Happynomics

A methodology built to be cross-examined.

Well-being valuation is not our invention. It is a two-decade-old, peer-reviewed research tradition in economics and public health — which we have engineered into a disciplined, auditable process for legal valuation.

Where the approach comes from

Since the early 2000s, economists have used large-scale survey data on subjective well-being to estimate the monetary value of things markets don't price — health conditions, bereavement, noise, crime, disasters. The application to compensatory damages was proposed in the peer-reviewed legal-economics literature nearly two decades ago, and the underlying valuation approach has since been adopted in national government guidance for policy appraisal.

The logic is the same one used to appraise a damaged car or a piece of property: compare to comparables. To value an injury, we compare people living with the diagnosis to demographically similar people without it, and measure the difference in their reported well-being. Where academic studies convert that difference using a survey-estimated income coefficient — an unstable denominator we do not rely on — we use an external standard for the value of a well-being point-year that three independent sources converge on (central $20,000; range $15,000–$25,000). That choice trades size for defensibility: our numbers are conservative by construction.

How a valuation is built

Step 1 — Measure the well-being gap

Using nationally representative panel surveys of American adults, we estimate how much a condition reduces life satisfaction — comparing people who live with the diagnosis to observably similar people who do not, and holding constant income, age, gender, marital status, education, children, work status, and personality. Personality controls address the most common objection head-on: that unhappier people simply report more pain.

Well-beingit = α + β·Conditionit + γ·Incomeit + Xit′δ + ui + εit

The model is a random-effects panel estimator — the approach generally preferred in the well-being literature, because it uses all of the variation between and within people — and the headline result is stress-tested across the family of alternative specifications formed by adding and removing controls. Every estimate carries a standard error and a confidence interval.

Step 2 — Convert points to dollars

The measured well-being gap is multiplied by an external standard for the dollar value of one well-being point-year — drawn from independent, largely U.S. sources rather than a single number. The U.S. health cost-effectiveness threshold and the U.K. Treasury's WELLBY sit near $20,000 per point-year; the U.S. federal value of a statistical life implies considerably more. We adopt a deliberately conservative $20,000 — at the low end of that range. We do not monetize through our own model's income coefficient, a small, imprecisely estimated number whose use produces wildly unstable values. Because the anchor is external, equal suffering receives equal valuation, regardless of income.

Step 3 — Project over time, honestly

People adapt to some conditions more than others. The evidence finds gradual partial recovery after events like divorce and bereavement, and less adaptation to severe chronic pain and unemployment. Our analyses default to moderate adaptation and make the assumption visible and adjustable — alongside duration and a disclosed 3% real discount rate. The result is a bounded range with every assumption on the table.

Why it holds up

What we disclose, and when

Every court-facing report includes full methodological disclosure — data sources, specifications, estimates, uncertainty, and limitations — sufficient for independent replication by opposing experts. Our maintained implementation — the coefficient library, estimation pipeline, and report engine — is proprietary. Transparent where it counts, proprietary where it doesn't.

Current coverage

Chronic pain across the major sites — back, neck, head, knees, shoulders, hips, arms, legs — plus life events including divorce, bereavement, job loss, and discrimination. Additional conditions and datasets are added continuously.

Selected literature

  1. Oswald, A. J., & Powdthavee, N. (2008). Death, happiness, and the calculation of compensatory damages. Journal of Legal Studies, 37(S2), S217–S251.
  2. Oswald, A. J., & Powdthavee, N. (2008). Does happiness adapt? A longitudinal study of disability. Journal of Public Economics, 92(5–6), 1061–1077.
  3. Powdthavee, N., & van den Berg, B. (2011). Putting different price tags on the same health condition. Journal of Health Economics, 30(5), 1032–1043.
  4. Ferrer-i-Carbonell, A., & van Praag, B. M. S. (2002). The subjective costs of health losses due to chronic diseases. Health Economics, 11(8), 709–722.
  5. Clark, A. E., Diener, E., Georgellis, Y., & Lucas, R. E. (2008). Lags and leads in life satisfaction. Economic Journal, 118(529), F222–F243.
  6. Lucas, R. E. (2005). Time does not heal all wounds: A longitudinal study of reaction and adaptation to divorce. Psychological Science, 16(12), 945–950.
  7. HM Treasury (2021). Wellbeing Guidance for Appraisal: Supplementary Green Book Guidance.
  8. Ryff, C. D. (1989). Happiness is everything, or is it? Journal of Personality and Social Psychology, 57(6), 1069–1081.
  9. Young, C., & Holsteen, K. (2015). Model uncertainty and robustness. Sociological Methods & Research, 46(1), 3–40.

Discuss the methodology with Dr. Nikolaev