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Welfare, the Stoics, and reference dependence



Economic accounts of consumer welfare focus heavily on the physical circumstances of the consumer.  In contrast, in many religious and philosophical traditions, welfare is thought to be largely independent of physical circumstances.  This essay argues that the introduction of reference dependence enriches economic models of choice in a way that connects the economic account of welfare with the contrasting account offered by the Stoics.  The Stoics wrote extensively about the relationship between wealth and welfare, and this essay argues that the model of choice implicit in their writings involves comparison of consumption to a reference.  When reference dependence appears in economic models, consumption options are chosen after evaluation through comparison to a reference.  For the Stoics, however, the correct primary object of choice was not consumption but the reference to which consumption is compared.  Other traditions and other developments in economic theory are also discussed.


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