ArticlePDF Available

Money or mental health: The cost of alleviating psychological distress with monetary compensation versus psychological therapy



Money is the default way in which intangible losses, such as pain and suffering, are currently valued and compensated in law courts. Economists have suggested that subjective well-being regressions can be used to guide compensation payouts for psychological distress following traumatic life events. We bring together studies from law, economic, psychology and medical journals to show that alleviating psychological distress through psychological therapy could be at least 32 times more cost effective than financial compensation. This result is not only important for law courts but has important implications for public health. Mental health is deteriorating across the world - improvements to mental health care might be a more efficient way to increase the health and happiness of our nations than pure income growth.
University of Warwick institutional repository
This paper is made available online in accordance with
publisher policies. Please scroll down to view the document
itself. Please refer to the repository record for this item and our
policy information available from the repository home page for
further information.
To see the final version of this paper please visit the publisher’s website.
Access to the published version may require a subscription.
Christopher J. Boyce and Alex M. Wood
Money or Mental Health: The Cost of
Alleviating Psychological Distress with
Monetary Compensation versus Psychological
Year of
Link to
Money or Mental Health: The Cost of Alleviating Psychological Distress with
Monetary Compensation versus Psychological Therapy
Christopher J. Boyce
Department of Psychology, University of Warwick
Alex M. Wood
School of Psychology, University of Manchester
Reference: Boyce, C. J. & Wood, A. M., (forthcoming) Money or Mental Health: The
Cost of Alleviating Psychological Distress with Monetary Compensation versus
Psychological Therapy, Health Economics, Policy and Law
This article is the copyright of Cambridge University Press and can be viewed online
at Cambridge Journals Online -
Money is the default way in which intangible losses, such as pain and suffering, are
currently valued and compensated in law courts. Economists have suggested that
subjective well-being regressions can be used to guide compensation payouts for
psychological distress following traumatic life events. We bring together studies from
law, economic, psychology and medical journals to show that alleviating
psychological distress through psychological therapy could be at least 32 times more
cost effective than financial compensation. This result is not only important for law
courts but has important implications for public health. Mental health is deteriorating
across the world – improvements to mental health care might be a more efficient way
to increase the health and happiness of our nations than pure income growth.
Address: Department of Psychology, University of Warwick, Coventry CV4 7AL.
Telephone: (+44) 024765 23158
Fax: (+44) 024765 24225
Acknowledgements: For helpful discussions and comments the authors are grateful to Gordon Brown, Anna
Cunningham, Stephen Joseph, Andrew Oswald, Paul Raffield and two anonymous referees. The Economic and
Social Research Council (ESRC) provided research support. The usual disclaimer applies.
Putting a price tag on “pain and suffering” seems an impossible task but
judges in law courts are regularly expected to make such decisions. Equating money
with an intangible loss may seem peculiar but in tort law an individual who has
suffered should, as nearly as possible, be restored to the same position had they not
sustained some wrong (Lunney & Oliphant, 2008). In law courts monetary
compensation is the expected remedy and there are established monetary guidelines to
compensate for the “pain and suffering” of various injuries (Mackay et al., 2006). In
the UK, the Fatal Accidents Act 1976 provides a one off payment for the
“bereavement” of family members. Economists have developed a method to place
monetary values on various life events (Blanchflower & Oswald, 2004, Ferrer-i-
Carbonell & van Praag, 2002, Powdthavee, 2008). It has further been suggested that
such monetary values could be offered as compensation to help overcome
psychological distress after particularly traumatic life events (Oswald & Powdthavee,
2008a, Oswald & Powdthavee, 2008b). The economists’ calculations would suggest
that court settlements would need to be much higher than present to fully compensate
an individual. The high monetary values reflect money’s ineffectiveness at
compensating someone for pain and suffering.
We assess the evidence across law, economic, psychology and medical
journals and suggest psychological therapy as an alternative. Psychological therapy
would be substantially more cost effective than financial compensation at alleviating
psychological distress. We extend our argument beyond the law courts and suggest
that moneys low importance in achieving mental health has important implications for
public health. National happiness levels have remained flat in developed countries in
spite of large economic gains. Mental health, on the other hand, appears to have been
deteriorating across the world for some time and is estimated to deteriorate still
further (Michaud et al., 2001). The comprehensiveness and accessibility of mental
health services, in particular the provision of psychological therapies in publicly
funded services, have regularly been questioned. Increasing the investment in mental
health and generally broadening access therefore might be a more efficient way to
increase the health and happiness of our nations than pure income growth.
Money - a common metric for valuing life events and the movement towards
Monetary values have been calculated across numerous areas of life
including; marriage (Blanchflower & Oswald, 2004), social relationships
(Powdthavee, 2008), the fear of crime (Moore & Shepherd, 2006), noise (Van Praag
& Baarsma, 2005), health (Ferrer-i-Carbonell & van Praag, 2002) and disabilities
(Oswald & Powdthavee, 2008b). The income equivalences attached to such events are
typically large. For example, the value of a marriage is estimated to be equivalent to
having an extra $100,000 (around £70,000 at today’s exchange rate) each year
(Blanchflower & Oswald, 2004). Such values have been calculated using subjective
well-being data and computation is relatively simple. The average impact of some life
event on an individual’s wellbeing can be determined statistically across a large
sample. This impact is then compared to the effect that income has on an individual’s
well-being. Typically, a one standard deviation rise in income would be expected to
induce a rise in well-being of between 0.17 and 0.21 standard deviations (Lucas &
Dyrenforth, 2006). By comparing the two effects researchers can estimate how much
extra income an individual would need on average to achieve an equivalent level of
well-being as the life event.
Compensation for injustices is an important aspect of society. In tort cases,
particularly those involving psychological distress, judges are commonly faced with
the dilemma of awarding compensation to restore an individual to the position they
were before any injustice took place. Such a decision is mostly subjective, arbitrary
and normally takes the form of a one off monetary payment (Mackay et al., 2006).
Some researchers have suggested that the psychological impact of particularly
traumatic life events can be evaluated in purely financial terms (Clark & Oswald,
2002). With the aim of alleviating psychological distress recent studies have
suggested that such figures could be useful in a court of law to guide compensation
payouts for individuals who have lost family members (Oswald & Powdthavee,
2008a) or become disabled (Oswald & Powdthavee, 2008b).
Such events can devastate the lives of individuals and the sums suggested to
help alleviate the psychological distress are large; much larger than those presently
awarded by courts. For example, were an individual to lose a partner, then it is
suggested that a compensation amount ranging from £114,000 to £206,000 per annum
would be needed to overcome psychological distress. For the loss of a child,
individuals would require anything from £89,000 to £140,000 to compensate (Oswald
& Powdthavee, 2008a). In the UK the Fatal Accidents Act 1976 recommends a
substantially lower payout of just £10,000. If such a financial compensatory argument
were extended to unemployment, which is well known to have deep psychological
effects beyond the simple loss of income (Darity & Goldsmith, 1996), the income
equivalence of psychological distress alone would be in the region of £34,000 to
£59,000 per annum (Oswald & Powdthavee, 2008a).
The clinical and cost effectiveness of psychological therapy
Researchers have assessed the clinical and cost effectiveness of various
treatments for depressed patients (Bower et al., 2000, Ward et al., 2000). The
effectiveness of general practitioner care with both cognitive-behaviour therapy
(CBT) and non-directive counselling were all compared. Over twelve months all
treatments reduced average depression levels by at least one and a half standard
deviations. The average total cost, which even included indirect costs such as work
time lost, was less than £1,500. In fact, the improvement was achieved by both CBT
and non-directive counselling within the first four months at a total cost of less than
A cost effectiveness comparison between psychological therapy and direct
financial compensation
Comparing the cost effectiveness of psychotherapy and direct financial
compensation in alleviating individuals from severe psychological distress has not
been carried out before. There are several ways in which the costs between
psychological therapy and direct financial compensation can be compared using the
studies already outlined. Oswald and Powdthavee (2008a) estimate that the average
psychological impact of losing a partner is about one standard deviation. They suggest
that the individual would need to be compensated with at least £114,000. Pro-rata it
would cost less than £600 to help the individual adjust to such a difficult life event
using psychological therapy. Similarly for unemployment, which has deep
psychological consequences, it would be more cost effective to provide individuals
with psychological therapy (around £100-£200 pro rata) to overcome their loss of
purpose in life and help them back to work rather than solely offering financial
To compare the costs in another way; psychological therapy alleviates
psychological distress by one and a half standard deviations at a cost of £800 over 4
months. To achieve a one and a half standard deviation reduction in psychological
distress using money alone would require (based on estimates in Oswald and
Powdthavee (2008a) and dependent on the statistical technique) somewhere in the
region of £179,000 to £292,000 of extra income every year. This illustrates that the
alleviation of severe psychological distress could be worth at least £179,000 of extra
income each year and suggests that financial compensation is an inefficient way of
helping individuals overcome distress.
The wide disparity between the effects of psychological therapy and income
arises out of the poor ability of income to improve mental health. However, income’s
effect on psychological distress in studies such as Oswald and Powdthavee (2008a) is
likely to be under estimated. More realistic income effects can be obtained by
allocating income randomly to individuals and observing the effects on individuals’
lives. Such an experiment is not possible but researchers have analyzed longitudinally
the effect of medium sized lottery wins on psychological distress. An average lottery
or pool win of £4,300 is found to bring approximately a quarter of a standard
deviation improvement to mental health two years after the win (Gardner & Oswald,
2007). This suggests that even when the best income-psychological distress estimates
are considered (Gardner & Oswald, 2007), psychological therapy is still calculated to
be at least 32 times more cost effective than financial compensation. This figure is
large and places huge questions on the use of income as an effective compensation
Our argument is not without its limitations. There are of course inherent
difficulties in making inferences across studies and just like the proponents of the use
of monetary compensation it is necessary to draw some conclusions from one group
of individuals to another1. The evidence on the cost-effectiveness of psychological
therapy is not based exclusively on individuals experiencing loss as a result of a
devastating life event. Some psychological distress will undoubtedly follow from the
loss of a loved one but one may question whether, what could be considered a fairly
normal response, would benefit from psychological therapy. This perhaps calls into
question the purpose of psychological treatment more generally. One view of
psychological therapy is that mental health is a continuum and that everyone, no
matter their level of psychological distress, can benefit from psychological therapy.
Under this view any psychological distress would be viewed as mental disorder and
therefore treatable. Another viewpoint is that mental disorder is dichotomous, in that
individuals either have mental disorder or do not. This view suggests that mental
disorder is the presence of distorted thought processes that can result in protracted
psychological distress. In this latter view the psychological distress that arises as a
normal reaction to loss might not be seen as directly treatable. However, it is likely
that, without adequate support, some unnecessary mental disorder will arise from the
loss. Therapy should aim to avert such mental disorder. Additionally, even if there
were a substantial cost difference in helping individuals with loss and those with
mental disorders, the cost-effectiveness comparison figure calculated earlier should be
high enough to absorb any extra expense.
A further issue that requires some discussion is the process of adaptation.
People adapt to many of life’s events (Brickman et al., 1978, Clark et al., 2008) and
some individuals will naturally return to their baseline level of psychological
1The argument for using subjective well-being measures to calculate monetary compensation levels
must necessarily assume that the effect of income on psychological distress, based on estimates from
the entire sample, will be the same for the small sub-sample who have recently lost a family member
functioning given time. If individuals adapt anyway then an argument could be made
against the use of psychological therapy. The same argument, however, could be
made against the use of monetary compensation, the current default method of
addressing loss. In any case individuals do not always fully adapt and even if they did
resources should be used in the most efficient manner to relieve psychological distress
in the interim. Oswald and Powdthavee (2008b) address the issue of adaptation and as
such suggest that annual compensatory amounts should be reduced each year.
Similarly, psychological therapy could be proportionally reduced to help with the
lower levels of distress in later years after an event. However, it may turn out that
psychological therapy, focusing directly on psychological distress, speeds up the
process of adaptation and may even mean therapy is unnecessary in later years.
Practical implications of our argument – for judges
In tort law an individual who has suffered should, as nearly as possible, be
restored to the same position had they not sustained some wrong. The loss of future
earnings must undoubtedly be compensated financially. The evidence suggests that
following a devastating life event an individual is likely to experience an adverse
psychological reaction and our concern is with the efficiency of compensating such an
intangible and fairly normal psychological reaction financially. Currently monetary
compensation seems to be unquestionably taken in law courts as the only way of
helping an individual overcome psychological distress after a traumatic event. The
values currently offered as compensation are arbitrary (Mackay et al., 2006) and,
according to economists’ subjective well-being equations, should actually be much
higher (Oswald & Powdthavee, 2008a, Oswald & Powdthavee, 2008b). Rather than
giving individuals more income to cope with distress it seems sensible to consider
other alternatives such as psychological therapy.
Can bestowing an individual with money really be expected to help an
individual with psychological distress after a traumatic life event? As a compensatory
device, money, like most things, can never truly fulfil such a role. The purpose of
financial compensation, however, is to alleviate an individual’s psychological distress
by helping them to find enjoyment elsewhere. Thus, if a tool is judged by its ability to
alleviate an individual’s psychological distress then the answer may be found in
medical research. We have shown that psychological therapy could be much more
cost effective than financial compensation. We are not claiming that psychological
therapy will entirely prevent what could be considered as a normal adverse
psychological reaction but therapy may provide some short term relief. Moreover
such devastating life events if not adequately dealt with may lead to maladaptive
thoughts and result in undue distress. It is unlikely that financial compensation will
protect against such maladaptive thinking.
On punitive grounds we are not necessarily suggesting that large court payouts
are not justified2. However, we are suggesting that the sums currently offered may not
be the best way to help the injured party overcome any psychological distress unless it
is decreed, in the best interests of the injured party, that the money gets spent on some
form of psychological therapy. There is currently no legal obligation for individuals to
undertake steps to alleviate their psychological distress. However, there is some legal
support in New Zealand for an increased use of psychological therapy to help
individuals overcome psychological distress that occurs due to the actions of a third
2There are several theories concerning the purpose of tort, these include; deterrence, corrective justice,
risk allocation and distribution of loss. Some, depending on the legal system, would argue that
retribution also plays an important part
party. The Injury Prevention, Rehabilitation and Compensation Act of 2001 requires
that the cost of psychological therapy be borne by the state.
Financial compensation may not even have the causal effect on a traumatized
individual in the way that economists suggest. Additionally, individuals are likely to
be unequally affected by financial compensation, for example due to the diminishing
marginal utility of income wealthier individuals may require even more income to
replenish lost well-being. Financial compensation seems like a poor device for
alleviating psychological distress. In contrast psychological therapy does not attempt
to act as compensation but instead focuses directly on helping individuals to
overcome their loss. Psychological therapy acknowledges that trauma is person
dependent and is therefore effective, inexpensive and compassionate.
Practical implications of our argument – for policy makers and society
We believe our argument has important implications for public health. The
high levels of financial compensation that economists suggest help to highlight how
inefficient money is at alleviating psychological distress and generally improving
individual well-being. Economists are puzzled as to why developed societies are
becoming no happier in spite of large income gains (Easterlin, 1995). However, in
1999 unipolar major depression was the fifth leading cause of the disease burden and
by 2020 major depression is expected to rise to the second biggest burden (Michaud et
al., 2001). These conflicting findings, along with the evidence presented here, indicate
that although income growth may provide some benefit to well-being, the greatest
benefit to the health and happiness of our nations could come from improving access
to mental health care.
Our argument, although clearly comparing across studies and extending from
the law courts to wider society, adds a new perspective to public health debate on
mental health. Regarding the UK’s National Health Service, Richard Layard (2006)
has suggested that the cost of helping individuals overcome mental health issues using
psychological therapy more than outweighs the money saved from reducing the
individuals on benefits who are incapacitated by their mental health. Our argument
adds further support for increasing the availability of mental health resources by
instead suggesting that mental health in its own right is something to be valued
alongside economic progress. The importance of improving mental health for national
well-being needs to be further recognized and policy makers must consider improving
mental health care further. Individuals are also probably not fully aware of the
powerful effects that good psychological therapy can have on their mental health and
general well-being. It needs to be understood that aspiring to good mental health can
often be more important than aspiring to high income for well-being. Since
individuals are unlikely to unilaterally invest in their own mental health there is a
strong case for public provision.
Blanchflower, D.G. & Oswald, A.J. (2004) Well-being over time in Britain and the
USA, Journal of Public Economics, 88(7-8), pp. 1359-1386.
Bower, P., Byford, S., Sibbald, B., Ward, E., King, M., Lloyd, R. & Gabbay, M.
(2000) Randomised controlled trial of non-directive counselling, cognitive-
behaviour therapy, and usual general practitioner care for patients with
depression. II: Cost effectiveness, British Medical Journal, 321(7273), pp.
Brickman, P., Coates, D. & Janoffbulman, R. (1978) Lottery winners and accident
victims - is happiness relative?, Journal of Personality and Social Psychology,
36(8), pp. 917-927.
Clark, A.E., Diener, E., Georgellis, Y. & Lucas, R.E. (2008) Lags and leads in life
satisfaction: A test of the baseline hypothesis, Economic Journal, 118(529),
pp. F222-F243.
Clark, A.E. & Oswald, A.J. (2002) A simple statistical method for measuring how life
events affect happiness, International Journal of Epidemiology, 31(6), pp.
Darity, W. & Goldsmith, A.H. (1996) Social psychology, unemployment and
macroeconomics, Journal of Economic Perspectives, 10(1), pp. 121-140.
Easterlin, R.A. (1995) Will raising the incomes of all increase the happiness of all?,
Journal of Economic Behavior & Organization, 27(1), pp. 35-47.
Ferrer-i-Carbonell, A. & van Praag, B.M.S. (2002) The subjective costs of health
losses due to chronic diseases. An alternative model for monetary appraisal,
Health Economics, 11(8), pp. 709-722.
Gardner, J. & Oswald, A.J. (2007) Money and mental wellbeing: A longitudinal study
of medium-sized lottery wins, Journal of Health Economics, 26(1), pp. 49-60.
Layard, R. (2006) Health policy - The case for psychological treatment centres,
British Medical Journal, 332(7548), pp. 1030-1032.
Lucas, R.E. & Dyrenforth, P.S. (2006) Does the existence of social relationships
matter for subjective well-being?, in: E.J. Finkel & K.D. Vohs (Eds) Self and
relationships: Connecting intrapersonal and interpersonal processes (New
York, NY: Guildford Press).
Lunney, M. & Oliphant, K. (2008) Tort Law: Text and Materials (New York, Oxford
University Press).
Mackay, J., Bruffell, M., Cherry, J., Hughes, A. & Tillett, M. (2006) Guidelines for
the assessment of general damages in personal injury cases (New York,
Oxford University Press).
Michaud, C.M., Murray, C.J.L. & Bloom, B.R. (2001) Burden of disease:
Implications for future research, JAMA-Journal of the American Medical
Association, 285(5), pp. 535-539.
Moore, S. & Shepherd, J.P. (2006) The cost of fear: shadow pricing the intangible
costs of crime, Applied Economics, 38(3), pp. 293-300.
Oswald, A.J. & Powdthavee, N. (2008a) Death, happiness, and the calculation of
compensatory damages, Journal of Legal Studies, 37, pp. S217-S251.
Oswald, A.J. & Powdthavee, N. (2008b) Does happiness adapt? A longitudinal study
of disability with implications for economists and judges, Journal of Public
Economics, 92(5-6), pp. 1061-1077.
Powdthavee, N. (2008) Putting a price tag on friends, relatives, and neighbours: Using
surveys of life satisfaction to value social relationships, Journal of Socio-
Economics, 37, pp. 22.
Van Praag, B.M.S. & Baarsma, B.E. (2005) Using happiness surveys to value
intangibles: The case of airport noise, Economic Journal, 115(500), pp. 224-
Ward, E., King, M., Lloyd, M., Bower, P., Sibbald, B., Farrelly, S., Gabbay, M.,
Tarrier, N. & Addington-Hall, J. (2000) Randomised controlled trial of non-
directive counselling, cognitive-behaviour therapy, and usual general
practitioner care for patients with depression. I: Clinical effectiveness, British
Medical Journal, 321(7273), pp. 1383-1388.
... To deal with the time-invariant confounders, equation (2) already includes personality characteristics (i.e., Big-5). These personality characteristics are expected to capture the correlation between error terms and pro-activity (Boyce and Wood, 2010). Yet, to go a step further, we take another empirical strategy in which we ...
Full-text available
Using longitudinal data from the German Socio-Economic Panel (GSOEP), this paper investigates how pro-active time-use (e.g., in sports/arts/socializing) relates to subjective well-being of the unemployed and their probability of finding a new job. Allowing for a variety of socio-demographic and -economic observed characteristics, we find that proactivity is negatively associated with the well-being loss upon unemployment. That is, the negative unemployment shock on their well-being is mitigated through various stressreducing activities including, in particular, art participation, socializing, going on trips, and visiting a church. We also find that the probability of returning to the labor market later is positively associated with proactivity during the unemployment period. The results are robust to various checks including estimators, measures, and individual personality characteristics which can correlate with time-use activities.
... Once people compromise their sacred values with temptations and are exposed to taboo trade-offs because of resource constraints, and even contemplate such taboo trade-offs, they suffer strong moral distress and disturbance (Fiske and Tetlock 1997;Tetlock 2003;Tetlock and Oppenheimer 2008) and experience moral outrage or disgust from moral communities (Chorus et al. 2018), "to trade is to destroy". Congruent with this theory, some studies have found that a monetary value seems to be a poor device for improving the mental health of the bereaved (Boyce and Wood 2010). As such, if the special subsidy for FPFPs is perceived as a prototypical and pure secular value traded for a child's life or health, it might be considered an inappropriate and blaming "taboo trade-off" by LCPs and DCPs, which would trigger adverse effects on the mental health of the parents. ...
Full-text available
This study evaluated the association between the special subsidy policy and the mental health of loss/disability-of-single-child parents (LCPs/DCPs) in China and found that accepting the special subsidy is inversely related to the mental health of LCPs and DCPs. In addition, accepting the subsidy is more inversely related to the mental health of LCPs than DCPs, of rural parents than urban parents, of male parents than female parents, and of loss/disability-of-single-son parents than loss/disability-of-single-daughter parents. According to taboo trade-off theory, we proposed several explanations for the finding and put forward some policy recommendations.
... It also characterized by unpleasant subjective states such as feeling tense, worried and worthless. It can reduce the emotional resilience of individuals and put an impact on their ability to enjoy life and to cope with pain, disappointment and sadness [10][11][12]. ...
Full-text available
Background: People with common mental disorders have instability, poor self-care, social withdrawal, poor communication with others and frequent somatic pains. Seeking help from traditional healers which offer Prayer and treatment with holy water have been strategies reported by several studies particularly in developing world. Purpose : to assess perceived causes, associated factors and prevalence of common mental disorders among visitors to traditional healers in Mekelle town, North Ethiopia. Methods and subjects: We used a mixed study design; a quantitative study on 380 subjects and a qualitative study among fifteen subjects. We used Self-reported questionnaire (SRQ 20) to screen common mental disorders. Also perceived causes of mental illness and psycho-social stressful situations were assessed using a semi structured tool and in-depth interview. We analyzed data using Statistical Package for Social Sciences software, windows 25. Findings in the qualitative study were triangulated with the quantitative finding. Result: the prevalence of common mental disorders was 38.7% (95% CI; 33.7, 43.6). Factors independently associated with common mental disorders were being a woman (AOR= 1.68 (95% CI; 1.04, 2.72)), low level of education (AOR=3.2 (95% CI; 1.28, 6.91)), a conflict in the family (AOR= 3.82 (95% CI; 1.89, 7.68)) and traditional belief about the cause of mental illness (AOR= 2.33 (95% CI; 1.43, 3.79)). Experience of poor/no religious rituals, evil spirit, personal sin and will of God were the top traditional causes of common mental disorders. Conclusion : prevalence of common mental disorders was higher among the visitors as compared to prior studies. This refers the importance of establishing a link between traditional healers and modern treatment of mental illness with special attention to women, low socio-economic class and people with poor family dynamics.
... These figures have suggested to others that there is a very strong cost effective argument to be made to extend psychotherapy to many victims to alleviate negative feelings associated with injury and trauma. Indeed, there is a very strong case to be made that this therapy is extremely effective (Boyce and Wood 2010). Such is the effectiveness that one wonders if it should not be an expected legal act of reasonable mitigation in reducing the incursion of non-pecuniary losses in personal injury cases. ...
Full-text available
The law has historically granted damages for some forms of non-pecuniary losses. In doing so, courts have freely admitted that there is imprecision in quantifying such losses and that there is no quantitative and objective calculus on pain and suffering. Against this background, new research on how hedonic losses are experienced by a victim provide an opportunity to review how non-pecuniary losses should be compensated. Some of this research suggests that experiences of anxiety, frustration and suffering may not affect a victim's happiness as great as is presupposed in current models of compensation, and further, that its impact may also be ameliorated by the offering of an apology. In this essay, the author asks whether the law can incentivize tortfeasors to offer an apology as an element in mitigating compensatory damages for non-pecuniary loss. Resumen Históricamente, el derecho ha concedido daños y perjuicios para algunas pérdidas no monetarias. Al hacer esto, los tribunales han admitido que existe una imprecisión a la hora de cuantificar estas pérdidas y que no existe un cálculo cuantitativo y objetivo del dolor y el sufrimiento. En este contexto, nuevas investigaciones sobre la experiencia de las víctimas frente a pérdidas hedonísticas ofrecen la oportunidad de revisar cómo se deberían compensar las pérdidas no pecuniarias. Algunas de estas investigaciones sugieren que las experiencias de ansiedad, frustración y sufrimiento pueden no afectar a la felicidad de una víctima tanto como se presupone en los modelos actuales de compensación, y además, su impacto puede mejorar al ofrecer una disculpa. En este ensayo, el autor se pregunta si el derecho puede incentivar a los causantes del daño a ofrecer una disculpa como elemento con el que reducir la indemnización por una pérdida no pecuniaria. I wish to thank my research students Harrison Nemirov and Mitchell Fournie, three anonymous referees, and professors Prue
... As found in other studies, whereas individuals tend to completely adapt to changes in pecuniary domains (such as effects on income and material conditions), adaptation to domains like health, social relatedness, political and environmental conditions is often incomplete (Frank, 2005;Easterlin, 2003). Moreover, Boyce and Wood (2010) make a strong case that financial compensation is inadequate for alleviating psychological distress. When inspecting the type of psychological damages shared by the interviewees we frequently find reports on high levels of (persisting) stress, which individuals are still struggling with. ...
... Although we find that income rank is a better predictor of depressive symptoms than income, it must be noted that rank still explains a relatively small percentage of variability in depressive symptoms (4 and 12 % in WLS and ELSA respectively). Income, however specified, only explains a small amount of well-being relative to psychological characteristics (Boyce and Wood 2010;Boyce et al. 2013;Osafo Hounkpatin et al. 2014). Furthermore, the current research suggests an explanation of the Easterlin paradox (Easterlin 1973;Easterlin et al. 2010) where whilst income within a country is related to well-being at a point in time, increases in national income do not relate to aggregate increases in well-being. ...
Full-text available
This paper reports a test of the relative income rank hypothesis of depression, according to which it is the rank position of an individual's income amongst a comparison group, rather than the individual's absolute income, that will be associated with depressive symptoms. A new methodology is developed to test between psychosocial and material explanations of why income relates to well-being. This method was used to test the income rank hypothesis as applied to depressive symptoms. We used data from a cohort of 10,317 individuals living in Wisconsin who completed surveys in 1992 and 2003. The utility assumed to arise from income was represented with a constant relative risk aversion function to overcome limitations of previous work in which inadequate specification of the relationship between absolute income and well-being may have inappropriately favoured relative income specifications. We compared models in which current and future depressive symptoms were predicted from: (a) income utility alone, (b) income rank alone, (c) the transformed difference between the individual's income and the mean income of a comparison group and (d) income utility, income rank and distance from the mean jointly. Model comparison overcomes problems involving multi-collinearity amongst the predictors. A rank-only model was consistently supported. Similar results were obtained for the association between depressive symptoms and wealth and rank of wealth in a cohort of 32,900 British individuals who completed surveys in 2002 and 2008. We conclude that it is the rank of a person's income or wealth within a social comparison group, rather than income or wealth themselves or their deviations from the mean within a reference group, that is more strongly associated with depressive symptoms.
Full-text available
Academic and policy interest in the determinants of subjective well-being continues to grow. To date, the role of temporal discounting—the extent to which people devalue future rewards—in people’s reports of their subjective well-being has remained unexplored. This paper is the first to provide evidence on the relationship between discount rates and evaluative and hedonic subjective well-being. Using data from a nationally representative sample of 2000 UK respondents in multiple regression analyses, the results suggest that people who devalue future rewards are less satisfied with life and less happy than those who place greater value on future outcomes. However, those who discount heavily are also more likely to expect that they will be happier in the future.
Full-text available
his Handbook assembles original contributions from influential authors such as Herman Daly, Paul Ekins, Marina Fischer-Kowalski, Jeroen van den Bergh, William E. Rees and Tim Jackson who have helped to define our understanding of growth and sustainability. The Handbook also presents new contributions on topics such as degrowth, the debt-based financial system, cultural change, energy return on investment, shorter working hours and employment, and innovation and technology. Explorations of these issues can deepen our understanding of whether growth is sustainable and, in turn, whether a move away from growth can be sustained. With issues such as climate change looming large, our understanding of growth and sustainability is critical. This Handbook offers a broad range of perspectives that can help the reader to decide: Growth? Sustainability? Both? Or neither?
The costs of violent crime victimisation are often left to a tribunal, judge or jury to determine, which can lead to considerable subjectivity and variation. Using panel data, this paper provides compensation estimates that help reduce the subjectivity of awards by providing a benchmark for the compensation required to offset direct and intangible costs. Individual-area fixed-effects models of wellbeing that allow for adaptation and the endogeneity of income suggest that, on average, $88,000 is required to compensate a violent victim, with the amount being greater for females ($102,000) than males ($79,000). This article is protected by copyright. All rights reserved.
Full-text available
This paper presents a study of the mental distress caused by bereavement. The greatest emotional losses are from the death of a spouse, the second greatest from the death of a child, and the third from the death of a parent. The paper explores how happiness regression equations might be used in tort cases to calculate compensatory damages for emotional harm and pain and suffering. We examine alternative well-being variables, discuss adaptation, consider the possibility that bereavement affects someone's marginal utility of income, and suggest a procedure for correcting for the endogeneity of income. Although the paper's contribution is methodological and further research is needed, some illustrative compensation amounts are discussed.
Full-text available
There is substantial evidence in the psychology and sociology literature that social relationships promote happiness for the individual. Yet the size of their impacts remains largely unknown. This paper explores the use of shadow pricing method to estimate the monetary values of the satisfaction with life gained by an increase in the frequency of interaction with friends, relatives, and neighbours. Using the British Household Panel Survey, I find that an increase in the level of social involvements is worth up to an extra £85,000 a year in terms of life satisfaction. Actual changes in income, on the other hand, buy very little happiness.
Full-text available
This study employs a cross sectional crime survey of UK residents to estimate the shadow price of victimization with respect to fear of crime. Particular attention is paid to the relationship between household income and fear of crime and potential mediating variables such as neighbourhood deprivation and neighbourhood crime rates. A robust relationship between fear of crime and income is demonstrated having controlled for deprivation and crime rate. Further analyses suggest that a substantial increase in household income is required to offset the threat of physical violence. However, actual victimization (burglary, physical violence and car crime) do not significantly influence fear of crime.
Full-text available
This paper presents a study of the mental distress caused by bereavement. The greatest emotional losses are from the death of a spouse, the second greatest from the death of a child, and the third from the death of a parent. The paper explores how happiness regression equations might be used in tort cases to calculate compensatory damages for emotional harm and pain and suffering. We examine alternative well-being variables, discuss adaptation, consider the possibility that bereavement affects someone's marginal utility of income, and suggest a procedure for correcting for the endogeneity of income. Although the paper's contribution is methodological and further research is needed, some illustrative compensation amounts are discussed. (c) 2008 by The University of Chicago. All rights reserved..
Full-text available
Adaptation level theory suggests that both contrast and habituation will operate to prevent the winning of a fortune from elevating happiness as much as might be expected. Contrast with the peak experience of winning should lessen the impact of ordinary pleasures, while habituation should eventually reduce the value of new pleasures made possible by winning. Study 1 compared a sample of 22 major lottery winners with 22 controls and also with a group of 29 paralyzed accident victims who had been interviewed previously. As predicted, lottery winners were not happier than controls and took significantly less pleasure from a series of mundane events. Study 2 indicated that these effects were not due to preexisting differences between people who buy or do not buy lottery tickets or between interviews that made or did not make the lottery salient. Paraplegics also demonstrated a contrast effect, not by enhancing minor pleasures but by idealizing their past, which did not help their present happiness.
One overall challenge for public health and medicine in the future is to allocate available resources effectively to reduce major causes of disease burden globally and to decrease health disparities between poor and affluent populations. The major risk factors for death and disability worldwide are malnutrition; poor water supply, sanitation, and personal and domestic hygiene; unsafe sexual behavior; tobacco use; alcohol use; occupational hazards; hypertension; physical inactivity; illicit drugs; and air pollution. The challenge for research in the 21st century is to maintain and improve life expectancy and the quality of life that was achieved for most of the world's population during the 20th century.
Subjective well-being (SWB) researchers examine quality of life from the respondent's perspective. If the major reviews in this area are correct, people seeking to maximize happiness should forego the pursuit of money, beauty, and material possessions, and instead devote their lives to developing and maintaining close personal relationships. However, close examination of these reviews reveals that authors rarely address the link between the existence of social relationships and greater well-being. Instead, they focus on whether people are satisfied with their relationships or whether they value relationships over and above other life goals. For example, in his review of the literature on close relationships and SWB, Myers (1999) discussed individuals "who feel satisfied with their love life," "who enjoy close relationships," who value "having close friends and a close marriage," and who say they have friends who "support their goals by frequently expressing interest and offering help and encouragement" (p. 378). However, he only cited one study that examined individuals who actually report having more (or fewer) friends. In this chapter, we focus specifically on the question of whether the existence of social relationships is associated with higher levels of SWB. We review the literature on the associations between relationships and happiness and discuss the mechanisms that may be able to account for these links. The evidence reviewed in this chapter shows that social relationships do predict SWB. People who are sociable and extraverted experience more positive affect than those who are not. People who spend more time with others are happier than those who spend a lot of time alone. People who have many friends are happier than those who have only a few. And people who are married are happier than those who are divorced or widowed. However, the size of these effects does not support the conclusion that the existence of social relationships is a particularly strong correlate. Correlations with extraversion tend to be moderate to large, but extraverts' greater social activity can only partially explain their greater happiness. Correlations with marital status, number of friends, frequency of visits with friends, and other measures of actual social activity tend to be small, generally falling between .10 and .20. In fact, these correlations tend to be weaker than the effect of income, an effect that has been described as miniscule. Why, then, have social relationships been held up as "the single greatest cause" of SWB (Argyle, 2001, p. 71) when most effect sizes are very small? We believe that there are three reasons, all of which are speculative at this time. First, most of the research reviewed in this chapter relied on large-scale nationally representative surveys or meta-analyses of existing research. A second possible reason is that the beneficial effects of social relationships on SWB are generally discussed in the context of outcomes from a wide variety of domains. A final factor concerns the fact that relationship quality may be more important for well-being than the mere existence of relationships or the frequency with which individuals engage in social contact. We are not saying that the existence of social relationships is unimportant--just that the effect sizes are small by traditional standards. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
We look for evidence of habituation in twenty waves of German panel data: do individuals tend to return to some baseline level of well-being after life and labour market events? Although the strongest life satisfaction effect is often at the time of the event, we find significant lag and lead effects. We cannot reject the hypothesis of complete adaptation to marriage, divorce, widowhood, birth of child and layoff. However, there is little evidence of adaptation to unemployment for men. Men are somewhat more affected by labour market events (unemployment and layoffs) than are women but in general the patterns of anticipation and adaptation are remarkably similar by sex.