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“Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile. And it tells us everything about America except why we are proud that we are Americans.” ― Robert F. Kennedy
Politics and Economics
• Positive Psychology is Psychology…– Social science– Studies human cognition and behavior– PERMA and Optimism
Politics and Economics
• Economics • Study of what gets made, how it gets made,
and who gets it. • Social science• The first principal of economics is scarcity. • GDP is one measure; but, not the only one. – Employment Inflation Structure – Trade Money Supply Interest Rates
Beyond Money:
• True “Material prosperity matters to Positive Psychology only as at increases Well-Being.”
Beyond Money:• False “Economics focuses on wealth creation for
its own sake.” • (No, for the sake of improving people’s lives.) “Man does not live by GNP alone.” Paul Samuelson
Economics [1973, ch. 40] “Economics is … about the material well-being of society as a whole.” Thomas Sowell
Basic Economics [4th ed. Pg. 6]
Beyond Money:
• False “GDP tells them how a nation is doing.” (Not only GDP)
• Per Capita Real GDP
Beyond Money:
• True “The Economy has a central place in media and politics.”
• True “GDP may go up even if quality of life
may go down.”
Broken Window Fallacy
Broken Window Fallacy
• WYSIATI (What You See Is All There Is)Daniel Kahneman
• False Every time there is a divorce, GDP goes up
• False Every time two automobiles collide, GDP goes up
Broken Window Fallacy
• False More Police protection and longer commutes increase the GDP.
• False It does not matter if those events
happen to decrease the quality of life.
Broken Window Fallacy
• False Economists humorously, call these “regrettables”
Well-Being and Wealth
• True Life satisfaction in the U.S. has been flat in the last 50 years even though GDP has tripled.
• True Anxiety rates are higher; depression rates
have increased tenfold • True of every wealthy nation; but not of poor
nations
Well-Being and Wealth
• FALSE Growth in GDP in related to increases in anxiety and depression…
• Monism and Correlation is not Causation
• Third Variable???
Well-Being and Wealth
• The pace of modern living enabled by technological changes.
Physiological Effects of Stress
• Increased Adrenaline• Increase Cortisol• Increased Heart Rate• Elevated Blood Pressure• Increases Glucose Levels• Altered Immune System
Physiological Effects of Change
• Increased Adrenaline• Increase Cortisol• Increased Heart Rate• Elevated Blood Pressure• Increases Glucose Levels• Altered Immune System
Stress = Change
• Increased Adrenaline• Increase Cortisol• Increased Heart Rate• Elevated Blood Pressure• Increases Glucose Levels• Altered Immune System
• Increased Adrenaline• Increase Cortisol• Increased Heart Rate• Elevated Blood Pressure• Increases Glucose Levels• Altered Immune System
Why is change stressful?
• Loss of familiar structure
• Retain control where you can• Meditate• Use distractions• Minimize other changes.
Interventions
• Don’t waste time on things you can’t control• Resolve stress situations quickly• Engage in physical activity• Be self- aware• Reach out to others, do for others• Keep your perspective; stress is a natural
reaction
Wealth and Happiness:
1. More Money, higher life satisfaction (Chart on page 224)
2. Making more money reaches diminishing returns. (Hedonic treadmill)
The Financial Downturn
• Not have a single cause (monism) • Requires a multitude of causes with intended
and unintended consequences (pluralism)
“That’s my story, quite speculative and incomplete…”
The Financial Downturn
• Positive emotion is purchased with wealth• ERMA may actually increase or remain the
same as wealth declines
Kahneman’s Delusional Optimism
• Optimism is normal• Optimists are normally cheerful and happy• Resilient in adapting to failures and hardships• Chances of clinical depression are reduced• Immune system is stronger• Better care of their health• In fact likely to live longer
The Financial Downturn
• Caused by Optimism or Pessimism?
• Market Value ≠ Market Price
• Market Price is often determined by how optimistic or pessimistic people are.
• Value is intrinsic.
The Financial Downturn• False “When investors are very pessimistic
about the market’s future price of a stock, the price of the stock or the derivative crashes, and the economy melts down.”
• Price ≠ Value• Investing ≠ Speculating• Correlation ≠ Causation
The Financial Downturn
• “When investors are very pessimistic about the market’s future price of a stock, the price of the stock crashes…”
• A speculator focuses on price.– “the greater fool theory”
• Investors focus on value. – Income has greater value than the price
The Financial Downturn
There are two times in a man’s life when he should not speculate: when he can’t afford it, and when he can.
--Mark Twain
The Financial Downturn
“The stock market has predicted nine of the last five recessions.”
Paul Samuelson
• The burst of the speculative real estate bubble in 2008 was the major cause of both:– Recession – Market Downturn
Nonsense Page 235
• Mortgage Repayment
• Quantum Mechanics
Spouse Perception
• Sandra Murray• TRUE Optimism helps marriages;
pessimism hurts.
PERMA 51
• 2051 --- 51% of the world population will be flourishing
“The best things in life are not things.”
Art Buchwald