Abstract
Individual happiness is to some extent constructed by the individuals themselves and depends on the past and present social environment. Many individuals adapt quite quickly to a new situation and move towards a similar well-being level as they experienced before a positive or negative event. However, this is not always the case. Our well-being depends not so much on absolute income but on our income compared to colleagues, friends, and relatives. This also holds for unemployment. Experiments reveal that people are incapable of accurately remembering the pain they experienced in the past. Wrong decisions are often taken because people disregard the scale and speed of adjustment to a new situation. Human beings tend to be overoptimistic and find it difficult to predict how happy they will be in the future under different life circumstances.
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Literature
Frey, Bruno S., and Alois Stutzer. 2014. Economic Consequences of Mispredicting Utility. Journal of Happiness Studies 15 (4): 937–956.
Kahneman, Daniel. 2011. Thinking, Fast and Slow. New York: Farrar, Straus and Giroux.
Stutzer, Alois. 2004. The Role of Income Aspirations in Individual Happiness. Journal of Economic Behavior & Organization 54 (1): 89–109.
A recent study on self-predicting future life satisfaction is:
Odermatt, Reto and Alois Stutzer. 2018. (Mis-)Predicted Subjective Well-Being Following Life Events. Journal of the European Economic Association, forthcoming.
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Frey, B.S. (2018). Psychological Influences on Happiness. In: Economics of Happiness. SpringerBriefs in Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-75807-7_5
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DOI: https://doi.org/10.1007/978-3-319-75807-7_5
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