“Frogs in a Pot”: An Agent-Based Model of Well-Being versus Prosperity

Abstract

Surveys of rapidly-developing countries have shown that huge increases in average personal wealth are frequently accompanied by little or no increase in average (self-reported) happiness. We propose a simple agent-based model that may help to explain this phenomenon. The model shows that under certain conditions, the cumulative effect of individuals’ free choices of employment that maximizes their (self-perceived) personal well-being may actually produce a continuing decrease in the population’s average well-being. Like the proverbial “frog in a pot”, the eventual effect is worse when the onset of the decrease is more gradual. More generally, the model indicates that there is a natural tendency in free-market societies for well-being to become defined in increasingly materialistic terms. We discuss the implications of our model on the issue of incentive pay for teachers, and argue that our model may also provide insight into other situations where individuals’ free-market choices lead to progressive worsening of the population’s average well-being.