Abstract
AbstractStudies by psychologists, sociologists, and economists indicate that increases in incomes beyond a moderate level are not related to happiness nor significantly with the objective quality-of-life indicators (which increase with scientific and technological breakthroughs at the global level). Yet everyone wants more money. This may be explained by environmental disruption, relative-income effects, inadequate recognition of adaptation effects, and the materialistic bias due to our accumulation instinct and advertising. These factors cause a bias towards private consumption, making public spending, especially on research and environmental protection (with their long-term and global public-good nature) well below optimal. This is made worse by economists’ emphasis on the excess burden of taxation, ignoring the negative excess burden on the spending side. As Kaplow argues, if taxes are raised in accordance to the benefits of the funded public goods at the respective income levels, no disincentive effects are involved.