 348

contrast and compromise effect 236development of new 504–8differentiation and innovation 507environmental impact of 368expressive, functional and utilitarian

properties 244focusing on easy-to-evaluate attributes 236presentation of 236price of organic 367tool function 506, 507, 509

progress 212, 342property rights 282

and contingent valuation 438to nature and environmental issues 406, 417

pro-social environmental attitudes, andwillingness to pay 430, 445–7

prospect theory 4, 17, 19, 30, 40, 283certainty effect 73and framing effects 24perception of probabilities 241, 283and tax non-compliance 316value function relative to a reference point 74violation of expected utility theory 462

prospective reference 247protest, and environmental attitudes 447prudent person rule, and long-term responsible

investment (LTRI) 164, 171psychological characteristics

emergence of economic phenomena from 15explaining market failure through 17

psychological models of consumer behaviour232–4

consumer expectations 234, 245theory of planned behaviour 51, 232–4, 245

psychological perspective, and contingentvaluation method (CVM) 430–2

psychologists, indifference curves for theorypreferences 13, 13 (fig. 2.1)

psychology 3and ANOVA 29asymmetry with economics 512and behaviourism 24, 498bottom-up approach 512cognitive revolution in 22–4contributions to economics 30defining 7ecology and economics 516and economic behaviour 3and environmental issues 363–79, 406and evolutionary economics 7, 493–509experimental methods in 10explanations in 16in government decision-making 255as an inductive science 21levels of scientific question 14misunderstandings between economics and 9






Index 555

opportunities in economics for 31and sociobiology 523in the study of financial markets 40, 171theory and method in economics and 4, 9–32use by economists 13see also cognitive psychology; economic

psychology; evolutionary psychology;experimental psychology; socialpsychology

psychometric scalingon pro-social environmental attitudes 445–7of risk perceptions 243

psychophysicsand consumer behaviour 241, 246magnitude estimation and category rating

methods 260public choice theory, value of government and

voting 256public finance, neoclassical 286public good problem 287

in the natural environment 259, 407, 408–12standard prediction vs. experimental evidence

408–9public goods

case for government provision 262defined 408games 271with inseparable and separable benefits

292 (table 12.3), 291–3public goods games, linear 408public policy

cost–benefit analysis of 432effect on well-being 6

public sectorconsumer behaviour in 6, 255–75, 281–300,

304–24debate on optimum size 281–300

public services, contingent valuation 259public sphere, non-activist environmentally

significant behaviour 363publications, as possessions 182publicly listed companies 158Pucher, J. 384punishment, neural base of altruistic 479putamen 463, 467, 487Putrevu, S. 191Puviani, A. 294

Q learning 471, 484SARSA 471

Quality Adjusted Life Years (QALYs) 264quality of life 342

equation with economic performance 342, 343international index 345measures 199, 220, 264and subjective measures of happiness 219

quantities, neural representations in choice458

quasi-experimental method 28quasi-hyperbolic discount function 465, 483questionnaire studies 12

of saving and borrowing 5

Rabin, M. 13Raiffa, H. 28random sampling 432random walk hypothesis 86rational behaviour

learning 439neoclassical definition of 155tax evasion as 304, 305

rational behaviourism 11in economics 10–13, 40

Rational Economic Manmodel 4, 10, 73re-examined 73–7, 220see also Homo economicus

rational and efficient markets 64defined 67, 69–71disputed 67, 69, 89

rational expectations (RE) approach to markets67, 69, 71

rational self-interest model 285, 305, 517alternatives to 21of choice 11, 12, 18, 354, 517of lifestyle choice 354and the public good 408–9

rationalityachieving in markets 71–3, 89apparently in animals 518assumption 281, 498beliefs about 282–5and cognitive errors 43, 257of expectations 74failure of descriptive model 68, 70questioned 173, 267tension between individual and collective

408see also bounded rationality; economic

rationalityrationing 262, 264

of environmental resources 406Rattus norvegicus 11Read, D. 107Reagan, Ronald 432realism

vs. instrumentalism in explanation 10, 12, 27,30

see also Economic Psychological RealismReasoned Action, Theory of (TRA) 232, 366,

442reciprocal altruism 519, 522






556 Index

reciprocityin primitive societies 496in a social exchange 475‘strong’ 521violation of 412see also investor reciprocity

reference frames, responsiveness to 282reference groups, and personal norms 443referendum

on a public good 439on taxes 434

refinement effect, on perception 506, 507reflection, evolution of cognitive 500, 506reflexivity 340, 349Regner, I. 28regression analysis 29rehearsal 501Reibstein, J. 143Reich, Robert 160Reiling, S.D. 445reinforcement 498

contingent 509Skinner box 518see also conditioned reinforcement

Reinganum, M.R. 79Reinhart, M. 308relative income hypothesis 211relative price effect 406, 413, 414

and crowding-out effect 415, 416, 418, 421remarriage 134, 142–3repeated trust game

neural representation of 475 (fig. 19.9), 474–7social modelling aspect 476

representativeness 69and the base-rate fallacy 45–7conservatism and 48, 74and mispricing 82

reproductive successfading correlation with scarcity of resources

497and natural selection 496

residential location, and car ownership 384resistance

to changing lifestyles 349to tax authorities 319

resource allocationand efficient market hypothesis 172–3Pareto-optimal 65, 294role of security prices in guiding 64shift from status consumption to leisure,

health, education, etc. 219responsibility

corporate environmental 423investor 156policies for environmental and social 352–6,

419, 439

see also corporate social responsibility (CSR)responsible investment 168

definitions 156‘two-team’ approach 169see also long-term responsible investment

(LTRI)restorative justice, and tax strategies 320retirement

happiness and income 209, 210saving for 117, 120, 121, 132

returnsdrift in after earnings announcements 65predictability 65–9

revealed preference theory 10, 11, 217, 498and animals 11

revenge 19revenue, raising through tax system 286, 288reward

brain processing of 7, 19, 474, 482contingencies and learning 466distinguished from value 459dorsal striatum and pleasure and 19hidden cost of 412, 413–14, 415‘leaky integrator’ model of total 461magnitude effect 107neural representations 458, 459–61, 467, 481paradoxical effects of 24, 26prediction and prediction risk 472

Reynaud, P.-L. 512Ricardo, D. 267, 508Richardson, M. 77Richardson, Maryann 308, 316Ridge, Michael 316Riepe, W. 49, 76Rigaux, B.P. 141, 142rights

beliefs about 434, 448and responsibilities in families 149

Rilling, J.K. 18Rio Summit see United Nations Conference on

Environment and Developmentrisk, decisions under 74, 76, 464risk aversion 40, 66risk perception 74

and delayed gratification 112psychometric scaling of 243

risk preferencesasymmetric 238and expected value 462loss aversion 238neural correlates of 464as a personality characteristic 74

risk-as-feelings hypothesis 76risk-taking

and emotional responsiveness 76as situationally determined 74






Index 557

ritualsand consumption-based lifestyles 182funeral 184gift-giving and gift-receiving 189

road pricing 388, 390, 391, 395, 396Robbins, Lionel C. 217Roberts, Michael L. 311Rochberg-Halton, E. 183, 187Rodgers, Willard L. 209Rodriguez, M.L. 112Rojas, Mariano 203Roland-Levy, C. 142role competence 138role specialization, in marital decision making

141, 142role transition 183Ross, S.A. 66Ross, W.T. 237Roth, A. 4Roth, Jeffrey A. 304Rothman, A.J. 44Routh, D.A. 26, 137Rouwenhorst, K.G. 85Rubinfield, D.L. 16Rubinstein, A. 106rules of thumb 67, 70, 73, 116Rummel, A. 414Russia

economic growth and happiness 208income and happiness study 203, 208

Rusticini, A. 18, 25Ryan, Richard M. 415

sacred/profane domainsconsumption and 182incentives in 26

sacrifices 188sampling hypothesis 46Samuelson, Paul A. 106, 217Samwick, A.A. 117sanctioning, in environmental issues 407, 412,

416Sanfey, A.G. 18, 478Saris, Willem E. 203, 208SARSA 471satiation see deprivation–satiation dynamicssatisfaction

with the government and tax compliance 308see also consumer satisfaction; income

satisfaction; job satisfaction; lifesatisfaction

satisfaction treadmill see hedonic treadmillsatisficing 74, 235, 503saving

accounting period 115, 126age-related 117, 120, 123

behavioural models 116–17and borrowing 5, 105–27buffer stock model 117, 119cultural and group motives 120development in children and adolescents

123–6expectations, uncertainty and time horizons

117–22, 127generational transfer of behaviour 125golden-eggs model 117and happiness 202interpersonal influences 122, 123inter-temporal choice 115–16life-cycle model 116–17, 119, 231the meaning of 115motives 120 (fig. 5.3), 119–22, 231and permanent income hypothesis 116questionnaire studies 5self-report surveys 105social comparison 122, 123social value of 125socio-economic variables 107

savings board game 124Sawyer, Adrian J. 308, 316Sayre, S. 184, 185scandals, corporate 155scenario techniques 20Schaller, H. 172Schelling, T.C. 112Schiereck, D. 85Schkade, D.A. 431Schlarbaum, G.G. 79Schmidt, U. 19, 21, 22, 31, 478Schmolders, Gunter 304Schneider, F. 308Schoemaker, P.J.H. 73, 74Scholz, John T. 304, 310, 312, 323Schooler, J.W. 244Schor, J.B. 123Schouten, J.W. 185Schultz, W. 467Schulze, Bill 430Schwanen, T. 387Schwartz, Richard D. 304Schwartz-Shea, P. 272Schyns, Peggy 201, 213, 214scientific question, levels of 14, 15 (table 2.1)Scitovsky, Tibor 219, 508Scott, J. 86Seaford, R. 521security prices

calendar-related 65and earning power 67, 68false 67, 70responses to news 83role in guiding resource allocation 64






558 Index

Seldon, A. 257, 270, 292 (table 12.3), 291–3,306

selectionmultilevel 520pressure and primitive economic behaviour 7,

496, 514see also group selection; natural selection

selective distribution 190self

commodification of 191compensatory symbolic self-completion

process 185the extended 183, 188, 191modern project of the 185, 349postmodern 183sense of and consumption 183

self-actualization 199self-attribution, theories of biased 58, 171self-categorization theory, and taxpaying 321self-control

consistent planning 112defined 112exposure avoidance 112individual differences in 112in inter-temporal choice 105–12, 127prior commitment and 112problems of 171as a resource that may be depleted 114and stress 113, 114

self-deception 171self-determination, shift of locus of control and

412, 419self-enhancement, and compulsive consumption

188self-evaluation, positive and trading frequency

28self-image, negative 188self-interest

or altruism 271, 287–8and egoism 281, 285and equilibrium 15or fairness 481‘illusion’ 272rational model of choice see rational

self-interest modelself-perception 32self-report studies 256

of happiness 199selfish genes 481, 520Seligman, M.E.P. 261selves

home and work 183loss of and loss of possessions 184–5multiple 183and possessions 183–4possible 185

Sen, A. 435sense-making process

AREA 55hindsight and 55

sensory arousal, primary reinforcing of 508, 509sequential elimination rule 235service charges, advance payment 240services

government priorities on expenditure 262–4methods of allocation 262views about costs of providing government

270–1views on government supply 261, 262

Shamir, J. 266shareholders

activism 163Hampel Report (1999) on role of 163responsibilities of institutional investors 156,

161, 167rights 158, 162

sharing, consumption and identity 188–9Sharpe–Lintner Capital Asset Pricing Model

(CAPM) 66Sheffrin, Steven M. 318Shefrin, H. 17, 43, 46, 48, 108, 116, 122, 237Shelley, M.K. 107, 108, 109Sheppard, B.H. 233Shiller, R.J. 47, 56, 66, 68, 70, 170Shiv, B. 114, 244Shivakumar, L. 83Shleifer, A. 48Shoda, Y. 112, 113Shogren, J.F. 438Shome, Parthasarathi 306, 315, 318short-sales restrictions 77, 78short-termism, institutional investors 155, 160,

164, 167, 170Shultz, C. 191signalling 32, 286Simmel, Georg 347Simmons, R.T. 272Simon, Herbert 22, 67, 69, 338Simonson, I. 237simplicity, voluntary 189simplifying heuristics 50, 235Singer, T. 480situational constraints 29, 30Skinner, B.F. 242, 518Skinner, D.J. 84Slemrod, Joel 304, 310Sloan, R.G. 84, 85Sloman, S.A. 243Slovic, Paul 54, 74, 76small firms, returns 65, 85Smelser, N.J. 75Smith, Adam 15, 16, 282






Index 559

canons of taxation 315The Theory of Moral Sentiments 32, 111The Wealth of Nations 158

Smith, Kent W. 304, 316Smith, M.P. 161Smith, R.H. 20Smith, Vernon 4Smock, P.J. 147Sober, E. 520social alignments, and the pro-tax imperative

313–14, 315 (fig. 13.1)social anthropology 346social change

economic growth and happiness 214gender roles 142, 143–5

social class, and happiness 202social cognition, neuroeconomics and 458social comparison

income and happiness 209, 210, 211, 212and mass media 123and perceptions of fairness of tax system 312saving and 122, 123

social construction, of symbols 347social costs, internalization of 354social democratic parties 396social dilemma games 5, 19social exchange, brain processing of 7, 474–7social interaction

animal 496neural basis of 459, 474, 481, 482

Social Investment Forum (US) report (2005)166

social justice 395social learning 241, 272, 273, 353

and consumer learning 243social marketing 371, 377, 378social networks, resilience from 341social norms 232, 357, 410

ability to ignore 341adaptation to new 350and altruism 521and contingent valuation 437, 439, 448evolution of 351, 353neural correlates of 480and public goods 410renegotiation of 349and signalling 286and tax sanctions 310violators and altruistic punishment 479

social positioning, and asset base strength 341social pressures, in consumer behaviour 243social processes, modify psychological ones 32social psychology 5, 29, 513

approach to environmentally significantbehaviour 365, 366

causal path analysis 29

and contingent valuation 442, 448and economics 32and environmental economics 431fear of biological determinism 523of group processes 14motivational crowding theory 412–22persuasive communication strategies 31saving and borrowing 105, 122studies of emotions 20

social sciences 217–18, 281debate over sociobiology 512

social securitygovernment expenditure on and happiness

293, 296–9preference for higher spending on 293

social structure, and agency 351socialization theories 305–7socially responsible investment (SRI) 156

‘investment universe’ 165, 166 (table 7.2)sociobiology 494, 496, 512, 515, 519, 523socio-cognitive models 26socio-demographic variables, in environmentally

significant behaviour 368socio-economic variables

in saving 123, 127in well-being 32

sociology 75, 346, 350Solomon, M.R. 186Solow, Robert 433Sonnenberg, S. 137Sonuga-Barke, E.J.S. 124Sorensen, R. 269, 270South Sea Bubble 80Southworth, F. 384Sparkes, R. 156, 159, 165, 167Spash, Clive L. 7, 429–48speech production, locus in the brain 7spending behaviour

discretionary spending 234forecasting 234gender differences in marital decisions 137,

140–2and self-control 114see also expenditure

Sperling, D. 384Srivastava, J. 29stakeholder theory 159Stalans, Loretta J. 316standard expected utility (SEU) model 13, 16standard of living

and economic development 342Stanovich, K.E. 228state

gaining from the ‘nanny’ 284, 284 (fig. 12.1)as mediator and co-creator of social and

institutional context 356






560 Index

statistical methodsincentives and overconfidence 24–9for testing causal models 28

Statman, M. 17, 46, 163status

car ownership and 388effect of celebrity status on behaviour change

353ego and 286perceived and correlations 241recognition and consumption items with tool

function 507, 509status quo bias 238Steenbergen, Marco R. 323Steg, L. 387, 389, 390, 396Stein, J.C. 85Stephan, E. 44, 51Stern, Paul C. 6, 363–79, 392, 445, 447Stevens, S.S. 241

power law 241Stevenson, H.W. 87Stiglitz, J. 65, 67, 70stimulus generalization 47stimulus–response associations 11, 22stimulus–response reaction patterns, and

interpretation and subjective perception500

stock marketbubbles 57, 64, 71, 78, 80, 89, 160, 168crashes 43, 53, 168economic psychology of 5, 39–60investor feelings and emotions 52–3, 67, 69prediction of developments 56–8psychological expectations 41see also investors

stock pricesbehavioural finance and 64–90and changes in corporate earnings 67, 68excess volatility 66, 68, 70Fama–French factors 66, 86and ‘intrinsic values’ of companies 68, 70, 71investor psychology as a determinant of 64,

77, 172Miller–Modigliani theory 66, 68, 70mispricing 82and optimism 77, 80, 89overreaction hypothesis and drifts in 67, 68and pessimism 77, 80and short-termism 168and values of large publicly traded

corporations 67, 69stockholder, new role of the 158stocks, value compared to glamour 67, 68, 78Stone Age see Environment of Ecological

Adaptation (EEA)Stotz, O. 60

Stout, L.A. 90Stracca 172Stradling, S.G. 388, 390strategic bias, contingent valuation method

(CVM) 434–5strategic choice, game theory 485strategic interaction, game theory 474stress

effects of inflation on 266physiological measures of 199and self-control 113, 114

striatum 463, 466, 467, 469 (fig. 19.6), 472, 480,480 (fig. 19.13), 487

‘strong inference’ 21, 23Strotz, R.H. 109, 112, 125structuralism 22structuration theory (Giddens) 351Stutzer, Alois 7, 32, 203, 207, 210, 212, 215,

216, 217, 219, 258, 274, 295, 406–23subjective discount rates 106, 245, 246

variability in inter-temporal choice 107–9subjective discounting 240, 245subjective expected utility model 247, 407subjective norms 443, 448subjective preference theory 497, 499, 500subjective utility

measuring 217, 260–1theory of 497, 499, 500

subjective well-being (SWB) 199, 220and beliefs about income 204, 218and economic growth 214–15, 218and government economic activity 255, 258–9ideal method of measuring government and

260–1measures of 199, 260national surveys 261and political participation 295psychological variables in 259see also happiness

subjectivityof expectations 41, 44of happiness 200, 218

Subrahmanyam, A. 27subsidiarity principle, and happiness 295subsidies

as a ‘dead weight cost’ 421and environmental morale 409, 421–2

substantia nigra pars compacta (SNc) 468, 472,487

suburbanization, and car ownership and use 385,386, 387

‘sucker effect’ 420Sugden, R. 10, 13, 16, 30, 172Sugrue, L.P. 461, 471Sunder, S. 21sunk cost effect 239, 283






Index 561

‘sunspots’ 71supply, entrepreneurs offering new or better

products 504–8surprise 43, 48sustainable consumption

and lifestyle 6, 335–58policies for 335, 337, 352–6terminology 335

sustainable developmentcorporate responsibility and 163and the life-satisfaction paradox 345

Swaminathan, B. 86Swaziland 313Sweden 137

referendum on the European Monetary Union267

social expenditure and happiness 296, 298,299 (fig. 12.2)

Switzerlandcompensation for a nuclear waste repository

422direct democracy and tax compliance 416direct democracy and well-being 258, 274,

295, 323symbolic meanings, in material goods 346–9symbols, social construction of 347systematic bias, theory of 68, 70

tabula rasa theory 12Tang, S.-H. 414Tanzi, Vito 306, 307, 315, 317, 318taste-for-novelty hypothesis 503, 509tastes, problem of altruism 520Tatzel, Miriam 219tax

acceptability of coercion 305, 307, 309–10,321, 323

acceptable and unacceptable minimizingstrategies 320

aggressive tax planning 319, 321, 322conflicts arising from 307–13gap 6non-compliance 306, 316pro-tax imperative 307–13referendum on 434and revenue raising: deadweight loss 286underestimation of the tax-price see fiscal

illusionsee also income tax

tax adviser 320tax authorities

enforcement regimes 309, 317listening to taxpayers 318–20motivational postures towards 318, 319perceptions of 305, 313, 317, 322

tax avoidance 6, 304–24

costs 288definition of 306deterrence model 6, 304, 305–7, 310

tax ‘avoision’ 306tax compliance

consumer–citizen perspective 6, 304–24costs of 288, 316creative 321and fear of sanctions 309as good citizenship 290, 409and social alignments 313–14and tax rates 316

tax ethics 310tax evasion 6, 304–24

and alienation 308costs 288definition of 306deterrence model 6, 304, 305–7, 310, 317,

321injustice and 312, 318and perceptions of complexity 316reducing 320shame and guilt in 310

tax law, principle-based 320tax non-compliance see tax evasiontax policy

advance payment 240and material aspirations 219

Tax Reform Act (US) (1986) 323tax system

assumptions about 317complexity of 294, 306, 312, 315, 322cost-effectiveness 316design and management 304, 313, 315–17horizontal equity 312implementation of 317–18life space model of perception 314–17, 318,

320–2procedural justice and dialogue in 322–3progressive 311regressive 311and respect and responsiveness to the

democratic will 322–3the role of the other in 320–2and social role 307trust in 312vertical equity 312weaknesses in administration 312, 313

taxationAdam Smith’s canons of 315and costs of government services 263, 287disaggregation bias in thinking about 269lay thinking about 255, 268–70metric effect 269misperceptions about 270role for 287






562 Index

taxation costscompliance costs 288disincentive costs 288enforcement and litigation costs 288evasion and avoidance costs 288government costs 288uncertainty costs 288

taxpaying culturesdifferent 321voluntary 323

Taylor, L.O. 437Taylor, S. 28TD-learning models 466, 467, 471, 476, 484Teh, L. 86Teigen, K.H. 43, 48Temin, P. 80temporal discounting, neural representations of

465Terlizzese, D. 118terrorism, and war on terror 342Tetlock, P.E. 26Thaler, R.E. 12, 26, 82, 84, 107, 108, 116, 122,

237, 239theft, emotional impact of 184Theodossiou, I. 209theory

and constructs not directly observable 217experiments to test 23, 24hypothesis generation and 23and method in economics and psychology 4,

9–32simplicity of 220

Thesmar 31Thomas, P. 123Thompson, L. 261Thorndike, Edward 11, 24, 242Thorpe, N. 390Thurstone, L.L. 4Tian, Kelly 183time preference see subjective discount ratesTirole, J. 26, 32Titman, S. 82, 85Tobin’s q 71token economies 415, 522Tomlin, D. 476Tooby, J. 46, 513, 518tool function, goods with 506, 507, 509tradable emission rights, and environmental

morale 414, 417–18trade see international tradetransitional object 184transport

characteristics of system and car ownership383, 385

environmentally significant behaviour 364system management 390

travel choice 387UK government expenditure on 293

trap setting 283, 284and trap spiking 284

travelalternatives 393, 393 (fig. 16.2)determinants of 386, 387 (fig. 16.1)and environmentally significant behaviour 367theories of choice and the change process 392value of time 387

travel demand 385, 386travel demand management (TDM) 390–6

classification 390–2measures 390, 391 (table 16.1), 398 (table

16.1), 399 (table 16.1)political feasibility 396, 397, 397 (fig. 16.3)public acceptability 395–6, 397reasons for ineffective 395

Trivers, R.L. 481, 519trust

erosion of 357in government 295–6, 312heuristic 313investment decisions and 168neural correlates of 459, 475in tax governance 312, 322, 323

trust gameone-shot version 479, 479 (fig. 19.12), 480see also repeated trust game

trusteesfiduciary duty 164and prudent person rule 164

Tunstall, S. 442Turgot, A.R.J. 15Turnage, M.T. 191Tversky, Amos 4, 17, 30, 40, 43, 44, 45, 48, 50,

52, 73, 82, 283, 462, 471, 483, 517Tyler, Tom 319, 322

Ubel, P. 264UBS/Gallop investor expectations 58UK

car ownership and use 384carbon emission reduction goal 336, 355Civil Partnership legislation (2004) 134, 147Department of the Environment use of

contingent valuation method (CVM) 432divorce laws 132government expenditure analysis 292 (table

12.3), 291–3government expenditure on communications

293government expenditure on education 293government expenditure on social security

293government expenditure on transport 293






Index 563

government sector size 281, 291income and happiness study 212income inequalities 355incomes and life satisfaction 343poll tax 316‘roll back’ of the welfare state 291saving motives 120, 120 (fig. 5.3)Seldon’s classification of government (table

12.3), 291–3, 292services for government or private supply 262

ultimatum game 29, 273, 478underconfidence see conservatismunderconsumption

age factors in 232of basic goods 339

underreaction 48, 64, 67, 68, 83, 85, 88, 170unemployment, and unhappiness 202, 258, 267United Nations Conference on Environment and

Development (Rio), Agenda 21 onchanging consumption patterns 335

University of Michigan, Investor Survey 57University of Wisconsin, Survey of Economic

Expectations 57US

car ownership 384cost of tax system 287energy conservation programs 354, 372household investor survey 57income and happiness studies 203, 212, 213investor sentiment statistics 67, 68living standards and life satisfaction 258public spending preferences 263, 263 (table

11.1)refusal to ratify Kyoto Protocol 336social expenditure and happiness 296, 298,

299 (fig. 12.2)SRI funds under management 166Superfund legislation 432

US General Social Survey 261, 263, 268utilitarianism

and behavioural adaptations 494, 497–500Bentham’s sensory 497, 517preference 446

utilityattitude models 232, 246behavioural measures of 256, 500decision and experience 218defined 217evolutionary approach to 497–500expected see expected utilityand happiness 217–20marginal and total of government services 270maximization 230, 394measurability of 217multi-attribute 246and revealed preferences 217

as a sensory perception 497, 498standard expected (SEU) model see standard

expected utility (SEU) modelsubjective expected see subjective expected

utility modelviews of 217see also discounted utility (DU) model

utility function 494, 498interdependent 287and meaning 501replaced by value function 283

Valenzuela, A. 29valuation models, efficient market hypothesis 65value

attitudinal measures of 259, 442–7distinguished from reward 459instrumental of money 522money not regarded as a universally

appropriate measure of 259perceptions of intrinsic of action and

acknowledgement 5, 290symbolic 347

value added tax 231value function

gains and losses 238utility function replaced by 283

value–belief–norm (VBN) theory 366, 375,376 (fig. 15.1), 377 (table 15.2)

values 448and acceptance or rejection of tax

progressivity 311behavioural measures of 256conflict in environmental issues 441and consumer behaviour 243consumerist 345ecocentric 392economic 429egocentric 392environmental attitudes and 7, 366–7, 373,

429–48extrinsic/intrinsic orientation 215, 216and happiness 220incommensurable problem 437internalized 411orientations to environmental issues 392passive or indirect use 429perception of government economic activity

255–7post-materialist 338preferences as expression of ‘true’ 434social 349surveys of national perceived 261

Van Den Brink, Henriette Maassen 206Van Liere, K.D. 444Van Praag, Bernard M.S. 209, 210, 215, 218






564 Index

Van Raaij, W.F. 58, 118variables, interacting and mediating 28Vatn, A. 430Veblen, Thorstein 67, 68, 286, 495Veenhoven, Ruut 206, 212, 214, 219, 296–9ventral medial prefrontal cortex (VMPFC) 459,

460 (fig. 19.2), 461, 462, 480, 487ventral striatum 461, 462, 463, 465, 466, 467,

468 (fig. 19.5), 487ventral tegmental area (VTA) 468, 487verbal protocol analysis 431Verhoef, P.C. 237Verrecchia, R.E. 72, 75Verschoor, C.C. 163victims

of earthquakes 184of fires 184, 185

Vienna Diary Study 140Vilhelmson, B. 384visceral factors, in inconsistent inter-temporal

choice 111Vissing-Jorgensen, A. 57visual illusions 243Vlek, C. 390Vogler, C. 147Vohs, K.D. 114voluntary contribution mechanisms 407, 409,

423voluntary sector, as fund-raising 287, 288Von Neumann, J. 474, 482von Nitsch, R. 60voters

attitudes to travel demand management 396less than fully informed about tax 294

Voth, H.-J. 80voting

environmental policy and 407as a low cost decision 420participation and information 274, 409and valuation of government 256, 271,

296‘voxels’ 458vulnerability context, of livelihood 341, 342

Wackman, D.B. 123Waddock, S.A. 163wage negotiations, in inflation 266Wagner, R.E. 294Wahal, S. 162Wall Street, price and value 81–6Wallendorf, M. 186Ward, S. 123Warneryd, Karl-Erik 5, 27, 39–60, 76,

118Wartella, E. 123waste, reducing household 367

wealthaggressive tax planning 319happiness and consumption 6, 199–220management and life-cycle theory 231personal and individual 200–10

Webb, B. 163Weber, Ernst 241Weber, E.U. 74Webley, Paul 5, 105–27, 306, 522Weigel, Russel H. 304weighted utility theory 247Weiner, B. 15Weitzman, M. 343welfare

expenditure and divorce laws 132government provision crowding out altruism

290, 293measures based on income sharing in the

household 132welfare economics 281, 343, 431welfare states

cross-country comparison of size andhappiness 297, 298 (table 12.6)

and happiness 296–9policies and efficiency losses 289‘roll back’ of the UK 291

welfare theory, microeconomic 429well-being

concept of 258, 342effects of public policy on 6, 294and material consumption 344 (fig. 14.2),

343–5net domestic product as proxy for sustainable

343socio-economic and political factors in 32see also subjective well-being (SWB)

Wenzel, Michael 6, 304–24West, R.F. 228Wicklund, R. 185Wiersma, Uco J. 414Williams, J.B. 67, 68willingness to accept (WTA) 429

vs. willingness to pay 437–9willingness to pay (WTP) 422, 429

and compensation 438as a contribution model 431estimation of 436ethical positions 448information provision and 439–41‘interrogating’ social groups re 431and loss aversion 438, 439motivation 446and pro-social environmental attitudes 445–7,

448vs. willingness to accept 437–9

Willis, K. 434, 442






Index 565

Willoughby, A.R. 20Wilson, D.S. 520Wilson, E.O. 512, 519, 520Wilson, T.D. 54, 55, 244winner–loser contrarian strategy 84,

86‘winner’s curse trap’ 28Winter, S.G. 495withholding tax 309, 316, 317Witt, Ulrich 7, 493–509, 516Witte, Ann D. 304women

and compulsive buying 188economic vulnerability of 135financial independence 134, 143,

148human capital as mothers 136, 137independence from car driving 388investment in domestic capital 135in paid employment 134

provision of childcare expectation 135and sharing 188

Wong, N.Y.C. 186Wootton, J. 384working memory

limited capacity theory 23, 502and selective attention 501

World Economic Forum, survey on LTRI 167World Values Survey 213, 289Wright, C. 388Wurgler, J. 172Wynne-Edwards, V.C. 519

Yacubian, J. 462, 471Yale School of Management, Stock Market

Confidence Indexes 56

Zacks, L. 88Zajonc, R.B. 54, 243Zhou, Y. 117






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