Accounting for Happiness in Civil Settlements

Abstract:     
In Hedonic Adaptation and the Settlement of Civil Lawsuits, John Bronsteen, Christopher Buccafusco, and Jonathan Masur offer an interesting application of the nascent research on hedonic psychology to a mature economic model of litigation. Informed by empirical research on individual happiness and hedonic adaptation, the authors argue that delays in civil trials create greater economic opportunities for settlement of civil lawsuits. In short, they argue that where a plaintiff suffers an adaptable injury - i.e., an injury that does not permanently affect the happiness of an individual-settlement is easier for two reasons: (1) over time, "the degree to which a plaintiff believes she has been 'wronged' will dissipate," and therefore, (2) the plaintiff will accept a lower settlement offer because she will believe that less money is required to make her whole. I believe that the authors have overestimated the strength, ubiquity, and importance of hedonic adaptation and happiness in civil settlements and have underestimated the impact of the litigation process on individual happiness. I offer first a number of positive critiques about the data on hedonic adaptation and on the authors' arguments about how the litigation process affects individual adaptation. Then I consider the normative question of whether the judicial system ought to foster post-adaptation settlements.

Keywords: litigation, lawsuits, civil settlements, happiness, hedonic adaptation, affective forecasting, behavioral, economics, trial

JEL Classifications: A12, D60, K10, K40, K41

Accepted Paper Series