Happiness Research and Cost-Benefit Analysis

31 Pages Posted: 11 Jul 2007  

Matthew D. Adler

Duke University School of Law

Eric A. Posner

University of Chicago - Law School

Date Written: June 29, 2007

Abstract

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.

Keywords: happiness, subjective well-being, SWB, cost-benefit analysis, CBA, social welfare

Suggested Citation

Adler, Matthew D. and Posner, Eric A., Happiness Research and Cost-Benefit Analysis (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. Available at SSRN: https://ssrn.com/abstract=999928 or http://dx.doi.org/10.2139/ssrn.999928

Matthew D. Adler (Contact Author)

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

Eric A. Posner

University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States
773-702-0425 (Phone)
773-702-0730 (Fax)

HOME PAGE: http://www.law.uchicago.edu/faculty/posner-e/

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