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Teaching Evaluations � Please do fill your teaching evaluations � 25 minutes of your time could be 25 minutes well spent � and very much appreciated � www. Ratemyprofessors. com � www. Studentsreview. com � www. myprofessorsucks. com 1 Behavioral Finance 1/25/2022

Happiness � What makes us happy? � Do we really know what makes us happy? � How to be happier � Money and Happiness 2 Behavioral Finance 1/25/2022

Happiness across the world � 3 Also, it seems like American men got happier, but American women did not Behavioral Finance 1/25/2022

Does Wealth Make Us Happy? Wealth? 4 Behavioral Finance 1/25/2022

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 12 K $/ year there’s barely increase in happiness. 5 Behavioral Finance 1/25/2022

Employment and Happiness 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 nonpecuniary distress. 6 Behavioral Finance 1/25/2022

If you are so rich why commit suicide? 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 7 Behavioral Finance 1/25/2022

Job Satisfaction and Happiness Job satisfaction has not increased in US and UK over time 8 Behavioral Finance 1/25/2022

Why Wealth Does not Make Us Happy 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. 9 Behavioral Finance 1/25/2022

How to Spend Your Time to Be Happier 10 Behavioral Finance 1/25/2022

Does Marriage Make Us Happy? Wealth? Marriage? 11 Behavioral Finance 1/25/2022

Marriage and Happiness 12 Behavioral Finance 1/25/2022

Does Youth Make Us Happy? Youth? Wealth? Marriage? 13 Behavioral Finance 1/25/2022

Youth and Happiness 14 Behavioral Finance 1/25/2022

Does Education Make Us Happy? Youth? Wealth? Marriage? 15 Behavioral Finance Education? 1/25/2022

Education and Happiness There is no effect on happiness across countries and only a small effect within countries 16 Behavioral Finance 1/25/2022

Do Looks Make Us Happy? Youth? Wealth? Marriage? Education? Looks? 17 Behavioral Finance 1/25/2022

Looks and Happiness Looks don’t make us happy after taking away the hair, makeup, jewelry and nice clothing 18 Behavioral Finance 1/25/2022

Does Gender Have Effect on Happiness? Youth? Wealth? Marriage? Education? Looks? Gender? 19 Behavioral Finance 1/25/2022

Gender and Happiness Men are more prone to alcoholism, while women to depression 20 Behavioral Finance 1/25/2022

Does Religion Make Us Happy? Youth? Wealth? Marriage? Looks? Education? Religion? Gender? 21 Behavioral Finance 1/25/2022

Religion and Happiness Religion does make us happy…but why? Is it the “God” part which makes us happy, or the “community” part? 22 Behavioral Finance 1/25/2022

Does Family Make Us Happy? Youth? Wealth? Marriage? Looks? Education? Religion? Gender? 23 Behavioral Finance Family? 1/25/2022

Family and Happiness People with the highest levels of happiness have strong social relationships 24 Behavioral Finance 1/25/2022

Do These Things Make Us Happy? Youth? Wealth? Marriage? Looks? Education? Religion? Gender? 25 Behavioral Finance Family? 1/25/2022

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 26 Behavioral Finance 1/25/2022

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 � 27 Behavioral Finance 1/25/2022

What We’ve Learned So FAr What makes us happy? � Do we know what makes us happy? � How to be happier � � � 28 How to spend your time Positive psychology Behavioral Finance 1/25/2022

Money and Happiness: Economist Advice More is Better! 29 Behavioral Finance 1/25/2022

Money and Happiness: Alternative View 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? 30 A solution from Economics: Acquire more blocks! A solution from Hedonomics: Learn to combine the blocks in new and more satisfying ways! Behavioral Finance 1/25/2022

Choose a reference point wisely Changing reference points can change the way you perceive your wellbeing: 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? 31 Behavioral Finance 1/25/2022

More Happiness Can Be Achieved with Same Money Consider opportunity costs 32 BMW X 3 and Free Gas for 7 Years BMW X 5 $46, 200 Behavioral Finance 1/25/2022

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 � 33 Behavioral Finance 1/25/2022