Student Spotlight, Filka Sekulova
Climate change, economics and happiness
Filka Sekulova joined ICTA team to explore the ways to combining the fields of economics, climate change and happiness. Filka completed her Master's degree in Spatial, Transport and Environmental Economics in the Vrije Universiteit in Amsterdam in 2008, and has a background in economics (University of Amsterdam) and psychology (University of Sofia).
Filka analyses how climate change impacts and climate policies can affect well-being, using the major insights from the happiness literature, or the processes of social comparison and adaptation. Evidence shows that people tend to restore their level of well-being or adapt to changes in material welfare. Adaptation to injuries, social losses or environmental deterioration, however, does not fully take place. Thus, one of the proposition that Filka is trying to defend is that extreme events would have more severe costs, either monetary or non-monetary, than what is usually quantified, using standard economic valuation approaches such as Cost Benefit Analysis.
Another major finding in the happiness literature is that well-being consistently decreases with the increase of the average income of one's neighborhood, state, country, reference group and even partner. It can be therefore argued that if everyone's level of material consumption goes down (while not falling below the basic minimum), the expected loss of life satisfaction is not likely to be significant. The second main proposition Filka makes is therefore whether climate change abatement policy, based on a tax or a natural cap on the amount of CO2- intensive material wealth gained would negatively affect aspirations for material gains negatively and positively influence life satisfaction.
The study of happiness started to ring the alarm bell for economists,when panel data on income and life-satisfaction from the fifties on showed that growth of material welfare does not correspond with a growth of happiness (Easterlin, 1974). In economic terms, within one's life-path, an increase in income, above certain minimum ceiling, would not necessarily bring an individual to a higher utility level. The finding poses a challenge to one of the fundamentals of neoclassical micro economics and to standard policy making, based on economic growth.
Easterlin, R. (1974), “Does Economic Growth Improve the Human Lot? Some Empirical Evidence”, in Paul. A. David and Melvin W. Reder (eds.), Nations and Households in Economic Growth: Essays in Honour of Moses Abramowitz, New York and London: Academic Press, 89-125