Hedonic Capital

Graham, Liam; Oswald, Andrew J.

doi:10.2139/ssrn.898574

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Hedonic Capital

IZA Discussion Paper No. 2079

37 Pages Posted: 25 Apr 2006

See all articles by Liam Graham

Liam Graham

University College London - Department of Economics

Andrew J. Oswald

University of Warwick - Department of Economics; IZA Institute of Labor Economics

Date Written: April 2006

Abstract

This paper proposes a new way to think about happiness. It distinguishes between stocks and flows. Central to the analysis is a concept we call 'hedonic capital'. The paper sets out a model of the dynamics of wellbeing in which bad life-shocks are smoothed by the drawing down of hedonic capital. The model fits the patterns found in the empirical literature: the existence of a stable level of wellbeing and a tendency to return gradually towards that level. It offers a theory of hedonic adaptation.

Keywords: adaptation, wellbeing, evolution, happiness, habituation

JEL Classification: D1, I3

Suggested Citation: Suggested Citation

Graham, Liam and Oswald, Andrew J., Hedonic Capital (April 2006). IZA Discussion Paper No. 2079, Available at SSRN: https://ssrn.com/abstract=898574 or http://dx.doi.org/10.2139/ssrn.898574