Not sure if this is worth a post but I am turning 41 today.

I did have one observation related to birthday practices. A few days ago I got a gift in the mail from Jim Levine and on it in big letters was a warning not to open it before today. I did not.

The interesting thing was that I was very happy to get the gift a few days ago and I was happy again today to open it and realize what a nice gift it is. In fact I expect that this approach almost doubled my overall happiness. (more…)

Sumi (my lovely wife) and I are currently house hunting. So we’ve been thinking about how difficult it is to calculate the optimal amount of money we should spend on a house. And how much of it should we take as a mortgage? To work this out, we need to take into account our current income, our expected future income, our predictions for the stock market and the housing market, and the interest rate of mortgages today and in the future. On top of that, we need to consider the amount of happiness different houses will provide us, and how that level of happiness measures up against the lifetime costs of these homes. 41 years of education between us does not seem to be enough to figure this out. (more…)

Over the past few weeks many people told me that they were experiencing difficulties viewing the videos (a quicktime issue), so after trying to solve it for a while I gave up and, instead, I am now using YouTube to show the videos.I hope this approach will work for everyone. There is one video per chapter (for the first 6 chapters), and we will add one more video every 2 weeks or so. The videos are under “demonstrations”, or you can follow this linkPlease let me know if this does not work for you.

Dear Irrational,I dearly love your book. I now have a question.When my father passed away, I only had my mother left. I started to make more trips to Davenport, Iowa, to visit her on the weekends. I felt that I didn’t want to not know her in her old age when she died. (more…)

An interesting story about research on well-being and our understanding of it was published today in the NYT. The issue is whether people get used to new life circumstances and, as a consequence, their long-term happiness (well-being) is not affected. Basically, a large body of research on well-being suggests that people in general become used to new circumstances to an extent that is beyond their, and others’, initial estimates (Diener and Diener 1996; Diener and Suh 1997; Gilbert et al. 1998; Kahneman 1999; Schkade and Kahneman 1998). For example, it has even been suggested that people who sustain a substantial injury are not much worse off than people who have not (Brickman, Coates, and Janoff-Bulman 1978). The story in the NYT describes some new research that questions these findings.

Here are some personal reflections on this topic:
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Tax Season is here and cheating is in the air. We are all trying to find receipts, and figure out what we can reasonably claim as deductions. Did we end up talking about work last summer when we invited our co-workers for a BBQ?

Let me tell you about an experiment we did at MIT on cheating with some unsuspecting students. (more…)

Clinton recently suggested that if she wins the Democratic primaries, she would select Obama as her vice president. Was this a good move on her part? How should Obama have reacted to this? (more…)

Dear Irrational –

Our daughter graduated from college last winter and decided to move back home until she found a job. She is bright and full of potential. However, she is having trouble deciding on what kind of career she should pursue. Her problem is not that nothing interests her, it’s that she is interested in too many things and is having trouble deciding which path she should choose.

While my husband and I love her and are happy that we are able to support her, we are becoming frustrated with her indecisiveness. She has gone on several job interviews but is reluctant to accept any offers for fear that she’ll make the wrong decision.

What advice can you give us that might help her make a decision?

Thank you,

J. H, California
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Can it be that cheating and taking too much risk are related?

We learned that people cheat more when the object of cheating is even one step removed from money. Could it be that when financial tools are more complex it encourages people to take too much risk? It is hard to tell, but I suspect this might be the case.