Teaching Evaluations  Please do fill your teaching evaluations  25 minutes of your time could be 25 minutes well spent  and very much appreciated    14/26/2015Behavioral Finance

Happiness  What makes us happy?  Do we really know what makes us happy?  How to be happier  Money and Happiness 24/26/2015Behavioral Finance

Happiness across the world  Also, it seems like American men got happier, but American women did not 34/26/2015Behavioral Finance

Does Wealth Make Us Happy? 4 Wealth? 4/26/2015Behavioral Finance

5 Income and Happiness The belief is that by raising its output and productivity a society truly betters itself … The truth is individual happiness appears to be the same across poor countries and rich countries, additionally economic growth does not raise well-being: once the GDP per capita increases above about 12K $/ year there’s barely increase in happiness. 4/26/2015Behavioral Finance

Employment and Happiness 6  Unemployed feel much less satisfied with life. However, the decrease in well-being comes not from losing one’s job and drop in take-home income, but rather a non- pecuniary distress. 4/26/2015Behavioral Finance

If you are so rich why commit suicide? 7  Denmark: 1/3.000 deaths; Britain: 1/12.000; USA: 1/7.000  In Britain a fifth of all emergency admissions to hospital are du to para-suicide (suicide which did not work out); between 8 to 20 times more common the successful suicide.  At the same time suicidal rates about halved in Britain between 1911 and  Joblessness is the main cause of suicide: 1.345/ vs 114/ for employed 4/26/2015Behavioral Finance

Job Satisfaction and Happiness 8  Job satisfaction has not increased in US and UK over time 4/26/2015Behavioral Finance

Why Wealth Does not Make Us Happy 9  1) Happiness is a relative phenomenon. Earning more or less does not matter in isolation; what is important is how much you earn relatively to your neighbors. As the wealth of the economy increases the relative ranking of people in the economy does not change.  2) individuals adapt to materials goods and, some argue, that material goods yield little joy for most individuals. Thus, increases in incomes have little long-lasting effects above certain levels of consumption.  3) As income raises peoples time use does not appear to shift toward activities that are associated with improved affect. Subjective well-being is related to how people spend their time. People with greater income tend to devote relatively more time to their work., compulsory non-work activities (such as shopping and childcare), and active leisure (such as exercise) and less of their time to passive leisure activities (such as watching TV). Thus the activities that higher-income individuals spend relatively more their time engaged in are associated with no greater happiness, on average, but with slightly higher tension and stress. 4/26/2015Behavioral Finance

10 How to Spend Your Time to Be Happier 4/26/2015Behavioral Finance

Does Marriage Make Us Happy? 11 Wealth?  Marriage? 4/26/2015Behavioral Finance

12 Marriage and Happiness 4/26/2015Behavioral Finance

Does Youth Make Us Happy? 13 Wealth?  Marriage?  Youth? 4/26/2015Behavioral Finance

Youth and Happiness 144/26/2015Behavioral Finance

Does Education Make Us Happy? 15 Wealth?  Marriage?  Youth?  Education? 4/26/2015Behavioral Finance

Education and Happiness There is no effect on happiness across countries and only a small effect within countries 164/26/2015Behavioral Finance

Do Looks Make Us Happy? 17 Wealth?  Marriage?  Youth?  Looks? Education?  4/26/2015Behavioral Finance

Looks and Happiness Looks don’t make us happy after taking away the hair, makeup, jewelry and nice clothing 184/26/2015Behavioral Finance

Does Gender Have Effect on Happiness? 19 Wealth?  Marriage?  Youth?  Education?  Looks?  Gender? 4/26/2015Behavioral Finance

Gender and Happiness Men are more prone to alcoholism, while women to depression 204/26/2015Behavioral Finance

Does Religion Make Us Happy? 21 Wealth?  Marriage?  Youth?  Looks?  Gender?  Religion? Education?  4/26/2015Behavioral Finance

Religion and Happiness Religion does make us happy…but why? Is it the “God” part which makes us happy, or the “community” part? 224/26/2015Behavioral Finance

Does Family Make Us Happy? 23 Wealth?  Marriage?  Youth?  Looks?  Religion? Family? Education?  Gender?  4/26/2015Behavioral Finance

Family and Happiness People with the highest levels of happiness have strong social relationships 244/26/2015Behavioral Finance

Do These Things Make Us Happy? 25 Wealth?  Marriage?  Youth?  Looks?  Religion? Family? Education?  Gender?  4/26/2015Behavioral Finance

Long Term vs. Short Term Happiness Life satisfaction vs. experienced happiness:  “In the moment” and “Morning after” have very different levels of happiness  Momentary happiness and life satisfaction could be dramatically different too  Obese people love to eat the food they do…but are not happy with their overall life 264/26/2015Behavioral Finance

The Focusing Illusion  We fail to recognize that people do not continuously think about their circumstances, whether positive or negative  As a result, we tend to exaggerate the effect of various circumstances on well-being  Paraplegics are not as miserable as you think and lottery winners are not as happy as you think 274/26/2015Behavioral Finance

What We’ve Learned So FAr  What makes us happy?  Do we know what makes us happy?  How to be happier  How to spend your time  Positive psychology 284/26/2015Behavioral Finance

Money and Happiness: Economist Advice 29 More is Better! 4/26/2015Behavioral Finance

Money and Happiness: Alternative View 30  One analogy  A person that loves wooden blocks becomes bored playing with the ones he has had for a while  How can we make him happier?  A solution from Economics: Acquire more blocks!  A solution from Hedonomics: Learn to combine the blocks in new and more satisfying ways! 4/26/2015Behavioral Finance

Choose a reference point wisely 31  Changing reference points can change the way you perceive your well- being:  Don’t compare yourself to your BA classmates…but your high school classmates  Reference point can be real or counterfactual:  Are Olympic bronze medalists happier than silver medalists? 4/26/2015Behavioral Finance

BMW X3 and Free Gas for 7 Years BMW X5 $46, More Happiness Can Be Achieved with Same Money Consider opportunity costs 4/26/2015Behavioral Finance

Investment can be fun Create multiple accounts  Nest-egg account managed by professionals and kept largely out of sight  Have fun account managed by investor with low transactions costs and lots of feedback (although perhaps with limits on leverage and non-zero liability investments) Potential benefits of these accounts:  Investors get to have fun (and possibly make some money)  At the same time, they are protected from the downside of the natural desire to meddle 334/26/2015Behavioral Finance