Free advice from the far side: a retiring economist’s ake on the “U-shaped curve of happiness” Jim Whitney, June 22, 2014 The Seven Ages of Man …The sixth age shifts Into the lean and slippered pantaloon, With spectacles on nose and pouch on side; His youthful hose, well saved, a world too wide For his shrunk shank; and his big manly voice, Turning again toward childish treble, pipes And whistles in his sound. Last scene of all, That ends this strange eventful history, Is second childishness and mere oblivion, Sans teeth, sans eyes, sans taste, sans everything. William Shakespeare, As You Like It 1 Before there was the U-shaped curve of happiness, there was…

2 My “legacy” lecture My topic My timing My credentials

3 My game plan: to divide our time into quarters: 1.The U-shaped curve of happiness 2.My personal journey along the U-shaped curve of happiness 3.Questions and answers 4.Happiness at home and abroad: key findings from the new field of happiness research

4 Consider this an opportunity for some “marginal advice”

5 Part 1: The U-shaped curve of happiness

6 How do researchers determine how happy someone is? 1.Usually, they just ask people—massive surveys 2.Exactly the same survey everywhere and every time 3.Example: Gallup-Healthways Well-Being survey: every year since countries, 1,000 people each year in each country. Overall self-evaluation question: Please imagine a ladder with steps numbered from 0 at the bottom to 10 at the top. The top of the ladder represents the best possible life for you and the bottom of the ladder represents the worst possible life for you. On which step of the ladder would you say you personally feel you stand at this time?

7 Researchers then try to figure out why happiness differs across survey respondents: What makes people happy in the first place? Should you go to college? Should you get a job? Should you get married? Should you have children? Should you exercise? Should you eat lots of fruits and vegetables? Should you retire by 66? How much income should you make? Should you be a man or woman Yes, good for you Yes Yes, at least so far Only if you want to Yes Not completely The more, the better Woman

Here’s how each of these compare in contributing to happiness: 8

9 So, what’s with the U-curve? It appears everywhere researchers have looked Happiness starts high in early adulthood, declines to the “mid-life” crisis in the 40s to early 50s, then rises afterwards It exists in practice, so can it exist in theory?

10 A plausible story Middle years are the most stressful: financial responsibilities, child rearing, job security, etc. NAS researchers took factors like those into account (female, child at home, unemployed, partnered) This chart shows what happened

On top of that, we’re not the only ones with a U-shaped happiness curve: 11

12 An alternative possibility: NAS also found that people’s emotions change with age Q: Why? A: With experience, our coping skills get better, and we don’t sweat the small stuff as we age.

13 Part 2: My life in thirds --and how you can live it My foundational advice: Don’t settle down too soon or retire too late The 30/60/90 rule Probably not always popular with parents of my advisees I was 30 when I started my career at Oxy but had already fudged some And now, I am trying to walk the talk and retire before it is too late. Here is how that is shaping up….

Our spending skews toward travel and activities, so we spend less on tangible items. Here is a picture of our first home, taken when we bought it in 1987: My mother-in-law described it as “a perfect starter home.” 14

Here is where we live now: My mother-in-law now describes it as “a perfect retirement home.” We still have the same next-door neighbors too 15

And here is the bike we ride to the Y for exercise, ride to the Rose Bowl for yoga, and fold up to fit in our trunk when we travel: 16

17 Our consumption goal is what Keynes called “sufficiency” for the good life. Here’s what that looks like for us:

18 Overall, we presently feel contented and optimistic so far.

We feel good about how things have worked out. We have been lucky, but we have also made some decisions that helped We based our retirement savings target on consumption, not income Benchmark: average consumption over my last 7 work years + a premium for retirement activities in our “early” years Key resource: Economic Security Planner 2. We saved from the start of my Oxy career : 15% (Oxy: 8%; payroll deduction: 7%) 2002-now: 17%+ (Oxy 10%; payroll deduction: 7% to max) 3. We plan to maximize our Social Security income Jim: File and delay at 66; own benefits at 70 Linda: Spousal benefits at 66; own benefits at 70 Key resource: Maximize your Social Security Income

20 We made “risky” investments… Portfolio allocation Typical AggressiveDrJ Large cap domestic 30% 40% Mid/small cap dom 30% 24% Specialty 12% International 25% 24% Cash and bonds 15% 0%

21 …and held onto them through bad times and good

22 We saved early and continuously:

23 … and trend-adjusted to maintain sanity

We decided to retire once we had reached our retirement assets goal: 24

25 And that brings us to where we are now, as we head into our Oxy after-life

26 Part 3: Happiness at home and abroad: key findings from the new field of happiness research Economics is all about happiness and well-being How we have measured well-being in the past Why change? 1.Well-being depends on more than income: clean air, comfortable community, individual freedom, confidence in leadership, fairness 2.The “Easterlin paradox”

27 Why did we wait so long? Jeremy Bentham The difficulty of interpersonal comparisons Modern technology and diffusion of information

28 Today’s global data sources are all recent: 1.Gallup-Healthways Gallup World Poll (2009) 2.Bhutan Gross National Happiness Index (2010) 3.Organization for Economic Cooperation and Development (OECD) Better Life Initiative (2011) 4.United Nations World Happiness Report (2012) 5.Happiness Research Institute (2013)

29 Recent findings: 1.The “Easterlin paradox” appears to be wrong 2.The US performs well, but we’re not #1 Per capita income Housing Health Safety Well-being

30 So, why aren’t we happier? UN Report lists “six key variables that we have found to explain three-quarters of the international differences in average life evaluations:” GDP per capita years of healthy life expectancy having someone to count on in times of trouble perceptions of corruption prevalence of generosity freedom to make life choices

This is the end 31