Worth the Risk? The Behavioural Path to Well‐Being

Abstract

There is increasing interest in the ‘economics of happiness’, reflected in the volume of articles appearing in mainstream economics journals exploring the major determinants of self‐reported well‐being. We contribute by exploring the factors influencing how satisfied farmers are with their quality of life. We find that farm income, subjective perceptions relating to the adequacy of household income, debt, health and personal characteristics such as age and relationship status are significantly associated with farmers’ self‐reported life satisfaction. While significantly associated with farm income, farm structural variables such as farm size, farm type and the presence of a farm successor were not found to be significantly related with life satisfaction. Our results also suggest that farmers who are more risk averse enjoy significantly lower levels of both life satisfaction and farm income than their more risk seeking or risk neutral counterparts. We suggest that, in the same way that risk aversion inhibits farmers from making choices that could lead to an increase in their income, it may also constrain farmers (and the wider public at large) from engaging in certain types of behaviours that could lead to an increase in their self‐reported quality of life. Finally, we find that while farm income is significantly related to self‐reported life satisfaction, the direct correlation between these variables is weak, suggesting that farmer life satisfaction can be distinct from business success.

Representation of decision-making in European agricultural agent-based models

“…This is particularly relevant in the agricultural sector in which farming families are the main decision makers but differ widely, and whose decisionmaking often goes beyond income maximization (Feola and Binder, 2010;Meyfroidt, 2013, Levine et al 2015, Howley, 2015. For many farmers, for example, farming is a vocation that is valued in itself and goals such as maintaining farming lifestyle, upkeep traditions or fulfilment of personal 'intrinsic' values i.e., enjoyment of works tasks or enjoyment of self-employment may be as important as economic drivers (Burton and Wilson, 2006;Gasson, 1973;Howley et al, 2017;Howley et al, 2014).…”

Neoclassical Approach to Traditional Business Insurance – Introduction to the Theory of Agricultural Insurance

“…As recently confirmed by Howley, Dillon, Heanue and Merdith (2017), persons characterised by this attitude abandon potentially higher expected profit or income or rate of return in exchange for their lower variability (Howley et al, 2017). In a longer time perspective, however, this strategy, per saldo, results in lower profit and income and rate of return than in the case of indifferent persons or even persons preferring the risk.…”

Bridging behavioural factors and standard bio‐economic modelling in an agent‐based modelling framework

“…These models integrate information about farm structures, environmental variables, price and market developments and policy instruments. Extensive empirical evidence indicates, however, that in reality farmers do not base their production decisions solely on income maximisation (e.g., Dessart et al, 2019; Howley, 2015; Howley et al, 2017; Malek et al, 2019). Based on this research, our conceptual framework focuses on three extensions of the assumption that farmers are profit maximisers by including prospect value, social networks, and farming preferences in the simulation of famers’ decision‐making (Figure 1a).…”