Positive Psychology and Well-being

Positive psychology focuses on the study of the good life, aiming for a happy and healthy existence.
Well-being encompasses feeling comfortable, safe, and happy, which are significant personal and societal goals.
The lecture explores the approaches of psychologists and economists to happiness, key business applications, and measurement methods.

Why study economics or psychology? To help people and improve lives, a primary goal of public policy and academic research.
Well-being definition: Being comfortable, warm, healthy (not sick), having nutritious food, and feeling happy and satisfied with life.
Employee well-being and mental health are critical in the workplace. Enhancing these aspects can positively affect business outcomes.
Employees with high well-being are generally more productive and better performers.

One of the main theories in psychology. It explains positive psychology and well-being.

The theory starts with positive emotions, which arise from stimuli, such as happiness or joy from seeing a cute dog.
Positive emotions can arise from personal confidence, feeling good about oneself.
These emotions make individuals more open to new experiences and thoughts, fostering creativity and new relationships.
Feeling happy can lead to initiating conversations, creating further positive emotions and building resources.

Positive emotions encourage broadening, which involves opening up to new thoughts and experiences.
Happy individuals may enroll in classes to build skills or dedicate more time to assignments.
This motivation allows people to take on new activities.

New experiences build new resources like personal relationships.
Example: Laughter with a friend strengthens the relationship and builds social support.
Taking on activities like a cooking class can improve skills.

Resources improve health, mental health (through social support), and survival skills, enhancing the sense of fulfillment.
Starts from positive emotions.
Enhanced will-being leads to further positive emotions, creating an upward spiral of positivity.

Economists define utility as space of being warm, comfortable, healthy, happy.
*How economist measure utility is using money.
Utility is measured using money within a utility function:
$U = f(x)$
Where:
- $U$ is utility.
- $f$ is the function/relationship.
- $x$ is some monetary variable.
Money is used as an objective and quantifiable measure, despite potential controversy.
Behavioral economics incorporates emotions and biases into utility functions, considering fairness and reference points.
*Recent changes in money affect happiness. It is not the absolute amount of money.

Scenario: Getting a job with a $70,000 salary brings happiness, the feeling changes upon learning a friend earns$ 90,000 for the same job.
*The feelings change from happiness to unfairness and this is all due to salary benchmarks.
Feeling depends on outperforming or underperforming some benchmark, known as the reference point.

The hedonic treadmill suggests everyone has a stable baseline level of happiness determined by personality.
Changes in happiness are usually short-lived, with individuals returning to their baseline, despite major life events.

Study: Compared lottery winners with paralyzed accident victims.
Finding: Lottery winners were not significantly happier than the control group and took less pleasure in mundane events.
Accident victims did not show any less happiness than others.
People adjust to circumstances, returning to a stable level of happiness.

Playing to employees' strengths and creating an engaged workforce (employees who care about the organization) lead to major business benefits like profitability.

Transformational leadership improves well-being through:
- Self-efficacy: Belief that one can do a good job.
- Trust in management: Feeling secure in managers' promises.
- Meaningful work: Seeing that one's work makes a difference.
- Social belonging: Feeling connected to others.

Emotional commitment to work enhances engagement, reduces sick days and employee turnover, and increases customer satisfaction.
Increased profitability is observed in highly engaged workforces.
Employee well-being improves job performance, productivity, health, and human capital.
Happier employees are more likely to improve their skills and performance.

Surveys correlate well-being with other variables.
Example (Australia): People in energy poverty report lower well-being.
Example (UK): Individuals with friendship networks of similar people indicated higher well-being.

Well-being is complex and subjective.
Measuring well-being objectively is a challenge for economics and psychology.
Organizations and governments are interested in research on well-being and its causes.