This paper discusses the social nature of needs and the implications of alternative theories of human preferences for long-run environmental choices.

We discuss theories on consumption from social psychology, consumer research and economics, with special emphasis on the social nature of consumer behaviour. These perspectives on consumption are attempted integrated into an economic model using Sen concept of functionings.

Sen's approach assumes that what people value is the functionings derived from material consumption and not the pure act of consumption itself. The social nature of needs is introduced by assuming that mappings from commodities to functionings depend, for many important functionings, on socially determined variables. Assuming that individuals hold constant preferences over functionings we derive socially determined preferences for consumption goods.

Our analysis examines a stylized Ramsey model of climate-economy interactions in which a standard representation of preferences is altered to account for the social construction of wants. We explore different specifications of the utility function that are grounded in alternative sociological and psychological theories. We present simulations that are based on a version of this model that is

numerically calibrated to represent the interactions between the world economy and global climate change. In this model, the social nature of preferences induces a consumption externality. This externality leads to a rat race for consumption growth that comes at the expense of environmental quality and leisure. Thus, although it is not directly an environmental externality, correcting the consumption externality has significant effects on environmental quality, and on leisure. Based on plausible parameter values, we find that rather high labour tax rates may be optimal.