Happiness Research and Cost-Benefit Analysis
Matthew D. Adler
Duke University School of Law
Eric A. Posner
University of Chicago - Law School
June 29, 2007
U of Penn, Inst for Law & Econ Research Paper No. 07-15
U of Penn Law School, Public Law Research Paper No. 07-29
U of Chicago Law & Economics, Olin Working Paper No. 345
A growing body of research on happiness or subjective well-being shows, among other things, that people adapt to many injuries more rapidly than is commonly thought, fail to predict the degree of adaptation and hence overestimate the impact of those injuries on their well-being, and, similarly, enjoy small or moderate rather than significant changes in well-being in response to significant changes in income. Some researchers believe that these findings pose a challenge to cost-benefit analysis, and argue that project evaluation decision-procedures based on economic premises should be replaced with procedures that directly maximize subjective well-being. This view turns out to be wrong or, at best, premature. Cost-benefit analysis remains a viable decision-procedure. However, some of the findings in the happiness literature can be used to generate valuations for cost-benefit analysis where current approaches have proven inadequate.
Number of Pages in PDF File: 31
Keywords: happiness, subjective well-being, SWB, cost-benefit analysis, CBA, social welfare
Date posted: July 11, 2007
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