In reaction to the article `Car ownership, car use and status: a consideration of policy directed at more economical cars from happiness theories and the welfare economics' by B. van Wee and E.T. Verhoef (See IRRD E201661), it is contended that `status effects' do not satisfy the definition of externalities that is common in welfare theory. Principally, this is because they do not imply any sacrificing of scarce resources. `Status effects', therefore, are not, and opposed to the opinion of B. van Wee and E.T. Verhoef, a case of divergence from maximum welfare. Quite apart from this, and also in opposition to both authors, it is argued that no absolute prescriptions for policy may be derived from economic theory. Such prescriptions necessarily are conditional on the optimum allocation of resources being the sole objective of policy. Finally, it is stated that `happiness', a concept used by the authors in their discussion of `status effects' has no role to play in economic. (A)
Abstract