Overconfidence

There is a lot of academic research in behavioral economics on how individuals tend to be overconfident. This leads people to make irrational decisions which is basically what the field of behavioral economics is all about.

One of my favorite studies is a survey was given to college students that asked them about their own chance of positive events (ex: marriage, income, career success etc) and the chance of their classmates. On average people, rate their own chances for success/happiness to be much higher than their classmates. Here is a link to an abstract of the study http://content.apa.org/journals/psp/39/5/806

Low Expectations is the Key to Happiness

A study by a Danish epidemiologist found that for over the 30 years, the citizens of Denmark have scored higher than any other Western country on measures of life satisfaction. The author of the study attributed the finding to Denmark's culture of low expectations.

The New York Times wrote an article summarizing the study and you can link to the original study here .

Its a rough ride until 45

Slate published an article summarizing a recent study by David Blanchflower of Dartmouth and Andrew Oswald of Warwick which contains some sobering findings. The main finding, or the one i found most interesting, is how happiness evolves with age. Happiness over people's lifetimes is a U-shaped curve: there is a gradual decline from ages 16 to 45, you bottom out and then your happiness rises from age 45 on into old age.

I have mentioned this study to friends and everyone instinctively jumps to the conclusion that 45 is the age when your kids leave home. My hypothesis is that at 45 you have sufficiently lowered your expectations and have come to terms with the fact that you are not going to be as wealthy, famous, renowned etc as you expected and you learn to appreciate what you have. Perhaps we should all expect a little bit less out of life.