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Hedonic Capital

Author Info

  • Graham, Liam

    ()

    (University College London)

  • Oswald, Andrew J.

    ()

    (University of Warwick)

Abstract

This paper proposes a new way to think about happiness. It distinguishes between stocks and flows. Central to the analysis is a concept we call ‘hedonic capital’. The paper sets out a model of the dynamics of wellbeing in which bad life-shocks are smoothed by the drawing down of hedonic capital. The model fits the patterns found in the empirical literature: the existence of a stable level of wellbeing and a tendency to return gradually towards that level. It offers a theory of hedonic adaptation.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2079.

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Length: 37 pages
Date of creation: Apr 2006
Date of revision:
Handle: RePEc:iza:izadps:dp2079
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Keywords: adaptation; wellbeing; evolution; happiness; habituation;

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Find related papers by JEL classification:
  • D1 - Microeconomics - - Household Behavior
  • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

This paper has been announced in the following NEP Reports:

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  6. Keely, Louise C., 2005. "Why isn't growth making us happier? Utility on the hedonic treadmill," Journal of Economic Behavior & Organization, Elsevier, vol. 57(3), pages 333-355, July.
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  8. Wu, Stephen, 2001. "Adapting to heart conditions: a test of the hedonic treadmill," Journal of Health Economics, Elsevier, vol. 20(4), pages 495-507, July.
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  11. Di Tella, Rafael & Haisken-De New, John & MacCulloch, Robert, 2010. "Happiness adaptation to income and to status in an individual panel," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 834-852, December.
  12. Easterlin, Richard A., 2005. "A puzzle for adaptive theory," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 513-521, April.
  13. Oswald, A.J., 1997. "Happiness and Economic Performance," Papers 18, Centre for Economic Performance & Institute of Economics.
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  15. Menzel, Paul & Dolan, Paul & Richardson, Jeff & Olsen, Jan Abel, 2002. "The role of adaptation to disability and disease in health state valuation: a preliminary normative analysis," Social Science & Medicine, Elsevier, vol. 55(12), pages 2149-2158, December.
  16. Oswald, Andrew J. & Powdthavee, Nattavudh, 2008. "Does happiness adapt? A longitudinal study of disability with implications for economists and judges," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1061-1077, June.
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  22. Gardner, Jonathan & Oswald, Andrew J., 2005. "Do Divorcing Couples Become Happier By Breaking Up?," IZA Discussion Papers 1788, Institute for the Study of Labor (IZA).
  23. Daniel Kahneman & Robert Sugden, 2005. "Experienced Utility as a Standard of Policy Evaluation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(1), pages 161-181, 09.
  24. Alois Stutzer, . "The Role of Income Aspirations in Individual Happiness," IEW - Working Papers 124, Institute for Empirical Research in Economics - University of Zurich.
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  31. Bruno S. Frey & Stephan Meier, 2004. "Social Comparisons and Pro-social Behavior: Testing "Conditional Cooperation" in a Field Experiment," American Economic Review, American Economic Association, vol. 94(5), pages 1717-1722, December.
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Cited by:

  1. Nattavudh Powdthavee, 2012. "Resilience to Economic Shocks and the Long Reach of Childhood Bullying," CEP Discussion Papers dp1173, Centre for Economic Performance, LSE.
  2. Francesco Ferrante, 2009. "Education, Aspirations and Life Satisfaction," Kyklos, Wiley Blackwell, vol. 62(4), pages 542-562, November.
  3. Oswald, Andrew J. & Powdthavee, Nattavudh, 2006. "Does Happiness Adapt? A Longitudinal Study of Disability with Implications for Economists and Judges," IZA Discussion Papers 2208, Institute for the Study of Labor (IZA).
  4. Claudia Senik, 2007. "Is man doomed to progress?," PSE Working Papers halshs-00590519, HAL.
  5. Frijters, Paul & Johnston, David W. & Shields, Michael A., 2008. "Happiness Dynamics with Quarterly Life Event Data," IZA Discussion Papers 3604, Institute for the Study of Labor (IZA).
  6. Stutzer, Alois & Frey, Bruno S., 2012. "Recent Developments in the Economics of Happiness: A Selective Overview," IZA Discussion Papers 7078, Institute for the Study of Labor (IZA).
  7. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2006. "Income and happiness: Evidence, explanations and economic implications," Working Papers halshs-00590436, HAL.
  8. Konow, James, 2010. "Mixed feelings: Theories of and evidence on giving," Journal of Public Economics, Elsevier, vol. 94(3-4), pages 279-297, April.
  9. Konow, James & Earley, Joseph, 2007. "The Hedonistic Paradox: Is Homo Economicus Happier?," MPRA Paper 2728, University Library of Munich, Germany.

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