![]() Given the variety of health variables in the survey, I can test to see which specific aspects of well-being and health adapt to health shocks and which do not. The current analysis will focus on specific health conditions to test whether people adapt to these conditions over time and whether subjective measures of well-being improve over time, even when the condition continues to be present. ![]() In this paper, I will use the recent Health and Retirement Study (HRS), which has an abundance of measures of health status and subjective happiness, to conduct a more in-depth empirical test of the hedonic treadmill and the adaptation level theory. In addition, the measurement of well-being has often been confined to a single subjective index. Due to these limitations, it is difficult to convincingly test for the presence of adaptation. Though there have been several studies that have examined these hypotheses, most of the work has used case studies with extremely small samples and data with severe limitations. ![]() Once again, however, this is merely cross-sectional evidence and there is no attempt to follow specific individuals over time to test for the presence of adaptation. Diener and Suh (1997) show that across 40 different countries, men and women of all different ages hardly differ along the dimension of subjective well-being. Diener and Diener (1996) find that most people report relatively high levels of subjective well-being regardless of demographic characteristics. ![]() There is some evidence that people living in poorer cities or countries are not unhappier than those in more affluent places. While paraplegics did rate their happiness lower than controls, the accident victims “did not appear as unhappy as might have been expected.” Of course, it is difficult to distinguish whether this signifies a process of adaptation or it is simply the result of a lack of ex-ante information on the part of these individuals. They use 22 lottery winners and 29 paralyzed accident victims as case studies and find that as predicted, major lottery winners are not significantly happier than control subjects and actually derive much less satisfaction from a series of ordinary daily life activities. The landmark study that is most cited in the literature is by Brickman et al. Several empirical studies claim to show support for the hedonic treadmill idea, though many of them are rather unconvincing. Likewise, those who undergo changes for the worse will slowly adapt to these changes so that these “worsened” conditions will not necessarily translate into a lower assessment of well-being. Subsequent work by Brickman and Campbell (1971) further develops this idea of a “hedonic treadmill”, which implies that if people continue to adapt to their improving circumstances, the improvements yield no real benefits. The main hypothesis is that individuals’ judgments and reactions to current stimuli, whether they are negative or positive, depend on how their previous history has given them a reference point for comparison. The earliest research that brings these ideas together in a general framework dates back to Helson’s (1964) theory of adaptation level. This notion of “reference-dependent preferences” has important implications to the study of externalities and the Coase Theorem (see Kahneman et al., 1990 and Knetsch, 1989). A number of recent papers have shown preferences to be conditional on current endowments (Bateman et al., 1997), implying that the willingness-to-pay for a good is not necessarily equivalent to the willingness-to-accept for a good. The effect of current consumption on the desirability of future consumption has been the subject of a large amount of research, including theories of habit formation (Constantinides, 1990) and addiction (see, for example, Becker and Murphy, 1988 and Becker et al., 1994). In the recent literature on utility and decision theory, there has been an increasing emphasis on the importance of reference points of comparison in determining individual preferences. (1978) conclude that people adapt to their circumstances so that happiness is indeed relative, while Veenhoven (1991) finds evidence that is inconsistent with this hypothesis. More recently, many researchers have proposed the question, “Is happiness relative?” and have found mixed results. The idea that happiness, or well-being, is relative to one’s circumstances is centuries old and can be traced to the writings of early Greek philosophers.
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