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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

    ()

    (University of Warwick)

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
Publication status: published in: Journal of Public Economics, 2008, 92 (5-6), 1061-1077
Handle: RePEc:iza:izadps:dp2208
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