Understanding Life

and Happiness
Lok Sang Ho
2023

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 • A uniquely interdisciplinary approach to
understanding life and happiness.
• Aims at uplifting your life experience, so you can
discover a much more fulfilling life.

http://www.authentichappiness.sas.upenn.edu/questionnaires.aspx

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 Assessment
• Assessment
• Continuous Assessment
• 50%: consisting of:
• Continuous Assessment (50%): Cumulative
• ·       Attendance/participation 4 + 6% 10%
• ·       Presentation 5% 15%
• ·       Mid Term: 20% 35 %
• Reflective essay:15%(NSL) 10+5(SL) 50 %
• The final examination: 50% 100 %
• NSL=Non Service Learning; SL=Service Learning 4
• SL Students: Not required to attend, though
encouraged to attend, presentations from NSL
students, which will start after all textbook chapters
have been covered.

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 Indicative Contents
• Introduction to the Economics of Life and the meaning and strategy of constrained maximization
• Love and the Economics of Love
• The Role of Culture in Household Production
• Mental Capital and Habit Formation, with a Digression to Spiritual Capital
• Seligman’s Happiness Formula: a proposed amendment
• Marriage, Mental Capital, and Happiness
• More on Mental Goods: Achievement versus Vanity
• Insight, Fortitude, and Engagement
• “Three Happinesses” and Transcendental Happiness
• Avoiding Regrets and Coming to Terms with Past Errors
• Avoiding Worries and Coming to Terms with an Uncertain Future and Negative Emotions
• The Paradox of Choice: More Choices and More Sophisticated Products Need Not
• We can have a better world: The holistic perspective on life, successful living and happiness
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 Lecture 1 – Outline chapter 1
(one hour)
• Why Life is the most precious resource we have, and what is
meant by positive living.
• Life is truly the most precious resource because our lifetime
is limited and each day gone is gone forever; positive living
is making the most out of our life whether the circumstances
are favourable or unfavourable, easy or difficult; what is
common between economics and positive psychology.
Concept of mental good needs and material good needs. Why
Maslow’s hierarchy of needs is wrong.
• Nature of Human Nature
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 Introduction to the Economics of Life and the
meaning and strategy of constrained maximization

• What is life, our Lives?

• The typical life cycle: infancy – toddler – child – teenager-
young adult – prime age – middle age – old age – death.
• Life as truly scarce resource
• Positive living as maximizing the benefits of the life
experience subject to constraints, which means we have to
make choices that involve costs (opportunity cost, what we
have to give up) and benefits (what we gain in the choice we
opt for) 8
 What positive living is not

• Not imagining things are better than they actually

are.
• Not wishful thinking about the future.
• Not escapism
• Positive psychology is NOT seeing the half cup full
instead of seeing the half cup empty
• What is it then?
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 Positive Psychology as
Normative Economics

• Constrained maximisation is also called ‘the economic

problem’:
• Positive psychology is about the will – the determination
– to make the best out of every situation. Conceptually,
this is really no different from ‘constrained
maximisation’, the key concept that economists talk
about!
• You don’t want to spoil your own life!
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 Economics and the Economics
of Life
• The domain of microeconomics: how human beings go about
determining ---
• what to produce,
• how to produce and
• for whom to produce
• The Economics of Life recognizes that Life is the unique
scarce resource at our command and that goods include both
mental goods and physical goods, while capital includes both
mental capital and physical capital(actually, health stock is
also an important capital that we should protect and enhance)
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 The Domain of Mental Goods
(MG just another term for Positive Emotions)

• ‘Mental goods’ are qualities perceived in our minds which

are important to our wellbeing, but which do not fill any
physical needs. Examples of mental goods are peace of
mind, freedom from anxiety, honour, self-esteem, sense of
being accepted by others, sense of success, achieving what
we set out to do, self-actualisation and love.
• Human nature: we need both physical goods and mental
goods in order to thrive
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Q: Why call positive emotions
mental goods?

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 The Misleading Interpretation of the
human hierarchy of wants due to Abraham
Maslow
• Banerjee and Duflo (2012), in a recent highly acclaimed
book(“Poor Economics”), documented how the very poor may
prefer to suffer hunger and even go into debt in order to pay for
an honourable wedding, dowries and funerals.
• Does that hierarchy still hold? What should it mean?

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From Abraham Maslow (1954)
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 Harvard Grant Study
• http://www.huffingtonpost.com/2013/08/11/how-this-harvard-psycholo_n_3727229.ht
ml

• 268 male Harvard undergraduates from the classes of 1938-1940 (now well into their
90s) studied for 75 years.
• George Vaillant, a Harvard psychiatrist, directed the study from 1972 to 2004
Below, five lessons from the Grant Study to apply to your own pursuit of a happier
and more meaningful life.
• Love Is Really All That Matters (Live to LOVE)
• It’s About More than Money and Power
• Regardless of How We Begin Life, We Can All Become Happier
• Connection Is Crucial (connecting with others emotionally and spiritually)
• Challenges –- and the Perspective They Give You -- Can Make You Happier
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• Economics is about making the most out of the
limited resources that we have – notwithstanding
the difficulties that we may face and the
misfortunes that could hit us. This book is about
making the most of our lives.

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Optimising and seeing the big picture

• Paradoxically, without seeing the big picture and

thus without a sense of proportion, trying to
‘optimise’ could turn out to be counterproductive.

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Two problems with excessive attention
to maximizing over the short term:

• First is that you could lose sight of an even more

attractive target.
• Second is that if, for some reason, the attempt to
achieve it fails, you could be disheartened and lose the
spirit to take on other challenges in life. You could
dwell upon the failure for too long, and unwittingly
give up precious time which is part of your limited life.

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 Shooting your own feet.

• The key to successful living lies in being able to tell what decisions are
important and what are not. Most fundamentally, consider life as like a journey.
• Some people quickly learn to acquire tools and accumulate capital that they could use
along the way later.
• Others take up a lot of junk that would make the journey that much more difficult later on.
• The paradoxical truth is that, while they all want to optimise, without knowing
it some accumulate positive mental capital, whereas others accumulate
negative mental capital. This leads to totally different qualities of lives.
• Paying too much attention to the self is shooting your own feet.

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Q: Why generous people tend to
be happy people

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 Cost benefit analysis and decision making

Decisions not based on cost benefit comparison:

• Rash/impulsive decisions
• Decisions by default or procrastination
• Decisions on little things (don’t be too calculating)
Decisions based on cost benefit comparison:
• Deliberative decisions, needed for important decisions
Q: Should you do cost benefit analysis in decision making?23
 Words of Wisdom:

• 緩事急辦；急事緩謀 (Act fast with non-urgent

decisions; Act slow with urgent decisions)
• With subjects that are not urgent (and are not
serious), get them done fast (without much
consideration) CBA is not necessary.
• With subjects that are urgent (and are serious
matters), go slowly, and think carefully. CBA is
necessary.
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 there are many different ways of filling similar
needs. Some ways are far more costly than
others.

• We certainly have no physical need for jewelry, but

attending some occasions without any jewelry could
make some women feel very bad, and it could be like
men attending functions without a tie and a suit when
all the other men are wearing them. All these cases
may comprise mental goods involving a perception
of ‘acceptance by others’ and that of ‘self-
acceptance.’
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 Household activities: nature of our day-
to-day activities (note: inputs owned include mental capital)

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 Q: Why are Intrinsic Motivations far
more important than extrinsic motivations

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 Mental Capital:
Discipline or self control &
Helpful Habits

• http://www.theatlantic.com/health/archive/2013/07/
study-people-with-a-lot-of-self-control-are-happier
/277349/

• Relationship between Discipline and Good Habit

Formation. Good Habit Formation is part of
Mental Capital Formation.

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 Discussions

• “Words can hurt even more deeply than a knife.” Find

and report cases to demonstrate if this is true.
• Public policy question: should there be a limit to speech
freedom? Why and How?
• “Success” is a mental good. “Failure” is a mental bad.
How can one ensure success? Can one ensure success?
Can one turn failure around to enhance happiness?
• Does Happiness produce Success, or Success produce
Happiness?
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