Breaking the Hedonic Paradox

Breaking the Hedonic Paradox: The Paradoxical Nature of Scarcity as it Relates to Happiness Aman Babbarwal ECON 475 – Spring 2014

Abstract. This paper investigates the paradoxical nature of scarcity as it relates to happiness. By building upon the hedonic treadmill theory, this study, employing fundamental principles of economics, seeks to establish that the lives of humans are perpetually bounded in a circular dialogue (trade-offs) between scarcity and happiness. It is ultimately suggested that although liberation from the hedonic paradox may prove to be onerous, it is not futile. Indeed, the role of personal beliefs seems to constitute the decisive element in breaking the hedonic paradox. Keywords: Hedonic Paradox; The Artist; Internal Competition; Scarcity; Personal Beliefs 1. Introduction The impetus for selecting scarcity as the contending concept in better gaining an understanding of happiness originated as an attempt to provide a link to all of the prevailing theories of what constitutes happiness. Clearly – as shown empirically by Kahneman and Deaton that income levels above ~$75,000 do not correspond to higher levels of happiness – money is not the answer5. And although psychologists have suggested that people are hedonically neutral because of their adaptation to new experiences, they fail to provide an economic rationale as to why that habituation occurs in the first place2. Economics, at its core, is the study of the allocation of scarce resources. Consequently, the answer to the above-mentioned concern may lie in the notion of scarcity itself. Although it has been debated that happiness, in and of itself, may be too subjective of a topic to examine through the lenses of a narrow paradigm, it is believed that scarcity should provide a broad yet extensive look into this inquiry. Thus it is postulated that scarcity and happiness are inextricably linked. As such, this paper will first attempt to draw, on the basis of the hedonic theory, a credible...