Death, Happiness, and the Calculation of Compensatory Damages

Death, Happiness, and the Calculation of Compensatory Damages This paper studies the mental distress caused by bereavement. The largest emotional losses are from the death of a spouse; the second-worst in severity are the losses from the death of a child; the third-worst is 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. JEL Classification: D1, I3, I31, K0