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1 04/18/23Behavioral Finance

Happiness What makes us happy?

Do we really know what makes us happy?

How to be happier

Money and Happiness


Happiness across the world

Also, it seems like American men got happier, but American women did not


Does Wealth Make Us Happy?

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Wealth?

04/18/23Behavioral Finance

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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.


Employment and Happiness

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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.


If you are so rich why commit suicide?

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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 1990. Joblessness is the main cause of suicide: 1.345/100.000 vs 114/100.000 for employed


Job Satisfaction and Happiness

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Job satisfaction has not increased in US and UK over time


Why Wealth Does not Make Us Happy

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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.


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How to Spend Your Time to Be Happier


Does Marriage Make Us Happy?

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Wealth?

Marriage?


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Marriage and Happiness


Does Youth Make Us Happy?

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Wealth?

Marriage? Youth?


Youth and Happiness


Does Education Make Us Happy?

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Wealth?

Marriage? Youth?

Education?


Education and Happiness

There is no effect on happiness across countries and only a small effect within countries


Do Looks Make Us Happy?

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Wealth?

Marriage? Youth?

Looks?

Education?


Looks and HappinessLooks don’t make us happy after taking away

the hair, makeup, jewelry and nice clothing


Does Gender Have Effect on Happiness?

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Wealth?

Marriage? Youth?

Education?

Looks?

Gender?04/18/23Behavioral Finance

Gender and Happiness

Men are more prone to alcoholism, while women to depression


Does Religion Make Us Happy?

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Wealth?

Marriage? Youth?

Looks?

Gender? Religion?

Education?


Religion and Happiness

Religion does make us happy…but why?

Is it the “God” part which makes us happy, or the “community” part?


Does Family Make Us Happy?

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Wealth?

Marriage? Youth?

Looks?

Religion?

Family?

Education?

Gender?


Family and Happiness

People with the highest levels of happiness have strong social relationships


Do These Things Make Us Happy?

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Wealth?

Marriage? Youth?

Looks?

Religion?

Family?

Education?

Gender?


Long Term vs. Short Term HappinessLife 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


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


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


Money and Happiness: Economist Advice

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More is Better!


Money and Happiness: Alternative View

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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!


Choose a reference point wisely

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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?


BMW X3 and Free Gas for 7 Years BMW X5

$46,200 $46,200

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More Happiness Can Be Achieved with Same Money

Consider opportunity costs


Investment can be funCreate 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


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