1. Hedonic Adaptation Why we don’t stay happier

2. PastExpected Future Alternative Nearby additional Relevant Observed Current Multiple Alternative Our choices and our satisfaction are driven by the comparisons we make

3. Behavioral Economics Concepts PastExpected Future Alternative Nearby additional Relevant Observed Current Multiple Alternative Hedonic Adaptation Placebo Effect; Stereotypes Peer Effects; Relative Standing Endogenous Determination of Time Preference Anchoring; Paradox of Choice Loss Aversion; Endowment Effect; Status Quo Bias Availability Effects

5. Hedonic adaptation in marriage Daniel Kahneman (Princeton) and Alan B. Krueger (Princeton), 2006, Developments in the measurement of subjective well-being. Journal of Economic Perspectives, 20(1), 3-24.

6. Hedonic adaptation to death of a spouse A. Clark (Paris School of Economics), E. Diener (U. of Illinois), Y. Georgellis (Brunel U.), R. Lucas (Michigan State U.), 2008, Lags And Leads in Life Satisfaction: a Test of the Baseline Hypothesis. The Economic Journal, 118, F222-F243 Males Females

7. Hedonic adaptation in divorce R. Lucas (Michigan State U.), 2005, Time Does Not Heal All Wounds: A Longitudinal Study of Reaction and Adaptation to Divorce. Psychological Science, 16, 945-950

8. R. Di Tella (Harvard), J. Haisken-DeNew & R. MacCulloch (Imperial College London), 2007, Happiness adaptation to income and to status in an individual panel. National Bureau of Economic Research Working Paper, no. 13159. Hedonic adaptation in being fired

9. Hedonic adaptation in disability Paraplegic / quadriplegic injury victims an average of 20 years after injury tested on (1) Index of Psychological Weil-Being, (2) Life Satisfaction Index, and (3) Center for Epidemiologic Studies Depression Scale. For all three outcome measures, respondents reported levels of well- being only slightly lower than population means of nondisabled persons of similar age. R. Schulz (U. Pittsburgh) & S. Decker (U. Portland), 1985, Long-term adjustment to physical disability: the role of social support, perceived control, and self-blame. Journal of Personality and Social Psychology, 48(5), 1162-1172

11. In a longitudinal study of a 215,000 person-years, for people who become disabled, “we estimate the degree of hedonic adaptation at – depending on the severity of the disability – approximately 30% to 50%” A. Oswald (U. of Warwick, UK) & N. Powdthavee (U. of London, UK), 2008, Does happiness adapt? A longitudinal study of disability with implications for economists and judges. Journal of Public Economics, 92, 1061-1077.

12. “There is less evidence of adaptation to chronic or progressive diseases…in contrast to paralysis victims, whose condition is likely to remain constant over time, sufferers of such debilitating diseases must cope … with new impairments as their disease progresses” S. Frederick (MIT) and G. Loewenstein (Carnegie Mellon), 1999, “Hedonic adaptation,” in Well- being: The foundations of hedonic psychology. D. Kahneman & E. Diener eds. NY, NY: Russell Sage Foundation, pp. 302-29. Adaptation takes time

13. Hedonic adaptation in wealth Happiness level of lottery winners interviewed a few months after winning was not significantly different from non- winners Brickman, P., Coates, D., & Janoff-Bulman, R. (1978). Lottery winners and accident victims: Is happiness relative? Journal of Personality and Social Psychology, 36(8), 917–927.

14. The hedonic treadmill Greater past consumption leads to higher norms causing satisfaction to return to previous levels.

15. Adaptation and relative standing may prevent overall increases in income from creating overall increases in satisfaction Economic research “show[s] that happiness is indeed negatively related to others’ incomes and to own past income.” A. Clark (Paris School of Economics), P. Frijters (Queensland U.), & M. Shields (U. of Melbourne), 2008, Relative income, happiness, and utility: An explanation for the Easterlin paradox and other puzzles. Journal of Economic Literature, 46, 95–144 Your Happiness at Income X Your Previous Income Your Comparison Group Income

16. R. Di Tella (Harvard), J. Haisken-DeNew & R. MacCulloch (Imperial College London), 2007, Happiness adaptation to income and to status in an individual panel. National Bureau of Economic Research Working Paper, no. 13159. Effect of a 50% spike in income

17. Positive addictions A way off the hedonic treadmill? A positive addiction gradually increases satisfaction from consumption and may generate future benefits. This accumulated experience resulting in greater enjoyment is called “consumption capital”.

18. Daniel Mochon (MIT), Michael Norton (Harvard), and Dan Ariely (Duke) studied two positive addictions that have been most strongly associated with subjective well-being: exercise and religious attendance. D. Mochon (MIT), M. Norton (Harvard), D. Ariely (Duke), 2008, Getting off the hedonic treadmill, one step at a time: The impact of regular religious practice and exercise on well-being. Journal of Economic Psychology, 29, 632-642.

19. Repetition stops hedonic adaptation Many studies have shown that few events in life have a lasting impact on subjective well-being because of people’s tendency to adapt quickly; worse, those events that do have a lasting impact tend to be negative. However, while major events may not provide lasting increases in well-being, certain seemingly minor events – such as attending religious services or exercising – may do so by providing small but frequent boosts: if people engage in such behaviors with sufficient frequency, they may cumulatively experience enough boosts to attain higher well-being.

20. Repetition stops hedonic adaptation A survey of places of worship for 12 religions found that people did receive positive boosts for attending service, and that these boosts were cumulative: the more they reported attending, the happier they were.

21. Repetition stops hedonic adaptation Another study showed that people received boosts for exercise and yoga, and that these boosts too had a cumulative positive impact on well-being.

22. Repetition stops hedonic adaptation These findings suggest that shifting focus from the impact of major life changes on well-being to the impact of seemingly minor repeated behaviors is crucial for understanding how best to improve well-being.

23. Immediate impact: Well-being before and after exercise

24. Cumulative impact Well-being and accumulated exercise “for each unit of extra time they had attended their gym or yoga class in the previous month, participants experienced an increase in their well-being of about a third of a point.” D. Mochon (MIT), M. Norton (Harvard), D. Ariely (Duke), 2008, Getting off the hedonic treadmill, one step at a time: The impact of regular religious practice and exercise on well-being. Journal of Economic Psychology, 29, 632-642, p.640.

25. 2,095 surveyed before and after religious service (different people to prevent participants reporting increased mood by remembering earlier response). D. Mochon (MIT), M. Norton (Harvard), D. Ariely (Duke), 2008, Getting off the hedonic treadmill, one step at a time: The impact of regular religious practice and exercise on well-being. Journal of Economic Psychology, 29, 632-642, p.640.

26. Immediate impact: Well being before and after attendance

27. Cumulative impact: well-being and accumulated attendance

28. “Our findings imply that, in contrast to the notion of an inescapable hedonic treadmill, it is not pointless for people to seek to improve their well-being…, it seems like the key for long lasting changes to wellbeing is to engage in activities that provide small and frequent boosts, which in the long run will lead to improved well-being, one small step at a time.” D. Mochon (MIT), M. Norton (Harvard), D. Ariely (Duke), 2008, Getting off the hedonic treadmill, one step at a time: The impact of regular religious practice and exercise on well-being. Journal of Economic Psychology, 29, 632-642, p.640.

29. Policy implications These findings suggest that policies aimed at improving welfare are not a pointless endeavor, as the hedonic treadmill suggests. However, single-shot events such as a one time tax refund will probably have little lasting impact on the well-being of the country Policies that lead to small but repeated gains are likely to succeed.

30. Hedonic adaptation and prospect theory Sensitivity to the perception of gains or losses, rather than the absolute level of outcomes, reflects the importance of one’s current state in valuing outcomes.

32. 7 ft. Cell 9 ft. Cell Freedom Small difference in utility between two large losses Large difference in utility after adaptation Utility New prisoner Prisoner after adapting to incarceration S. Frederick (MIT) and G. Loewenstein (Carnegie Mellon), 1999, “Hedonic adaptation,” in Well-being: The foundations of hedonic psychology. D. Kahneman & E. Diener eds. NY, NY: Russell Sage Foundation, pp. 302-29. Original Hedonic Norm: Freedom New Hedonic Norm: 7ft Cell

33. Summary Changes in income or experiences temporarily affect happiness, but as people become accustomed to the new situation, the impact diminishes. However, hedonic adaptation takes time and may not offset ongoing improvements (e.g., positive addictions) or declines (e.g., progressive diseases)