Hedonic capital.

This paper proposes a new way to think about happiness. It distinguishes betweenstocks and flows. Central to the analysis is a concept we call ?hedonic capital?. Thepaper sets out a model of the dynamics of wellbeing in which bad life-shocks aresmoothed by the drawing down of hedonic capital. The model fits the patterns foundin the empirical literature: the existence of a stable level of wellbeing and a tendencyto return gradually towards that level. It offers a theory of hedonic adaptation. This paper proposes a new way to think about happiness. It distinguishes betweenstocks and flows. Central to the analysis is a concept we call ?hedonic capital?. Thepaper sets out a model of the dynamics of wellbeing in which bad life-shocks aresmoothed by the drawing down of hedonic capital. The model fits the patterns foundin the empirical literature: the existence of a stable level of wellbeing and a tendencyto return gradually towards that level. It offers a theory of hedonic adaptation.