THE FRAME OF REFERENCE AS A PUBLIC GOOD.

The article examines the concept of human well-being and satisfaction. Most economists accept the proposition that market allocations may be suboptimal when production is accompanied by the discharge of environmental pollutants. Most tend also to be enthusiastic in their embrace of effluent taxes as a solution to the problem of environmental pollution. The dependence of utility on relative consumption gives rise to positional externalities. Analytically, these externalities are no different from ordinary environmental pollutants. The author's proposal to tax consumption is thus precisely a nalogous to an effluent tax. Most economists accept the existence of positional externalities as a purely descriptive matter. Yet many of these same economists may question whether such externalities are proper targets for public policy intervention. On the face of it, this is a curious position for the profession that has always insisted that a taste for poetry is no better than a taste for pushpins.