Nonstandard beliefs/Decision-making/Happiness

Question 1

How does behavioural economics measure welfare?

Answer 1

Using indicators of subjective well-being

Question 2

Assumptions of happiness economics

Answer 2

Income matters but much less than expected
Relationship between income and wellbeing is reference-dependent and subject to adaptation

Question 3

Happiness economics proves people

Answer 3

Make flawed decisions
Don’t overestimate welfare gains from their own choices

Question 4

Types of subjective wellbeing

Answer 4

Affective wellbeing - emotions
Cognitive - satisfaction
Psychological - alignment of own actions with personal values

Question 5

Methods of measuring affective wellbeing

Answer 5

Experience Sampling Method - random times
Day Reconstruction Method - diary
Indicators of subjective well-being
Highly correlated and lead to the same implications

Question 6

Probability estimation errors

Answer 6

Availability heuristic
Representativeness heuristic
Confirmatory bias
Projection bias

Question 7

Decision-makers preferences

Answer 7

Familiar - domestic investment
Salient - first on voting list

Question 8

Easterlin paradox

Answer 8

Happiness varies directly with income but over time happiness does not trend upwards as income continues to grow
Answered using reference-dependent preferences

Question 9

Bayesian theory

Answer 9

(probability x accuracy) / (probability x accuracy) + (1-probability x 1-accuracy)