Abstract
The link with subjective well-being has not been addressed in the literature of sustainability, the latter defined by social well-being improvement. We explicitly derive genuine savings as an indicator of sustainability inclusive of one form of subjective well-being, namely habit formation, building on the work of Aronsson and Löfgren (Econ Lett 98:84–88, 2008). We show that, along an optimal path, the effect of habits on well-being improvement is negative, as long as the current output is larger than the current habit stock. Moreover, a numerical example for an optimal balanced growth path hints that this adjustment is potentially large in the case of a large weight parameter on habits.
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Notes
To see this, suppose that a constant fraction \(\rho \in [0,1]\) of consumer goods remains in the economy as a waste, such as packages. If the waste stock assimilates at a constant rate, which happens to be the same \(\rho \), the waste stock dynamics can be described by (1).
Fuhrer (2000) estimates that \(\gamma \) can be as high as 0.8 or 0.9, and that habit stock is almost essentially last period’s consumption (i.e., \(\rho \approx 1\)), as is consistent with assumptions in other studies.
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Acknowledgments
The author would like to thank the journal editor Amitrajeet A Batabyal, three anonymous referees, and Minoru Nakada for helpful suggestions. An earlier version of the article was contained in the author’s dissertation, whose referees were Akihisa Shibata, Kazuhiro Yuki, and Kazuhiro Ueta. Editorial assistance was provided by Kellie Petruzzelli. The remaining errors are the author’s. The opinions expressed here are those of the author and not those of the organization he belongs to.
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Yamaguchi, R. A note on sustainability and habit formation. Lett Spat Resour Sci 7, 149–157 (2014). https://doi.org/10.1007/s12076-013-0107-6
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DOI: https://doi.org/10.1007/s12076-013-0107-6