Abstract: We model happiness as an innate incentive mechanism molded by natural selection. The metaphorical objective is to motivate the individual towards seeking goals that favor genetic replication. The end result of this evolutionary process is a mean-reverting happiness function that is based on a contextdependent reference point. This reference point will incorporate all information that is valuable in terms of assessing the individual's performance, which in turn leads to a process of habit formation and peer comparisons. Based on principles of optimal incentives and statistical inference, the model delivers a unified account of several stylized facts surrounding the hedonic experience.
Authors: Luis Rayo and Gary S. Becker
