Evolutionary efficiency and happiness

Luis Rayo*, Gary S. Becker

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

152 Scopus citations

Abstract

We model happiness as a measurement tool used to rank alternative actions. Evolution favors a happiness function that measures the individual's success in relative terms. The optimal function is based on a time-varying reference point - or performance benchmark - that is updated over time in a statistically optimal way in order to match the individual's potential. Habits and peer comparisons arise as special cases of such an updating process. This updating also results in a volatile level of happiness that continuously reverts to its long-term mean. Throughout, we draw a parallel with a problem of optimal incentives, which allows us to apply statistical insights from agency theory to the study of happiness.

Original languageEnglish (US)
Pages (from-to)302-337
Number of pages36
JournalJournal of Political Economy
Volume115
Issue number2
DOIs
StatePublished - Apr 2007

ASJC Scopus subject areas

  • Economics and Econometrics

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