Surveys Vs. Revealed Preference, III
I take a skeptical view of surveys in this essay.
From the standpoint of revealed preference, the [survey evidence] that income over $20,000 does not raise happiness simply falls apart. Observing the fact that even people with very high incomes choose to work, an economist would infer that for most people the point at which income brings sharply diminishing returns to happiness must be much higher than $20,000. If $20,000 were the point of diminishing returns, then people who earn more than that would reduce their work effort and consume more leisure.
For Discussion. Some people choose to retire early at relatively low levels of wealth, while others continue to work at high levels of wealth (think of Warren Buffett). How can this be explained?