Economic Approaches to Understanding Change in Happiness

Nattavudh Powdthavee and Alois Stutzer

No 8131, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Are people condemned to an inherent level of experienced happiness? A review of the economic research on subjective well-being gives reason to the assessment that happiness can change. First, empirical findings clearly indicate that people are not indifferent to adverse living conditions when reporting their subjective well-being as observed for limited freedom of choice, low levels of democratization, unemployment, low income, etc. Second, considering people's adaptation to life events and (external) conditions reveals substantial heterogeneity in the speed as well as the degree of reversion. Together, the evidence suggests that reported subjective well-being is a valuable complementary source of information about human well-being and the phenomenon of adaptation. Many challenges, of course, remain. First, we are only at the beginning of understanding variation in the process of adaptation. The modeling of happiness over the life course promises a productive perspective. Second, adaptation might well pose a challenge to individual decision-making when people are not good in predicting it. Third, adaptation might have great consequences for public policy and the idea of social welfare maximization depending on how fast and slow adapting people are treated.

Keywords: subjective well-being; life course perspective; economics and happiness; adaptation (search for similar items in EconPapers)
JEL-codes: D03 D60 I31 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2014-04
New Economics Papers: this item is included in nep-hap, nep-hpe and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Published - published in: K. Sheldon and R.E. Lucas (eds.): Stability of Happiness, 2014

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