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Does Happiness Adapt? A Longitudinal Study of Disability with Implications for Economists and Judges

  • Oswald, Andrew J.

    ()

    (University of Warwick)

  • Powdthavee, Nattavudh

    ()

    (London School of Economics)

Economics ignores the possibility of hedonic adaptation (the idea that people bounce back from utility shocks). This paper argues that economists are wrong to do so. It provides longitudinal evidence that individuals who become disabled go on to exhibit recovery in mental wellbeing. Adaptation to severe disability, however, is shown to be incomplete. The paper suggests ways to calculate the level of compensatory damages for the pain and suffering from disablement. Courts all over the world currently use ad hoc methods.

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File URL: http://ftp.iza.org/dp2208.pdf
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2208.

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Length: 40 pages
Date of creation: Jul 2006
Date of revision:
Publication status: published in: Journal of Public Economics, 2008, 92 (5-6), 1061-1077
Handle: RePEc:iza:izadps:dp2208
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  1. Luis Rayo & Gary S. Becker, 2007. "Evolutionary Efficiency and Happiness," Journal of Political Economy, University of Chicago Press, vol. 115, pages 302-337.
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  15. Daniel Kahneman & Robert Sugden, 2005. "Experienced Utility as a Standard of Policy Evaluation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 32(1), pages 161-181, 09.
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  18. Bruno S. Frey & Alois Stutzer, 2001. "What Can Economists Learn from Happiness Research?," CESifo Working Paper Series 503, CESifo Group Munich.
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  20. 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.
  21. Robert J. MacCulloch & Rafael Di Tella & Andrew J. Oswald, 2001. "Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness," American Economic Review, American Economic Association, vol. 91(1), pages 335-341, March.
  22. John Helliwell, 2005. "Well-Being, Social Capital and Public Policy: What's New?," NBER Working Papers 11807, National Bureau of Economic Research, Inc.
  23. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
  24. Ville, I. & Ravaud, J. -F. & Group, Tetrafigap, 2001. "Subjective well-being and severe motor impairments: the Tetrafigap survey on the long-term outcome of tetraplegic spinal cord injured persons," Social Science & Medicine, Elsevier, vol. 52(3), pages 369-384, February.
  25. Groot, Wim, 2000. "Adaptation and scale of reference bias in self-assessments of quality of life," Journal of Health Economics, Elsevier, vol. 19(3), pages 403-420, May.
  26. Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 997-1019, June.
  27. Easterlin, Richard A., 2005. "A puzzle for adaptive theory," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 513-521, April.
  28. Richard Layard, 2006. "Happiness and Public Policy: a Challenge to the Profession," Economic Journal, Royal Economic Society, vol. 116(510), pages C24-C33, 03.
  29. Clark, Andrew E., 1999. "Are wages habit-forming? evidence from micro data," Journal of Economic Behavior & Organization, Elsevier, vol. 39(2), pages 179-200, June.
  30. 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.
  31. Ada Ferrer-i-Carbonell & Bernard M.S. van Praag, 2002. "The subjective costs of health losses due to chronic diseases. An alternative model for monetary appraisal," Health Economics, John Wiley & Sons, Ltd., vol. 11(8), pages 709-722.
  32. Wim Groot & Henriëtte Maassen van den Brink, 2000. "Life-Satisfaction and Preference Drift," Social Indicators Research, Springer, vol. 50(3), pages 315-328, June.
  33. Wim Groot & Henri�tte Maassen van den Brink & Erik Plug, 2004. "Money for health: the equivalent variation of cardiovascular diseases," Health Economics, John Wiley & Sons, Ltd., vol. 13(9), pages 859-872.
  34. Winkelmann, Liliana & Winkelmann, Rainer, 1998. "Why Are the Unemployed So Unhappy? Evidence from Panel Data," Economica, London School of Economics and Political Science, vol. 65(257), pages 1-15, February.
  35. Anke C. Zimmermann & Richard A. Easterlin, 2006. "Happily Ever After? Cohabitation, Marriage, Divorce, and Happiness in Germany," Population and Development Review, The Population Council, Inc., vol. 32(3), pages 511-528.
  36. David Schmeidler & Itzhak Gilboa, 1996. "A Cognitive Model of Individual Well-Being," Working Papers 029, Ohio State University, Department of Economics.
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