Evolutionary Efficiency and Happiness
We model happiness as a measurement tool used to rank alternative actions. Evolution favors a happiness function that measures the individualâ€™s success in relative terms. The optimal function is based on a time-varying reference pointâ€”or performance benchmarkâ€”that is updated over time in a statistically optimal way in order to match the individualâ€™s potential. Habits and peer comparisons arise as special cases of such an updating process. This updating also results in a volatile level of happiness that continuously reverts to its long-term mean. Throughout, we draw a parallel with a problem of optimal incentives, which allows us to apply statistical insights from agency theory to the study of happiness.
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