Valuation of external effects through indicators of subjective well-being

Happiness economics has considerable potential for the valuation of externalities. This article focuses in particular on the possibility of using indicators of subjective well-being to measure, in monetary terms, the external effects of the public policies on local, urban and regional scales. The paper starts with a brief discussion on the concept of subjective well-being in relation to the utility theory and behavioural science; then the results of an empirical application are illustrated and these focus on a comprehensive database of interviews split by Italian regions and extracted from the official statistics. These statistics demonstrated the operative practicality of this new approach that has already been applied on numerous occasions at the international level.